<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
ISSUER OF SENIOR NOTES REGISTERED HEREBY
AK STEEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3312 31-1401455
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
GUARANTOR OF SENIOR NOTES REGISTERED HEREBY
AK STEEL HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3312 31-1401455
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
703 CURTIS STREET
MIDDLETOWN, OHIO 45043
(513) 425-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
RICHARD E. NEWSTED
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AK STEEL CORPORATION
703 CURTIS STREET
MIDDLETOWN, OHIO 45043
(513) 425-5000
(NAME AND ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies of communications to:
STEPHEN H. COOPER, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE NEW YORK,
NEW YORK 10153-0119
(212) 310-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of 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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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TILE OF EACH CLASS OF SECURITIES TO BET AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
REGISTERED BE REGISTERED PER UNIT PRICE(1) FEE(2)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/8% Senior Notes Due 2006.... $550,000,000 100% $550,000,000 $166,667
---------------------------------------------------------------------------------------------------
Guarantee of Senior Notes....... -- -- -- None
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(f)(2).
(2) Calculated pursuant to Rule 457(f)(2).
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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 14, 1997
PROSPECTUS
AK Steel Corporation
OFFER TO EXCHANGE ITS 9 1/8% SENIOR NOTES DUE 2006, WHICH ARE FULLY AND
UNCONDITIONALLY GUARANTEED BY AK STEEL HOLDING CORPORATION AND HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT, FOR ITS 9 1/8% SENIOR NOTES DUE 2006,
WHICH ARE FULLY AND UNCONDITIONALLY GUARANTEED BY AK STEEL HOLDING CORPORATION.
-----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED.
-----------
AK Steel Corporation ("AK Steel"), a Delaware corporation, hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $550,000,000 aggregate principal amount of its new 9
1/8% Senior Notes due 2006 (the "New Notes"), which are fully and
unconditionally guaranteed by AK Steel Holding Corporation ("Holding") and have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for a like principal amount of its outstanding 9 1/8% Senior Notes due
2006 (the "Old Notes"), which are fully and unconditionally guaranteed by
Holding but have not been so registered. The terms of the New Notes are
identical in all material respects to the Old Notes, except for certain
transfer restrictions relating to the Old Notes. The New Notes will evidence
the same indebtedness as the Old Notes and will be issued pursuant to, and
entitled to the benefits of, the same Indenture that governs the Old Notes (the
"Indenture"). As used herein, the term "Notes" means the Old Notes and the New
Notes, treated as a single class.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1997
unless extended (as so extended, the "Expiration Date"). Tenders of Old Notes
may be withdrawn at any time prior to the Expiration Date. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange pursuant to the Exchange Offer. The Exchange Offer is
subject to certain other customary conditions. See "The Exchange Offer."
The Notes are not redeemable, prior to December 15, 2001, except that, until
December 15, 1999, the Company may redeem, at its option, up to $175.0 million
aggregate principal amount of the Notes at the redemption prices set forth
herein plus accrued interest to the date of redemption with the net proceeds of
one or more Public Equity Offerings (as defined) if at least $375.0 million of
the principal amount of the Notes remains outstanding after each such
redemption. On or after December 15, 2001, the Notes are redeemable at the
option of the Company, in whole or in part, at the redemption prices set forth
herein plus accrued interest to the date of redemption. Upon a Change in
Control (as defined), each holder of Notes may require the Company to
repurchase such Notes at 101% of the principal amount thereof plus accrued
interest to the date of repurchase. See "Description of the Notes."
The New Notes will be, and the Old Notes currently are, senior unsecured
obligations of AK Steel ranking pari passu with other senior unsecured Debt (as
defined) of AK Steel and senior to all Subordinated Obligations (as defined).
At September 30, 1996, the aggregate amount of senior indebtedness of AK Steel,
as adjusted to give effect to the issuance of the Old Notes, was $875 million.
The guarantee of the New Notes by Holding is an unsecured senior obligation of
Holding ranking pari passu with other senior unsecured indebtedness of Holding.
The holder of each Old Note accepted for exchange will receive a New Note
having a principal amount equal to that of the surrendered Old Note. The New
Notes will bear interest from the most recent date to which interest has been
paid on the Old Notes or, if no interest has been paid on the Old Notes, from
December 17, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Old Notes accepted for exchange will not receive any payment in respect of
accrued interest on such Old Notes. Old Notes not tendered or not accepted for
exchange will continue to accrue interest from and after the date of
consummation of the Exchange Offer.
The Old Notes were issued and sold on December 17, 1996 in a transaction
exempt from the registration requirements of the Securities Act and may not be
offered or sold in the United States unless so registered or pursuant to an
applicable exemption under the Securities Act. The New Notes are being offered
hereunder in order to satisfy certain obligations of the Company and Holding
contained in the Registration Rights Agreement (as defined). Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") as set forth in no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a holder that is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act),
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in a distribution of such New
Notes. However, the Company has not sought a no-action letter with respect to
the Exchange Offer and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer. Each holder of Old Notes, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage or participate in, a
distribution of New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. Each broker-dealer that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
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 New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. For a period of 180 days
after the Expiration Date (as defined herein), the Company will make copies of
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Old Notes, the Company will promptly return
the Old Notes to the holders thereof. See "The Exchange Offer."
SEE "RISK FACTORS", BEGINNING ON PAGE 11, FOR A DESCRIPTION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS BEFORE DECIDING TO TENDER THEIR OLD NOTES
IN THE EXCHANGE OFFER.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
AK Steel and Holding have filed with the Commission a registration statement
on Form S-4 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act with respect to the New
Notes offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the New
Notes offered hereby, reference is made to the Registration Statement. Any
statements made in this Prospectus concerning the provisions of certain
documents are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement otherwise filed with the Commission.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, the exhibits forming a part thereof
and the reports, proxy statements and other information filed by the Company
with the Commission in accordance with the Exchange Act may be inspected,
without charge, at the Public Reference Section of the Commission located at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601-2511. Copies of all or any portion of the material may be
obtained from the Public Reference Section of the Commission upon payment of
the prescribed fees. In addition, the Company's common stock is listed on the
New York Stock Exchange and material filed by the Company may be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
The Company will furnish holders of the New Notes with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. The Company will also furnish such holders such other reports as it may
determine or as may be required by law. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding reporting companies under the Exchange Act, including the Company,
at http://www.sec.gov. In addition, if the Company ceases in the future to be
subject to the reporting requirements of the Exchange Act, the Company will be
required under the Indenture to continue to file with the Commission, and to
furnish holders of the New Notes with, the information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company (File No. 1-
13696) with the Commission are incorporated by reference in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996; and
(c) the Company's Current Reports on Form 8-K dated January 23, 1996,
February 5, 1996, April 10, 1996, May 15, 1996, July 11, 1996, November
21, 1996, December 3, 1996 and December 19, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Exchange Offer contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, including any beneficial owner, on the
written or oral request of such person, a copy of any and all of the documents
referred to above which have been or may be incorporated in this Prospectus by
reference, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference therein. Requests for such copies
should be directed to the Corporate Secretary of AK Steel Corporation at its
principal executive offices, which are located at 703 Curtis Street,
Middletown, Ohio 45043 (telephone number (513) 425-5000).
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in this Prospectus
or incorporated herein by reference. Unless otherwise indicated, industry data
contained in this Prospectus have been derived from publicly-available sources,
including industry trade journals and filings with the Securities and Exchange
Commission (the "Commission"), which AK Steel has not independently verified
but believes to be reliable. As used herein, except as the context otherwise
may require, the "Company" means and includes Holding, AK Steel and Holding's
other consolidated subsidiaries, and the term "Notes" means the Old Notes and
the New Notes, treated as a single class.
THE COMPANY
AK Steel is the most profitable integrated steel producer in the United
States, with an industry-leading operating profit per ton of $46 for 1994, $74
for 1995 and $65 for the first nine months of 1996. Most significantly, the gap
between these results and the average operating profit per ton reported by the
other five major domestic integrated producers has steadily widened from $25 in
1994 to $40 in 1995 and $54 in the first nine months of 1996.
The Company concentrates on the production of premium quality coated, cold
rolled and hot rolled carbon steel primarily for sale to the automotive,
appliance, construction and manufacturing markets. The Company also cold rolls
and aluminum coats stainless steel for automotive industry customers. In 1995,
the Company had net sales of $2.26 billion, net income of $268.6 million and
earnings before interest, taxes, depreciation and amortization ("EBITDA") of
$433.7 million. For the nine months ended September 30, 1996, it reported net
sales of $1.69 billion, net income of $115.2 million and EBITDA of $287.3
million.
At the core of the Company's profitability is an experienced, results-
oriented management team that focuses on continuously increasing productivity,
reducing costs and improving product quality while continually striving to
improve safety and health in the workplace. Since arriving in mid-1992, the new
management team has reconfigured the Company's production facilities,
eliminating eleven redundant operating units, significantly increasing the
operating rates on remaining equipment and reducing operating costs throughout
the organization. Product quality and reliability have been improved, enabling
the Company to increase its sales of value-added coated and cold rolled
products to the high-end automotive, appliance, construction and manufacturing
markets.
The results of these efforts have been significant. Each of the Company's key
production units has achieved double-digit percentage increases in average
monthly production since 1992 through a combination of improved operating and
maintenance practices, targeted capital investments and focused production
planning. The Company's tandem cold mill has increased average monthly
production by over 83% from 132,600 tons in 1992 to 243,100 tons in the first
nine months of 1996. Average monthly production from the Company's coating
lines has increased over 79% from 93,400 tons in 1992 to 167,200 tons in the
first nine months of 1996.
The Company has increased its total annual shipments from 2,989,000 tons in
1992 to 4,051,000 tons in 1995, an increase of nearly 36%. Enhanced
productivity rates on its tandem cold mill and coating lines have allowed the
Company to increase its shipments of value-added coated and cold rolled
products from 1,668,000 tons (representing 56% of total shipments) in 1992 to
2,628,000 tons (or 65% of total shipments) in 1995. Increased production of
premium quality coated and cold rolled products has enabled the Company to
focus its commercial efforts on the most demanding requirements of the
automotive, appliance, construction and manufacturing markets. In 1992, 43% of
the Company's total shipments, or 1,288,000 tons, served customers in those
markets. In 1995, 55% of the Company's total shipments, or 2,228,000 tons,
served those markets.
The Company has earned a reputation, particularly among high-end customers,
for consistent product quality and superior service, receiving numerous
customer quality awards. In August 1996, the Company earned registration under
the ISO 9002 international quality standard and certification under the QS 9000
quality assurance program used by domestic automotive manufacturers.
3
<PAGE>
Management believes that increased profitability can best be achieved by
expanding the Company's capacity to produce and sell high-margin coated
products while correspondingly reducing its shipments of lower margin hot
rolled products. The improved performance of the Company's existing tandem cold
mill and its five existing coating lines has been a major factor in the
Company's ability to increase its production of high-margin coated products.
However, all of these facilities are operating at full capacity and the
opportunities for further increasing their productivity are limited.
Accordingly, the Company plans to construct a new, state-of-the-art finishing
facility (the "New Facility") that when fully operational in 1999, will
eliminate the existing bottleneck in the Company's cold rolling and coating
operations, enable the Company to better satisfy the growing demand within the
automotive industry for coated products, particularly galvannealed products,
expand the Company's presence in the stainless steel market, and significantly
reduce the Company's exposure to the lower margin and increasingly competitive
market for hot rolled products.
THE NEW FACILITY
The New Facility, together with the Company's existing tandem cold mill and
coating lines, will enable the Company to further process all of the hot rolled
carbon steel that it produces, as well as additional quantities of hot band
that it will purchase from other producers. The New Facility also will enable
the Company to significantly expand its presence in the stainless steel market.
The Company will continue to sell certain premium grades of hot rolled carbon
steel when appropriate in light of customer demand.
The New Facility, to be located on a currently undeveloped 1,700-acre site in
Spencer County, Indiana near the Ohio River community of Rockport, will consist
of a continuous cold rolling mill designed to cold reduce carbon steel hot band
in widths up to 80 inches at an estimated rate of 500 tons per hour and
stainless steel hot band in widths up to 60 inches, a hot dip galvanizing line
with a projected capacity of approximately 800,000 tons per year, a continuous
carbon and stainless steel pickling line, a stainless steel annealing and
pickling line, hydrogen annealing facilities and a temper mill.
The Company plans to produce approximately 1,400,000 tons of cold rolled
carbon steel annually at the New Facility, of which approximately 800,000 tons
are expected to be hot dip galvanized. Galvanized steel, including galvannealed
material, is particularly desired by the automotive industry and is associated
with the highest margins of all flat rolled carbon steel products. Primarily as
a result of the expanding requirements of the U.S.-based production facilities
of foreign automotive manufacturers, demand by automotive manufacturers for
galvanized steel has grown from 4.3 million tons in 1992 to 6.0 million tons in
1995, an increase of nearly 40%. Existing domestic production capacity is
insufficient to fully satisfy this growing demand. Additional facilities
recently completed, as well as those announced and scheduled to come on line
within the next few years, are capable of processing material in widths of only
60 inches or less and are targeted primarily to the construction market. The
Company's existing facilities are capable of producing coated carbon steel
products up to 76 inches wide. The hot dip galvanizing line at the New Facility
will produce coated products in widths up to 80 inches, a width currently not
produced in the United States. These products will be targeted to automotive
customers who will benefit from the manufacturing and design flexibility of
larger width steel.
The Company currently cold rolls and aluminum coats approximately 80,000 tons
per year of Series 400 stainless steel for sale primarily to manufacturers of
automotive exhaust systems. The New Facility will enable the Company to
substantially increase its shipments of Series 400 stainless steel and to cold
roll and sell Series 300 stainless steel, which is used in restaurant and
kitchen equipment and medical appliances, as well as in the oil refining,
chemical production and food processing industries. Both of these products are
associated with substantially higher margins than coated carbon steel. Hot
rolled stainless steel coils in both series will be purchased from other
producers for finishing. The Company plans to finish an aggregate of
approximately 385,000 tons of stainless steel annually at the New Facility.
During 1995, domestic consumption of flat rolled stainless steel totalled
nearly 1.6 million tons. According to industry analysts, domestic consumption
is projected to continue to grow steadily at a compounded annual rate of 5%.
Approximately 22% of the flat rolled stainless steel consumed in the United
States in 1995 was produced abroad, although two domestic producers have
announced planned capacity expansions aggregating
4
<PAGE>
approximately 335,000 tons per year. The Company believes that there is
sufficient projected demand for high quality flat rolled stainless steel to
absorb this additional capacity as well as the projected capacity of the New
Facility.
Construction and start-up of the various major components of the New Facility
will be independent of each other and will be staggered over a period of
approximately three years. The first production component to begin commercial
operation will be the galvanizing line, which is projected to be at full
production of anticipated customer requirements of 800,000 tons per year
beginning in December 1998. The continuous cold mill is scheduled to achieve
its targeted production of cold rolled carbon steel in March 1999, and the
other facilities are expected to begin full commercial production at various
times between June 1999 and December 1999. The staggered start-up of the
various components of the New Facility should also enable the Company to begin
generating revenue from the New Facility prior to the end of the construction
period.
The cost of constructing and equipping the New Facility, currently estimated
at $1.1 billion, is being financed with the proceeds from the sale of the Old
Notes, together with proceeds from the sale of $250.0 million aggregate
principal amount of AK Steel's Senior Secured Notes Due 2004 (the "Secured
Notes") and approximately $300.0 million of the Company's own cash resources.
See "Use of Proceeds."
THE EXCHANGE OFFER
Securities Offered.......... Up to $550,000,000 aggregate principal amount of
AK Steel's 9 1/8% Senior Notes Due 2006, which
are fully and unconditionally guaranteed by Hold-
ing and have been registered under the Securities
Act (the "New Notes"). The terms of the New Notes
and the Old Notes are identical in all material
respects (including principal amount, interest
rate and maturity) to, and evidence the same in-
debtedness as, the Old Notes for which they may
be exchanged, except that the Old Notes have not
been registered under the Securities Act and, ac-
cordingly, are not freely-transferable.
The Exchange Offer.......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance
of the New Notes is intended to satisfy obliga-
tions of the Company contained in a Registration
Rights Agreement, dated December 12, 1996 (the
"Registration Rights Agreement"), between the
Company and CS First Boston and Goldman, Sachs &
Co., the Initial Purchasers of the Old Notes (the
"Initial Purchasers"). For procedures for
tendering the Old Notes pursuant to the Exchange
Offer, see "The Exchange Offer."
Tenders, Expiration Date;
Withdrawal................. The Exchange Offer will expire at 5:00 P.M., New
York City time, on , 1997, or such
later date and time to which it may be extended
(as so extended, the "Expiration Date"). A tender
of Old Notes pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration
Date. Any Old Note not accepted for exchange for
any reason will be returned without expense to
the tendering holder thereof as promptly as prac-
ticable after the expiration or termination of
the Exchange Offer.
Federal Income Tax
Consequences............... The exchange of Old Notes for New Notes pursuant
to the Exchange Offer should not result in any
income, gain or loss to the holders or the Com-
pany for federal income tax purposes. See "Cer-
tain Federal Income Tax Consequences."
5
<PAGE>
Use of Proceeds............. There will be no proceeds to the Company from the
Exchange Offer.
Exchange Agent.............. The Bank of New York is serving as the Exchange
Agent in connection with the Exchange Offer.
Shelf Registration
Statement.................. Under certain circumstances, certain holders of
Notes (including holders who are not permitted to
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may require the Company to file, and use
its reasonable best efforts to cause to become
effective, a shelf registration statement under
the Securities Act that would cover reoffers and
resales of Notes by such holders. See "Descrip-
tion of the Notes--Exchange Offer; Registration
Rights."
Conditions to the Exchange
Offer...................... The Exchange Offer is not conditioned on any min-
imum principal amount of Old Notes being tendered
for exchange. The Exchange Offer is subject to
certain other customary conditions, each of which
may be waived by the Company. See "The Exchange
Offer--Certain Conditions to the Exchange Offer."
Consequences of Failure to
Exchange................... Holders of Old Notes who do not exchange their
Old Notes for New Notes pursuant to the Exchange
Offer will continue to be subject to the restric-
tions on transfer of such Old Notes as set forth
in the legend thereon as a consequence of the of-
fer and sale of the Old Notes pursuant to exemp-
tions from, or in transactions not subject to,
the registration requirements of the Securities
Act. In general, the Old Notes may not be offered
or sold unless registered under the Securities
Act, except pursuant to an available exemption
from, or in a transaction not subject to, the Se-
curities Act and applicable state securities
laws. The Company does not currently anticipate
that it will register Old Notes under the Securi-
ties Act. Based on interpretations by the staff
of the Commission, as set forth in no-action let-
ters issued to third parties, the Company be-
lieves that New Notes issued pursuant to the Ex-
change Offer in exchange for Old Notes may be of-
fered for resale, resold or otherwise transferred
by holders thereof (other than a holder that is
an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, pro-
vided that such New Notes are acquired in the or-
dinary course of such holder's business and that
such holder, other than a broker-dealer, has no
arrangement with any person to participate in the
distribution of such New Notes. However, the Com-
mission has not considered the Exchange Offer in
the context of a no-action letter and there can
be no assurance that the staff of the Commission
would make a similar determination with respect
to the Exchange Offer as in such other circum-
stances. Each holder of Old Notes, other than a
broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a
distribution of such New Notes and has no ar-
rangement or understanding to participate in a
distribution of New Notes. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes must acknowledge that such
Old Notes were acquired by such broker-dealer as
a result of market-making activities or other
trading activities and that it will deliver a
prospectus in connection with any resale of such
New Notes. See "Plan of Distribution."
6
<PAGE>
SUMMARY DESCRIPTION OF THE NEW NOTES
Maturity Date............... December 15, 2006.
Interest Rate............... The New Notes will bear interest at the rate of 9
1/8% per annum, the same rate as applicable to
the Old Notes; provided, that if the Exchange Of-
fer is not consummated by June 16, 1997, the New
Notes will bear additional interest at the rate
of 0.50% per annum from and including June 16,
1997 until but excluding the date of consummation
of the Exchange Offer.
Interest Payment Dates...... June 15 and December 15 of each year, commencing
June 15, 1997. The New Notes will bear interest
from the most recent date to which interest has
been paid on the Old Notes or, if no interest has
been paid on the Old Notes, from December 17,
1996.
Optional Redemption......... The Notes are not redeemable prior to December
15, 2001, except that, until December 15, 1999,
AK Steel may redeem, at its option, up to $175.0
million aggregate principal amount of the Notes
at the redemption price set forth herein plus ac-
crued interest to the date of redemption with the
net proceeds of one or more Public Equity Offer-
ings if at least $375.0 million aggregate princi-
pal amount of the Notes remains outstanding after
each such redemption. On or after December 15,
2001, the Notes are redeemable at the option of
AK Steel, in whole or in part, at the redemption
prices set forth herein plus accrued interest to
the date of redemption.
Mandatory Redemption........ None.
Change in Control........... Upon a Change in Control (as defined) and subject
to certain conditions, each holder of Notes may
require AK Steel to repurchase such holder's
Notes at 101% of the principal amount thereof
plus accrued interest to the Change in Control
Payment Date (as defined).
Guarantee................... Payment of the principal of and interest on the
Old Notes is, and payment of the principal of and
interest on the New Notes will be, uncondition-
ally guaranteed on a senior basis by Holding (the
"Holding Guarantee").
Ranking..................... The Old Notes are, and the New Notes will be, se-
nior unsecured obligations of AK Steel, ranking
pari passu with all other senior unsecured in-
debtedness of AK Steel, including $325 million
aggregate principal amount of AK Steel's 10 3/4%
Senior Notes Due 2004 (the "10 3/4% Notes") and
senior to all Subordinated Obligations (as de-
fined). The Holding Guarantee of the New Notes
will be an unsecured senior obligation of Holding
and will rank pari passu with all other senior
unsecured indebtedness of Holding, including its
guarantees of the Old Notes, the 10 3/4% Notes
and the Secured Notes. See "Risk Factors--Factors
Relating to the Notes--Ranking," "Description of
the Notes--Ranking" and "Description of Certain
Indebtedness."
Certain Covenants........... The Indenture under which the Old Notes were, and
the Notes will be, issued limits, among other
things, (i) the incurrence of liens on assets of
AK Steel and its subsidiaries; (ii)
sale/leaseback transac-
7
<PAGE>
tions; (iii) the issuance of additional Debt (as
defined herein) by AK Steel; (iv) the issuance of
Debt and Preferred Equity Interests (as defined
herein) by AK Steel's subsidiaries; (v) the pay-
ment of dividends on, and redemption of, capital
stock of AK Steel and its subsidiaries, the re-
demption of certain subordinated obligations of
AK Steel and the making of investments; (vi) the
issuance and sale of equity interests of AK
Steel's subsidiaries; (vii) distributions from AK
Steel's subsidiaries; (viii) sales of assets, in-
cluding stock of AK Steel's subsidiaries;
(ix) transactions with affiliates; (x) lines of
business; (xi) consolidations, mergers and trans-
fers of all or substantially all assets; and
(xii) activities and liabilities of Holding. How-
ever, all of these limitations are subject to a
number of important qualifications. See "Descrip-
tion of the Notes--Certain Covenants."
Use of Proceeds............. The Company will not receive any proceeds from
the Exchange Offer. The net proceeds from the
sale of the Old Notes, together with proceeds
from the sale of the Secured Notes and approxi-
mately $300.0 million of the Company's own cash
resources, are being used to finance the cost of
constructing and equipping the New Facility.
Exchange Offer; Holders of New Notes (other than as set forth be-
Registration Rights........ low) will not be entitled to any registration
rights with respect to the New Notes. Pursuant to
the Registration Rights Agreement, the Company
has agreed, for the benefit of the holders of Old
Notes, to file a registration statement under the
Securities Act with respect to an exchange offer
for the Old Notes. The Registration Statement of
which this Prospectus is a part constitutes the
exchange offer registration statement referred to
in the Registration Rights Agreement. Under cer-
tain circumstances described in the Registration
Rights Agreement, certain holders of Notes (in-
cluding holders who may not participate in the
Exchange Offer or who may not freely resell New
Notes received in the Exchange Offer) may require
the Company to file, and use reasonable best ef-
forts to cause to become effective, a shelf reg-
istration statement under the Securities Act that
would cover
resales of Notes by such holders. See "Descrip-
tion of the Notes--Exchange Offer; Registration
Rights."
RISK FACTORS
Holders of the Old Notes should consider carefully all of the information set
forth in this Prospectus and, in particular, the information set forth under
"Risk Factors" before making a decision to tender their Old Notes for exchange
pursuant to the Exchange Offer.
8
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER TON DATA)
The following summary historical consolidated financial data have been
derived from, and should be read in conjunction with, the consolidated
financial statements of the Company and the selected historical consolidated
financial data included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------------
1993(1) 1994 1995 1995 1996
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. $1,594.5 $2,016.6 $2,257.3 $ 1,730.6 $ 1,693.6
Cost of products sold..... 1,380.3 1,655.2 1,768.1 1,349.5 1,341.3
Selling and administrative
expenses................. 111.2 113.7 116.5 86.2 84.7
Depreciation.............. 73.5 70.7 74.6 57.8 58.7
Special charges and
unusual items(2)......... 17.6 (15.9) -- -- --
Operating profit.......... 11.9 192.9 298.1 237.1 208.9
Interest expense.......... 58.1 48.2 35.6 26.6 28.4
Income (loss) before
income taxes and
extraordinary items...... (42.7) 152.0 281.5 224.5 188.9
Provision (benefit) for
income taxes(3).......... -- (120.5) 12.9 10.6 73.7
Net income (loss)......... $ (42.7) $ 257.6 $ 268.6 $ 213.9 $ 115.2
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------- -------------------
1993(1) 1994 1995 1995 1996
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents,
and short-term
investments.............. $ 144.2 $ 261.8 $ 312.8 $ 346.8 $ 223.2
Working capital........... 55.9 443.5 489.8 503.3 519.4
Total assets.............. 1,518.7 1,933.2 2,115.5 2,035.3 2,089.1
Current portion of long-
term debt................ 130.8 -- -- -- --
Long-term debt (excluding
current portion)......... 598.6 330.0 325.0 325.0 325.0
Current portion of pension
and postretirement
benefit obligations...... 93.8 110.3 0.1 37.3 0.1
Long-term pension and
postretirement benefit
obligations (excluding
current portion)............ 922.8 638.3 655.7 613.2 621.0
Partners' capital
(deficit)/stockholders'
equity(4)................ $ (586.2) $ 449.0 $ 674.2 $ 654.5 $ 744.0
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------------
1993(1) 1994 1995 1995 1996
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Ratio of earnings to
combined fixed
charges(5):
Actual(6)............... -- 3.6x 5.5x 5.7x 4.9x
Pro forma(7)............ 2.4x 2.2x
EBITDA(8)................. $ 132.6 $ 271.9 $ 433.7 $ 340.7 $ 287.3
Ratio of EBITDA to
interest expense(9):
Actual.................. 2.2x 5.3x 7.7x 8.0x 7.4x
Pro forma(7)............ 3.3x 3.0x
Operating profit per ton
(excluding special
charges and unusual
items)................... $ 9 $ 46 $ 74 $ 76 $ 65
Capital investments....... $ 40.2 $ 87.5 $ 175.7 $ 103.6 $ 55.3
Flat rolled shipments
(thousands of tons)...... 3,419 3,875 4,051 3,100 3,218
Man hours per ton
shipped.................. 4.20 3.78 3.26 3.19 3.02
Number of employees at end
of period................ 6,404 5,991 5,762 5,721 5,778
</TABLE>
- --------
Footnotes appear on following page.
9
<PAGE>
(1) Holding and AK Steel were formed effective March 29, 1994 as a result of
the recapitalization of Armco Steel Company, L.P. (the "Partnership"), a
limited partnership that operated as a joint venture of Armco Inc. and
Kawasaki Steel Corporation. Accordingly, data for 1993 are derived from the
financial statements of the Partnership.
(2) Special charges and unusual items for 1993 include $17.6 million relating
to additional fixed asset write-offs and related disposal costs, as well as
other miscellaneous charges. The $15.9 million for 1994 represents the gain
from the sale of the Company's equity interests in Southwestern Ohio Steel
("SOS") and Nova Steel ("Nova").
(3) Includes a tax benefit of $120.3 million in 1994 associated with
recognition of a deferred tax asset related to postretirement benefits.
(4) Partners' capital (deficit) at December 31, 1993 and stockholders' equity
at December 31, 1994 reflect reductions to equity of $113.2 million and
$39.3 million (net of tax), respectively, related to the establishment of
additional pension plan liability. As of December 31, 1995, the Company had
fully funded its pension plan liability on an accumulated benefit
obligation basis and eliminated the reduction to stockholders' equity.
(5) For the purpose of calculating the ratio of earnings to combined fixed
charges, (i) earnings consist of income (loss) before income taxes,
extraordinary items and effects of accounting change, the distributed
income of less than 50%-owned affiliates, plus fixed charges and (ii)
combined fixed charges consist of interest, whether expensed or
capitalized, and preferred stock dividends.
(6) Earnings were insufficient to cover combined fixed charges for 1993 by
$46.1 million.
(7) The pro forma ratios of earnings to combined fixed charges and EBITDA to
interest expense for the year ended December 31, 1995 and the nine months
ended September 30, 1996 reflect the pro forma interest expense on the
Notes and the Secured Notes as if those securities had been outstanding in
full during the entire period and without giving effect to any assumed
return on the interim investment of the proceeds from those securities. For
purposes of computing pro forma interest expense, the Company has assumed
an average annual rate of interest on the Secured Notes of 8.98%, and that
estimated expenses of $2.1 million associated with issuance of the Notes
and the Secured Notes are amortized to interest expense. Accordingly, pro
forma interest expense for the year ended December 31, 1995 and the nine
months ended September 30, 1996 reflects the following additional items:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Secured Notes:
Interest expense................... $22.5 $16.9
Amortized issuance costs........... 0.6 0.5
Notes:
Interest expense................... 50.2 37.7
Amortized issuance costs........... 1.5 1.1
----- -----
Total............................ $74.8 $56.2
===== =====
</TABLE>
(8) EBITDA represents earnings (loss) before interest expense, provision for
income taxes, depreciation and amortization and is presented herein because
it is a widely accepted indicator of a company's ability to service debt.
EBITDA does not represent net income or cash flow from operations as those
items are defined by generally accepted accounting principles, should not
be considered by holders of the Notes as an alternative to net income and
does not necessarily indicate whether cash flows will be sufficient to fund
cash needs. Under the Indenture governing the Notes, subject to certain
exceptions, the Company may not incur additional indebtedness unless the
pro forma consolidated EBITDA coverage ratio would be greater than 2.5 to
1.0. See "Description of the Notes--Limitation on Debt." As defined in the
Indenture, EBITDA excludes non-cash post-employment benefits other than
pensions and certain special charges. These exclusions reflect the fact
that (i) a component of retiree medical expense is a non-cash item
(representing an estimate of future medical costs) and (ii) certain of the
Company's special charges are non-cash items. Under the Indenture, to the
extent that these special charges become cash charges they will be included
in the calculation of EBITDA. See "Description of the Notes--Certain
Definitions."
(9) Interest expense consists of interest, whether expensed or capitalized,
amortization of debt issuance costs and preferred stock dividends.
10
<PAGE>
RISK FACTORS
Holders of the Old Notes should consider carefully all of the information
set forth in this Prospectus and, in particular, should evaluate the following
risks before tendering their Old Notes for exchange pursuant to the Exchange
Offer. The risk factors set forth below (other than those set forth under "--
Consequences of Failure to Exchange") are generally applicable to the Old
Notes as well as the New Notes.
FACTORS RELATING TO THE COMPANY
Substantial Leverage
As a consequence of the issuance of the Old Notes the Company has
substantial indebtedness. That indebtedness will increase upon issuance of the
Secured Notes. (See "Description of Certain Indebtedness -- The Secured
Notes.") The degree to which the Company is leveraged could affect its ability
to service its indebtedness, to make certain capital investments, to take
advantage of certain business opportunities or to obtain additional financing.
The Company believes that it will be able to make its principal and interest
payments, as and when required, from funds derived from its operations and
will be able to comply with its debt covenants. However, unexpected declines
in the Company's future business, declines in steel prices, increases in costs
or the inability to borrow additional funds for its operations if and when
required could impair the Company's ability to meet its debt service
obligations and, therefore, could adversely affect its business and future
prospects.
The New Facility
The construction, equipping and start-up of production at any new, major
manufacturing facility is associated with a number of risks, including risks
of delay in receipt of necessary permits, materials and supplies, delay and
unanticipated technical difficulties in the construction process and in the
installation of critical components and unexpected problems in initiating
operations, realizing targeted operating speeds and production capacity and
product specifications and consistency. Construction of the New Facility will
require a permit from the U.S. Army Corps of Engineers with respect to several
acres of wetlands that may be affected by such construction. New rules for the
permitting of projects involving wetlands were promulgated by the Corps of
Engineers in December 1996. Although the Company does not anticipate that the
new rules will materially impact its planned construction schedule, the Corps
of Engineers has broad discretion with respect to permitting. Accordingly,
there can be no assurance that the costs of constructing, equipping and
operating the New Facility will not exceed the Company's current estimates,
that the New Facility will be completed, commence operations or reach full
production within the Company's currently projected schedule or that it will
enable the Company to meet its planned levels of annual production. If
additional financing is required as a result of cost overruns or delays, there
can be no assurance that such financing will be available on terms acceptable
to the Company, if at all.
As noted elsewhere in this Prospectus, the Company is currently cold
rolling, aluminum coating and marketing Series 400 stainless steel, at an
annual rate of approximately 80,000 tons, for use in automotive exhaust
systems. The New Facility is intended, in part, to enable the Company to
substantially expand its presence in the market for flat rolled stainless
steel, which is associated with higher margins than carbon steel. Total
domestic consumption of flat rolled stainless steel was nearly 1.6 million
tons in 1995. The Company intends to cold roll and finish approximately
385,000 tons of stainless steel per year at the New Facility. However, as
noted below under "Factors Relating to the Steel Industry--Competition,"
because the high margins associated with stainless steel significantly reduce
the relative impact of shipping costs on the producer, the domestic market for
stainless steel is far more vulnerable to foreign imports and the adverse
effects of a strengthening U.S. dollar than the market for carbon steel. The
Company believes it has the requisite metallurgical expertise to produce high
quality, cold rolled stainless steel efficiently and economically and that the
market for its stainless steel products will include many of the automotive
and appliance industry customers to which it currently sells its carbon steel
products. Nevertheless, there can be no assurance that the Company will be
successful in its efforts to profitably produce and sell its targeted quantity
of flat rolled stainless steel. In addition, its ability to compete
effectively with other domestic and foreign producers of flat rolled stainless
steel will depend, in major part, on its ability to develop and deploy a
marketing and sales force with experience and credibility in the stainless
steel marketplace.
11
<PAGE>
Reliance on the Automotive Industry
The Company's sales directly to the automotive market accounted for
approximately 42%, 47% and 50% of its net sales in 1993, 1994, and 1995,
respectively, and 55% of its net sales for the first nine months of 1996.
Shipments to General Motors Corporation ("General Motors"), the Company's
largest customer in each of the past three years, accounted for approximately
23%, 22% and 20% of net sales in 1993, 1994 and 1995, respectively, and 18% of
the Company's net sales for the nine months ended September 30, 1996. In
addition, a substantial amount of the Company's sales to steel distribution
and converters consists of products that are resold (in original or modified
form) to the automotive industry. See "Business--Customers."
The Company's strategy is dependent upon continued growth in demand for
premium quality coated and cold rolled carbon and stainless steel products,
particularly from the automotive industry. The domestic automotive industry
has historically experienced significant fluctuations in demand, based on such
factors as general economic conditions, interest rates and consumer
confidence. In addition, strikes, lock-outs, work stoppages or other
production interruptions in the automotive industry can adversely affect the
demand for the Company's products. Since the beginning of 1994, automotive
industry demand for flat rolled coated steel products has been high, with
consumption of galvanized and galvannealed material increasing from
approximately 4.3 million tons in 1992 to approximately 6.0 million tons in
1995. A major factor contributing to this growth has been the increase in
construction and operation of U.S.-based production facilities by foreign
automotive manufacturers. Although several foreign manufacturers have
announced plans to expand their production facilities in the United States,
there can be no assurance that demand for the Company's coated and stainless
products, including those to be produced at the New Facility, will remain high
or continue to grow.
Labor Relations
As of September 30, 1996, the Company had approximately 5,800 active
employees, of whom approximately 57% were represented by the Armco Employees
Independent Federation, Inc. (the "AEIF"), 18% by the United Steelworkers of
America (the "USWA") and 6% by the Oil, Chemical and Atomic Workers Union (the
"OCAW"). The AEIF represents all hourly employees and certain non-exempt
salaried employees at the Middletown Works. The USWA represents hourly
steelmaking employees and certain non-exempt salaried employees at the Ashland
Works. The OCAW represents hourly employees at the Ashland Works coke
manufacturing facility. In 1994, the USWA sought to become the collective
bargaining representative of the hourly employees at the Middletown Works, but
a majority of those employees voted to retain the AEIF as their
representative. No assurance can be given that the USWA will not seek to
represent the Middletown Works' employees at some future date.
The Company's agreements with the AEIF and the OCAW are effective through
February 29, 2000 and October 1, 1997, respectively. The expiration date of
its agreement with the USWA is presently the subject of dispute, with the
Company asserting that the agreement is effective until March 30, 2000 and the
USWA asserting that the agreement will expire March 30, 1997. No prediction
can be made as to whether or when this dispute will be resolved or as to the
possible consequences thereof.
FACTORS RELATING TO THE NOTES
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the offer and sale of the Old Notes pursuant to exemptions
from, or in transactions not subject to, the registration requirements of the
Securities Act. In general, the Old Notes may not be offered or sold unless
registered under Securities Act, except pursuant to an available exemption
from, or in a transaction that is otherwise not subject to, the Securities
Act. The Company does not currently anticipate that it will register the Old
Notes under the Securities Act. See "Description of the Notes -- Exchange
Offer; Registration Rights." Based on interpretations
12
<PAGE>
by the staff of the Commission, as set forth in no-action letters issued to
third parties, the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by holders thereof (other than a holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course or such holder's business and that such holder, other than
a broker-dealer, has no arrangement or understanding with any person to engage
or participate in the distribution of such New Notes. However, the Commission
has not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Each holder of Old Notes, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage or
participate in, a distribution of such New Notes and has no arrangement or
understanding to engage or participate in a distribution of New Notes. If any
holder is an affiliate of the Company or is engaged in or intends to engage in
or has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such holder (i)
many not rely on the applicable interpretations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes pursuant to the Exchange Offer must acknowledge that such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus in connection
with any resale of such New 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.
Ranking
The Old Notes currently are, and the New Notes will be, senior unsecured
obligations of AK Steel, ranking pari passu with all other senior indebtedness
of AK Steel, including the Secured Notes and the 10 3/4% Notes, and senior to
all Subordinated Obligations (as defined). Holders of the Secured Notes, as
well as holders of future secured indebtedness of AK Steel permitted under the
Indenture, will have claims with respect to the assets constituting collateral
that are prior to the claims of holders of the Notes. Subject to certain
limitations set forth in the Indenture, AK Steel will be able to incur
additional indebtedness. See "Description of the Notes."
Any claim of AK Steel and its creditors, including the holders of the Notes,
to the assets of any of AK Steel's subsidiaries upon any liquidation or
reorganization of that subsidiary will be subject to the prior claims of that
subsidiary's creditors, including trade creditors of that subsidiary.
Accordingly, the Old Notes are, and the New Notes will be, effectively
subordinated to the creditors of AK Steel's subsidiaries to the extent those
subsidiaries are not Guarantor Subsidiaries (as defined). See "Description of
the Notes--Note Guarantees." The Indenture provides for, under certain limited
circumstances, additional indebtedness of AK Steel's subsidiaries. See
"Description of the Notes--Certain Covenants."
The Holding Guarantee will be an unsecured senior obligation of Holding and
will rank pari passu with other senior unsecured indebtedness of Holding,
including its guarantees of the Old Notes, the Secured Notes and the 10 3/4%
Notes. The principal asset of Holding is all of the outstanding shares of
Common Stock of AK Steel, and virtually all of Holding's operations are
conducted through AK Steel. In the Indenture, Holding has agreed not to engage
in any activities other than holding the outstanding shares of securities of
AK Steel as well as those activities incidental to its status as a public
company, and not to incur any liabilities other than those relating to its
guarantees of the Notes, the 10 3/4% Notes and certain other indebtedness of
AK Steel. See "Description of the Notes--Certain Covenants--Restrictive
Covenant of Holding."
Limited Support for Holding Guarantee
Holding, the issuer of the Holding Guarantee, is a holding company that
derives all of its operating income and cash flow from AK Steel and its
subsidiaries and whose only material asset is the outstanding shares of Common
Stock of AK Steel. The Indenture contains a covenant restricting Holding from
holding any assets other
13
<PAGE>
than securities of AK Steel. See "Description of the Notes--Certain
Covenants--Restrictive Covenant of Holding." Accordingly, the ability of
Holding to perform on the Holding Guarantee will be dependent on the financial
condition and net worth of AK Steel.
Limitation on Change in Control and Certain Dispositions
The Indenture requires AK Steel, in the event of a Change in Control, to
repurchase any Notes that holders thereof desire to have repurchased at 101%
of the principal amount thereof plus accrued interest to the Change in Control
Payment Date. The Indenture also requires that the net available cash proceeds
of certain asset sales be used to repurchase those Notes that holders desire
to have repurchased at par. See "Description of the Notes--Change in Control
Offer" and "--Certain Covenants--Limitation on Sales of Assets and Equity
Interests of Subsidiaries." Similar provisions are contained in the Indenture
governing the 10 3/4% Notes. There can be no assurance that AK Steel will have
the financial resources necessary to purchase the Notes and the 10 3/4% Notes
upon a Change in Control.
Lack of Public Market for the Notes
The New Notes are being offered to the holders of the Old Notes. The Old
Notes were issued on December 17, 1996 to a limited number of institutional
investors and are eligible for trading in the Private Offerings. Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association
of Securities Dealers' screenbased, automated market for trading of securities
eligible for resale under Rule 144A under the Securities Act. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Old Notes could be adversely affected.
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes, or
the ability of holders of the New Notes to sell their New Notes or the price
at which such holders may be able to sell their New Notes. If such a market
were to develop, the New Notes could trade at prices that may be higher or
lower than their principal amount or purchase price, depending on many
factors, including prevailing interest rates, the Company's operating results
and the market for similar securities. Each Initial Purchaser has advised the
Company that it currently intends to make a market in the New Notes. The
Initial Purchasers are not obligated to do so, however, and any market-making
with respect to the New Notes may be discontinued at any time without notice.
Therefore, there can be no assurance as to the liquidity of any trading market
for the New Notes or that an active public market for the New Notes will
develop. The Company does not intend to apply for listing or quotation of the
New Notes on any securities exchange or stock market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the Notes, or, if issued, the Exchange Notes.
FACTORS RELATING TO THE STEEL INDUSTRY
Competition
Competition within the steel industry is intense. In the sale of flat rolled
carbon steel the Company competes primarily on the basis of product quality,
responsiveness to customer needs and price with other integrated steel
producers and, to a lesser extent, mini-mills. Mini-mills have increased their
ability to produce higher quality products, which has enabled them to become
more competitive with integrated steel producers and, in periods of weak
demand, has increased pressure on prices and margins. Moreover, U.S. carbon
steel producers have historically faced significant competition from foreign
producers, although the weakness of the U.S. dollar relative to certain
foreign currencies has dampened this competition in the United States in
recent years. The highly competitive nature of the industry, combined with
excess production capacity for hot rolled and non-premium grades of cold
rolled carbon steel, may in the future exert downward pressure on prices.
Upon completion of the New Facility, the Company will substantially expand
its capacity to cold roll and finish stainless steel. The stainless steel
sector is highly competitive and has seen significant capacity additions,
14
<PAGE>
particularly in overseas markets. Generally, imports have been a far more
significant factor in the stainless steel market than the carbon steel market,
representing 22%, 23% and 22% of the domestic flat rolled stainless steel
market in 1993, 1994 and 1995, respectively. In part, the higher level of
imports of stainless steel is a reflection of its substantially higher
margins, which significantly reduce the relative impact of shipping costs on
the producer. There has been an increase in the capacity of foreign producers
in recent years, resulting in downward pressure on domestic prices. It is
difficult to predict the amount of stainless steel that will be imported into
the U.S. in the future. Increased domestic and foreign production capacity and
growth in imports will likely result in greater competition and have a
negative impact on prices. The ability of the Company to operate profitably in
this environment will depend on its ability to produce high quality stainless
steel at a cost that is equal to or below that of the other principal
producers.
Cyclicality
Historically, the steel industry has been cyclical in nature, reflecting the
cyclicality of many of the principal markets it serves, including the
automotive, appliance and construction industries, and changes in total
industry capacity. Although total domestic steel industry capacity was
substantially reduced during the 1980s through extensive restructuring, and
demand has been particularly strong since 1993, there can be no assurance that
demand will continue at current levels or that recent restarts of previously
idled domestic facilities and the addition of new mini-mills will not
adversely impact pricing and margins.
Environmental Regulation
Domestic steel producers, including the Company, are subject to stringent
federal, state, and local laws and regulations relating to the protection of
human health and the environment. The Company, like other domestic steel
producers, has expended, and can be expected to expend in the future,
substantial amounts for compliance with these environmental laws and
regulations. See "Business--Environmental Matters."
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the sale of the Old Notes, approximately $535.3 million,
together with proceeds from the sale of $250.0 million aggregate principal
amount of the Secured Notes, are being used to finance the approximately $1.1
billion cost of constructing and equipping the New Facility, with the balance
of such costs being funded with the Company's own cash resources. It is
anticipated that most of these costs will be incurred during the second half
of 1997 and the first half of 1998. Pending such application, the proceeds
will be invested in short-term, interest-bearing obligations.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
at September 30, 1996 and as adjusted to give effect to the sale of the Old
Notes and the Secured Notes. The information presented below should be read in
conjunction with the consolidated financial statements of the Company included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
HISTORICAL AS ADJUSTED
---------- -----------
(AMOUNTS IN MILLIONS)
<S> <C> <C>
Cash and short-term investments......................... $ 223.2 $1,008.5
======== ========
Long-term debt(1):
Senior Secured Notes Due 2004......................... -- $ 250.0
10 3/4% Senior Notes Due 2004......................... $ 325.0 325.0
9 1/8% Senior Notes Due 2006.......................... -- 550.0
-------- --------
Total long-term debt................................ 325.0 1,125.0
-------- --------
Stockholders' equity:
Preferred stock--authorized 25,000,000 shares;
7,479,674 shares issued; 4,845,774 shares
outstanding.......................................... 0.1 0.1
Common stock--authorized 75,000,000 shares; 26,958,834
shares issued; 26,319,950 shares outstanding......... 0.3 0.3
Additional paid-in capital............................ 698.7 698.7
Treasury stock--at cost--638,884 shares of Common
Stock................................................ (21.5) (21.5)
Retained earnings..................................... 66.4 66.4
-------- --------
Total stockholders' equity.......................... 744.0 744.0
-------- --------
Total capitalization................................ $1,069.0 $1,869.0
======== ========
</TABLE>
- --------
(1) At September 30, 1996, the Company had no short-term debt outstanding and
no current obligations in respect of its long-term debt.
16
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER TON DATA)
The following selected consolidated financial data for each of the five
years in the period ended December 31, 1995 have been derived from the
Company's audited consolidated financial statements. The information for the
nine-month periods ended September 30, 1995 and 1996 is unaudited, but, in the
opinion of management, contains all adjustments, including normal recurring
accruals, necessary to present fairly, in all material respects, the results
of operations for those periods. Interim results are not necessarily
indicative of results for a full fiscal year.
The selected historical consolidated financial data presented herein are
qualified in their entirety by, and should be read in conjunction with, the
consolidated financial statements of the Company, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors"
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:(1)
Net sales............... $1,301.4 $1,404.5 $1,594.5 $2,016.6 $2,257.3 $ 1,730.6 $ 1,693.6
Cost of products sold... 1,303.4 1,318.6 1,380.3 1,655.2 1,768.1 1,349.5 1,341.3
Selling and administra-
tive expenses.......... 134.4 118.6 111.2 113.7 116.5 86.2 84.7
Depreciation............ 82.6 87.3 73.5 70.7 74.6 57.8 58.7
Special charges and unu-
sual items (2)......... -- 379.3 17.6 (15.9) -- -- --
-------- -------- -------- -------- -------- --------- ---------
Total operating costs... 1,520.4 1,903.8 1,582.6 1,823.7 1,959.2 1,493.5 1,484.7
Operating profit
(loss)(2).............. (219.0) (499.3) 11.9 192.9 298.1 237.1 208.9
Interest expense........ 40.8 46.4 58.1 48.2 35.6 26.6 28.4
Other income............ 3.2 3.1 3.5 7.3 19.0 14.0 8.4
-------- -------- -------- -------- -------- --------- ---------
Income (loss) before
income taxes and
extraordinary items.... (256.6) (542.6) (42.7) 152.0 281.5 224.5 188.9
Provision (benefit) for
income taxes(3)........ (5.5) (10.6) -- (120.5) 12.9 10.6 73.7
-------- -------- -------- -------- -------- --------- ---------
Income (loss) before ex-
traordinary items...... (251.1) (532.0) (42.7) 272.5 268.6 213.9 115.2
Extraordinary items(4).. -- (12.1) -- (14.9) -- -- --
-------- -------- -------- -------- -------- --------- ---------
Net income (loss)....... $ (251.1) $ (544.1) $ (42.7) $ 257.6 $ 268.6 $ 213.9 $ 115.2
======== ======== ======== ======== ======== ========= =========
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Cash, cash equivalents,
and short-term
investments............ $ 13.8 $ 1.2 $ 144.2 $ 261.8 $ 312.8 $ 346.8 $ 223.2
Working capital (defi-
cit)................... 76.1 (14.9) 55.9 443.5 489.8 503.3 519.4
Total assets............ 1,632.8 1,425.0 1,518.7 1,933.2 2,115.5 2,035.3 2,089.1
Current portion of long-
term debt.............. 72.2 104.6 130.8 -- -- -- --
Long-term debt
(excluding current
portion)............... 497.9 563.3 598.6 330.0 325.0 325.0 325.0
Current portion of
pension and post-
retirement benefit
obligations............ 75.0 59.1 93.8 110.3 0.1 37.3 0.1
Long-term pension and
post-retirement benefit
obligations (excluding
current portion)....... 596.1 785.6 922.8 638.3 655.7 613.2 621.0
Partners' capital
(deficit)/stockholders'
equity(5).............. $ 73.3 $ (449.7) $ (586.2) $ 449.0 $ 674.2 $ 654.5 $ 744.0
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:(1)
Ratio of earnings to
combined fixed
charges(6):
Actual(7).............. -- -- -- 3.6x 5.5x 5.7x 4.9x
Pro forma(8)........... 2.4x 2.2x
EBITDA(9)............... $ (111.0) $ (329.5) $ 132.6 $ 271.9 $ 433.7 $ 340.7 $ 287.3
Ratio of EBITDA to
interest expense (10):
Actual................. -- -- 2.2x 5.3x 7.7x 8.0x 7.4x
Pro forma(8)........... 3.3x 3.0x
Operating profit (loss)
per ton (excluding
special charges and
unusual items)......... $ (79) $ (39) $ 9 $ 46 $ 74 $ 76 $ 65
Capital investments..... $ 163.1 $ 86.2 $ 40.2 $ 87.5 $ 175.7 $ 103.6 $ 55.3
Flat rolled shipments
(thousands of tons).... 2,688 2,989 3,419 3,875 4,051 3,100 3,218
Man hours per ton
shipped................ 6.86 5.93 4.20 3.78 3.26 3.19 3.02
Number of employees at
end of period.......... 8,925 7,433 6,404 5,991 5,762 5,721 5,778
</TABLE>
- -------
Footnotes appear on following page.
17
<PAGE>
- --------
(1) Holding and AK Steel were formed effective March 29, 1994 as a result of
the recapitalization of the Partnership, which was a joint venture of
Armco Inc. and Kawasaki Steel Corporation. Accordingly, data for years
prior to 1994 are derived from the financial statements of the
Partnership.
(2) The operating loss for 1992 includes special charges of $379.3 million
relating to the restructuring of the Company's operating facilities, the
shutdown of its hot-rolling mill at the Ashland Works, workforce
reductions and related costs, as well as the write-off of the Company's
investment in Eveleth Expansion Company ("Eveleth"). The operating profit
for 1993 includes special charges and unusual items of $17.6 million
relating to fixed asset write offs and related disposal costs as well as
other miscellaneous charges. The operating profit for 1994 includes a gain
of $15.9 million from the sale of the Company's equity interests in SOS
and Nova.
(3) Includes a tax benefit of $120.3 million in 1994 associated with
recognition of a deferred tax asset related to post-retirement benefits.
(4) The extraordinary item of $12.1 million in 1992 related to charges
associated with compliance with the Coal Retiree Benefit Act. The
extraordinary item of $14.9 million in 1994 consisted of charges
associated with the prepayment of certain outstanding debt.
(5) Partners' deficit at December 31, 1993 and stockholders' equity at
December 31, 1994 reflect reductions to equity of $113.2 million and $39.3
million (net of tax), respectively, related to the establishment of
additional pension plan liability. As of December 31, 1995, the Company
had fully funded its pension plan liability on an accumulated benefit
obligation basis and eliminated the reduction to stockholders' equity.
(6) For the purpose of calculating the ratio of earnings to combined fixed
charges, (i) earnings consist of income (loss) before income taxes,
extraordinary items and effects of accounting change, the distributed
income of less than 50%-owned affiliates, plus combined fixed charges and
(ii) combined fixed charges consist of interest, whether expensed or
capitalized, and preferred stock dividends.
(7) Earnings were insufficient to cover combined fixed charges in the years
1991, 1992 and 1993 by $263.7 million, $546.0 million and $46.1 million,
respectively. The deficiency of earnings to combined fixed charges in
those years was calculated as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Pre-tax loss................................. $ (256.6) $ (542.6) $ (42.7)
Interest expenses............................ 40.8 46.4 58.1
Other income (expense)....................... 0.9 1.3 (1.4)
-------- -------- -------
Earnings (loss).............................. (214.9) (494.9) 14.0
Combined fixed charges....................... 48.8 51.1 60.1
-------- -------- -------
Deficiency................................... $ (263.7) $ (546.0) $ (46.1)
======== ======== =======
</TABLE>
(8) The pro forma ratios of earnings to combined fixed charges and EBITDA to
interest expense for the year ended December 31, 1995 and the nine-months
ended September 30, 1996 reflect the pro forma interest expense on the
Notes and the Secured Notes as if those securities had been outstanding in
full during the entire period and without giving effect to any assumed
return on the interim investment of the proceeds from those securities.
For purposes of computing pro forma interest expense, the Company has
assumed an average annual rate of interest on the Secured Notes of 8.98%
and that estimated expenses of $2.1 million associated with issuance of
the Notes and the Secured Notes are amortized to interest expense.
Accordingly, pro forma interest expense for the year ended December 31,
1995 and the nine months ended September 30, 1996 reflects the following
additional items:
18
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Secured Notes:
Interest expense................... $22.5 $16.9
Amortized issuance costs........... 0.6 0.5
Notes:
Interest expense................... 50.2 37.7
Amortized issuance costs........... 1.5 1.1
----- -----
Total............................ $74.8 $56.2
===== =====
</TABLE>
(9) EBITDA represents earnings (loss) before interest expense, provision for
income taxes, depreciation and amortization and is presented herein
because it is a widely accepted indicator of a company's ability to
service debt. EBITDA does not represent net income or cash flow from
operations as those items are defined by generally accepted accounting
principles, should not be considered by holders of the Notes as an
alternative to net income and does not necessarily indicate whether cash
flows will be sufficient to fund cash needs. Under the Indenture governing
the Notes, subject to certain exceptions, the Company may not incur
additional indebtedness unless the pro forma consolidated EBITDA coverage
ratio would be greater than 2.5 to 1.0. See "Description of the Notes--
Certain Covenants--Limitation on Debt." As defined in the Indenture,
EBITDA excludes non-cash postretirement benefits other than pensions and
certain special charges. These exclusions reflect the fact that (i) a
component of retiree medical expense is a non-cash item (representing an
estimate of future medical costs) and (ii) certain of the Company's
special charges are non-cash items. Under the Indenture, to the extent
that these special charges become cash charges they will be included in
the calculation of EBITDA. See "Description of the Notes--Certain
Definitions."
(10) Interest expense consists of interest, whether expensed or capitalized,
amortization of debt issuance costs and preferred stock dividends.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
In 1993, as the U.S. economy and the domestic automotive industry emerged
from a recession that began in 1989, the domestic steel industry experienced a
significant resurgence in demand. This increase in demand enabled domestic
integrated steel producers to achieve higher shipments and to obtain price
increases for many of their major product lines. In the case of the Company,
the benefits of increased demand were accompanied by a significant increase in
the productivity of its operations, a corresponding reduction in its operating
costs and a substantial increase in its ability to produce and sell higher
margin value-added products.
As a result of these factors, the Company's shipments, revenues and net
income have increased significantly since the end of 1992. Most important, the
Company has realized a significant and continuing improvement in its operating
profit per ton, a key industry measure of profitability, from $9 for the year
ended December 31, 1993 to $74 for the year ended December 31, 1995 and $65
for the nine months ended September 30, 1996.
As more fully discussed under "The New Facility," after commencement of full
commercial production at the New Facility, the Company expects its shipments
of cold rolled, coated and stainless steel products to increase significantly
from current levels. Although increased shipments of these products would
continue the shift of the Company's product mix away from lower margin hot
rolled products, the Company will continue to sell certain grades of hot
rolled carbon steel when appropriate in light of customer demand.
The principal components of the New Facility are scheduled to commence full
production of their targeted capabilities at various dates over a thirteen-
month period beginning December 1998. Although the Company will not be
generating significant revenues from the New Facility prior to December 1998,
the Company will incur interest expense relating to the Notes and the Secured
Notes from their respective dates of issuance.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Net sales for the first nine months of 1996 were 2.1% below those for the
corresponding 1995 period. Included in net sales for the 1995 period were
$46.7 million from the sale of coke to third parties. As a result of the
shutdown of two of the coke oven batteries at the Company's Middletown Works
in December 1995, no material sales of coke were made during the nine months
ended September 30, 1996. Sales of flat rolled products during the 1996 period
increased approximately 1% over those during the corresponding period in 1995.
A decline in prices during the 1996 period for sales made on a contract basis,
which account for approximately 70% of the Company's annual sales volume, was
offset, in part, by an increase in total shipments and a series of price
increases on non-contract sales.
Consistent with management's strategic emphasis on increasing sales of
higher margin products, sales of coated products for the nine months ended
September 30, 1996 exceeded those for the corresponding 1995 period by
approximately 12%. This increase was largely attributable to an increase in
the productivity of the Company's coating facilities that resulted from
significant capital investments in those facilities during 1995. The emphasis
on production of coated products resulted in a decrease in sales of cold
rolled products, as an increased percentage of the output from the Company's
tandem cold rolling mill was allocated to its coating facilities in order to
maximize shipments of coated products. Improved productivity at the Company's
blast furnaces, casters and hot strip mill was reflected in an increase of
approximately 4.7% in sales of hot rolled products during the first nine
months of 1996 compared to the corresponding period in 1995.
Operating profit for the first nine months of 1996 totalled $208.9 million,
or $65 per ton shipped, compared to $237.1 million, or $76 per ton shipped,
for the corresponding period in 1995. The decrease was primarily due to
reduced selling prices and increased raw material costs. The Company continued
to emphasize productivity gains and quality enhancements as the primary
components of its cost reduction efforts. Man hours per net ton shipped
improved, declining to 3.02 for the first nine months of 1996 from 3.19 for
the corresponding 1995 period.
20
<PAGE>
Net income for the first nine months of 1996 totalled $115.2 million
compared with a reported $213.9 million for the same period of 1995. Because
the Company achieved full book taxpayer status in 1996, its book tax rate for
1996 is approximately 39%, compared to only 5% for 1995. On a comparably taxed
basis, net income for the 1995 period would have been $137.1 million. Earnings
per fully diluted share for the nine months of 1996 were $3.71, compared to a
reported $6.49 ($4.16 on a comparably taxed basis) for the corresponding 1995
period.
Demand for the Company's flat rolled products, especially coated and cold
rolled products, continued to be strong during the first nine months of 1996.
For the first nine months of 1996, the Company's shipments to the automotive
markets were approximately 15% above the record levels achieved during the
corresponding period in 1995.
1995 COMPARED TO 1994
Net sales for 1995 exceeded those for 1994 by approximately 12%. This
increase reflects an increase in shipments from 3,875,000 tons in 1994 to
4,051,000 tons in 1995, higher average selling prices and an improved product
mix. Net sales to affiliates decreased due to the sale of SOS and Nova in
1994.
The following table sets forth the percentage of the Company's net sales
attributable to various markets for the years indicated:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Automotive.................................................... 42% 47% 50%
Appliance, Construction and Manufacturing..................... 14% 16% 16%
Distribution and Converters................................... 44% 37% 34%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
The Company's shipment mix continued to show improvement. The high-end
market segments (automotive and appliance, construction and manufacturing)
accounted for approximately 55% of tons shipped for 1995, an increase of 3%
compared to 1994. Shipments to the automotive market increased nearly 15% to
1.6 million tons. Coated and uncoated cold rolled steel, both high-end
products, accounted for 65% of tons shipped, compared to 56% in 1994. In
addition, the Company completed capital improvement projects on its Middletown
Works continuous caster, electrogalvanizing line and hot dip galvanizing line,
which have increased the capacity to produce value-added products for the
high-end market.
Output at each of the Company's major production units continued to improve
during 1995. Significant productivity gains occurred at the continuous
casters, cold strip mill and several coating lines. Man hours per ton shipped
improved to 3.3 during 1995, compared to 3.8 in 1994, despite a more labor
intensive value-added product mix.
Primarily as a result of increased shipments and higher average selling
prices, as well as continuing cost reductions and productivity improvement
efforts, operating profit for 1995 increased 68% to $298.1 million compared to
$177.0 million for 1994 (excluding unusual items recorded in 1994), or $74 per
ton in 1995 compared to $46 per ton in 1994.
Interest expense decreased 26%, or $12.6 million, reflecting the full effect
in 1995 of the Company's recapitalization at the beginning of the second
quarter of 1994. Other income increased 160%, or $11.7 million, primarily due
to interest income on short-term investments.
The total income tax provision for 1995 was $12.9 million, the components of
which are described in Note 3 to the consolidated financial statements
included elsewhere herein.
21
<PAGE>
1994 COMPARED TO 1993
Net sales for 1994 exceeded those for 1993 by 27%. This increase reflects an
increase in tons shipped from 3,419,000 tons in 1993 to 3,875,000 tons in
1994, higher average selling prices and an improved product mix. The Company
implemented price increases in the first, second and fourth quarters of 1994.
During 1994, costs benefitted from high operating rates and ongoing cost
improvement activities. Production records were established at the Company's
blast furnaces, continuous casters, hot and cold strip mills and several
coating lines.
Primarily as a result of increased shipments and higher average selling
prices, as well as continuing cost reductions and productivity improvement
efforts, operating profit was significantly higher in 1994 than in 1993, both
in terms of absolute dollars and as a percentage of net sales. Operating
profit for 1994 also benefitted from a gain of $15.9 million from the sale of
the Company's equity interests in SOS and Nova.
As a result of its recapitalization at the beginning of the second quarter
of 1994, the Company eliminated all bank debt, reducing interest expense for
the year by $9.9 million compared to 1993 (after giving effect to the issuance
of the 10 3/4% Notes on April 7, 1994). In 1994, the Company recorded an
extraordinary loss of $14.9 million for prepayment fees associated with early
retirement of debt.
In accordance with the Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"), the Company recorded $120.3
million of income related to the recognition of a deferred tax asset in 1994.
LIQUIDITY AND CAPITAL RESOURCES
General. The Company's current liquidity needs are primarily for capital
investment and working capital requirements. After giving effect to the sale
of the Old Notes and the Secured Notes, the Company believes it has adequate
resources to address its operating, capital investment, employee benefit and
debt service requirements from cash flow from operations, cash, cash
equivalents and permitted borrowings. In the event of unanticipated reductions
in cash flow from operations, the Company would seek additional debt or equity
financing, although there can be no assurance that such financing will be
available when needed or, if available, will be obtainable on terms that are
favorable to the Company.
Nine Months Ended September 30, 1996. At September 30, 1996, the Company had
$223.2 million in cash, cash equivalents and short-term investments and $119.2
million of financing available under its $125.0 million accounts receivable
purchase credit facility. During the nine months ended September 30, 1996,
cash flow from operations generated $13.8 million, the Company contributed
$25.0 million to its pension trust and $50.0 million to a trust established to
prefund healthcare benefits for both active and retired employees and paid
profit sharing bonuses of approximately $34.0 million. In addition, the
Company made capital investments of $55.3 million, paid cash dividends of
$20.8 million and applied $39.1 million to open market purchases of its equity
securities. On October 8, 1996, the Board of Directors declared a quarterly
Common Stock dividend of $0.20 per share, payable on November 15, 1996 to
stockholders of record on October 21, 1996.
Year Ended December 31, 1995. The Company's cash, cash equivalents and
short-term investment position increased by $51.0 million during 1995. Cash
flow from operations generated $300.1 million. The Company contributed $93.0
million to its pension trust and $70.0 million to the healthcare benefits
trust, made capital investments of $175.7 million and used $73.8 million for
open market purchases of its equity securities.
Year Ended December 31, 1994. The Company's cash, cash equivalents and
short-term investment position increased by $117.6 million during 1994. Cash
flow from operating activities totalled $153.9 million. During 1994, the
Company generated $979.0 million from financing activities, consisting
primarily of the net
22
<PAGE>
proceeds of the initial public offering of its Common Stock, the public
offering of its 10 3/4% Notes and the subsequent public offering of $230
million of its 7.0% Convertible Preferred Stock. The Company repaid $629.4
million of outstanding debt, contributed $315.7 million to its pension trust
and made capital investments of $87.5 million.
Year Ended December 31, 1993. The Company's cash, cash equivalents and
short-term investment position increased by $143.0 million during 1993. Cash
flow from operating activities totalled $97.4 million. Capital investments
totalled $40.2 million. The Company repaid approximately $104.6 million of its
outstanding long-term debt and received $166.0 million in proceeds from
additional long-term borrowings, of which $70.0 million consisted of an
unsecured subordinated term loan from an affiliate of Kawasaki Steel
Corporation.
Anticipated Debt Service Requirements. After giving effect to the issuance
of the Old Notes and the Secured Notes, the Company has outstanding an
aggregate of $1,125.0 million of long-term indebtedness. No principal payments
are due in respect of this indebtedness until 2001, at which time the first of
four annual principal payments of $62.5 million in respect of the Secured
Notes will become due. The 10 3/4% Notes, aggregating $325.0 million in
principal amount, will become due as an entirety in 2004. The Notes,
aggregating $550.0 million in principal amount, will become due as an entirety
in 2006. Interest on the Company's long-term debt is expected to total $89.7
million in 1997 and $107.6 million in 1998 through 2001 and to decline ratably
thereafter to $90.7 million in 2004. For financial reporting purposes, a
portion of the interest on the Notes and the Secured Notes during the period
of construction of the New Facility will be capitalized and amortized over a
period of years.
Capital Investments. In addition to the projected $1.1 billion cost of
constructing and equipping the New Facility, the Company anticipates ongoing
capital investments to maintain the competitiveness and efficiency of its
existing facilities and to assure its compliance with applicable safety and
environmental standards. Capital investments for 1996 are expected to
aggregate approximately $90.0 million, inclusive of $55.3 million expended
during the first nine months of the year. At September 30, 1996, commitments
for future capital investments, including those made to assure environmental
compliance, totalled approximately $42.7 million, of which approximately $6.8
million will be funded in 1997 and $1.7 million in 1998. These commitments do
not include anticipated costs of constructing and equipping the New Facility.
Those costs, currently estimated at $1.1 billion, will be expended primarily
in the second half of 1997 and the first half of 1998, tapering off steadily
thereafter until final completion of the New Facility in December 1999.
EMPLOYEE BENEFIT OBLIGATIONS
The Company's pension plans are fully funded on an accumulated benefit
obligation basis in accordance with generally accepted accounting principles
as of September 30, 1996. Funding levels in the near term (three to five
years) are expected to be minimal. The Company also has available a pension
funding credit balance of $337.0 million that can be used to meet future
minimum pension funding requirements, if any, although there are no present
plans to do so.
At September 30, 1996 the Company's liability for postretirement benefits
other than pensions totalled approximately $621.0 million. Effective June 30,
1995, the Company established a healthcare trust as a means of prefunding this
liability. As of September 30, 1996, the Company had contributed approximately
$120.0 million to this trust. Effective January 1, 1996, the Company began
paying benefits from the trust, but it has reimbursed the trust for current
benefit payments. The balance of the trust at September 30, 1996 was $137.8
million, which is equivalent to approximately two years of active and retiree
benefit payments. Although there are no present plans to do so, the Company
could elect to stop reimbursing the trust for current benefit payments.
23
<PAGE>
BUSINESS
GENERAL
AK Steel is the most profitable integrated steel producer in the United
States, with an industry-leading operating profit per ton of $46 for 1994, $74
for 1995 and $65 for the first nine months of 1996. Most significantly, the
gap between these results and the average operating profit per ton reported by
the other five major domestic integrated producers has steadily widened from
$25 in 1994 to $40 in 1995 and $54 in the first nine months of 1996.
The Company concentrates on the production of premium quality coated, cold
rolled and hot rolled carbon steel primarily for sale to the automotive,
appliance, construction and manufacturing markets. The Company also cold rolls
and aluminum coats stainless steel for automotive industry customers. In 1995,
the Company had net sales of $2.26 billion, net income of $268.6 million and
EBITDA of $433.7 million. For the nine months ended September 30, 1996, it
reported net sales of $1.69 billion, net income of $115.2 million and EBITDA
of $287.3 million.
At the core of the Company's profitability is an experienced, results-
oriented management team that focuses on continuously increasing productivity,
reducing costs and improving product quality while continually striving to
improve safety and health in the workplace. Since arriving in mid-1992, the
new management team has reconfigured the Company's production facilities,
eliminating eleven redundant operating units, significantly increasing the
operating rates on remaining equipment and reducing operating costs throughout
the organization. Product quality and reliability have been improved, enabling
the Company to increase its sales of value-added coated and cold rolled
products to the high-end automotive, appliance, construction and manufacturing
markets.
The results of these efforts have been significant. Each of the Company's
key production units has achieved double-digit percentage increases in average
monthly production since 1992 through a combination of improved operating and
maintenance practices, targeted capital investments and focused production
planning. The Company's tandem cold mill has increased average monthly
production by over 83% from 132,600 tons in 1992 to 243,100 tons in the first
nine months of 1996. Average monthly production from the Company's coating
lines has increased over 79% from 93,400 tons in 1992 to 167,200 tons in the
first nine months of 1996.
The Company has increased its total annual shipments from 2,989,000 tons in
1992 to 4,051,000 tons in 1995, an increase of nearly 36%. Enhanced
productivity rates on its tandem cold mill and coating lines have allowed the
Company to increase its shipments of value-added coated and cold rolled
products from 1,668,000 tons (representing 56% of total shipments) in 1992 to
2,628,000 tons (or 65% of total shipments) in 1995. Increased production of
premium quality coated and cold rolled products has enabled the Company to
focus its commercial efforts on the most demanding requirements of the
automotive, appliance, construction and manufacturing markets. In 1992, 43% of
the Company's total shipments, or 1,288,000 tons, served customers in those
markets. In 1995, 55% of the Company's total shipments, or 2,228,000 tons,
served those markets.
The Company has earned a reputation, particularly among high-end customers,
for consistent product quality and superior service, receiving numerous
customer quality awards. In August 1996, the Company earned registration under
the ISO 9002 international quality standard and certification under the QS
9000 quality assurance program used by domestic automotive manufacturers.
The Company currently conducts operations at its Middletown Works in
Middletown, Ohio, and its Ashland Works in Ashland, Kentucky. Coke
manufacturing plants, blast furnaces, basic oxygen furnaces and continuous
casters are located at both of these facilities. The Company's hot rolling
mill, cold rolling mill, pickling lines, annealing facilities and temper mills
as well as four of its coating lines are located at the Middletown Works, and
one additional coating line is located at the Ashland Works.
24
<PAGE>
CUSTOMERS
The Company's principal customers are in the automotive, appliance,
manufacturing and construction markets. The Company also sells its products to
distribution centers and converters.
Since 1992, the Company's marketing efforts have been increasingly directed
toward those customers whose exacting requirements for on-time delivery,
technical support and the highest quality coated and cold rolled products
justify commensurate pricing. The Company believes that its enhanced product
quality and delivery capabilities, and its emphasis on customer technical
support and product planning, are critical factors in its ability to serve
this segment of the market.
The following table sets forth the percentage of the Company's net sales
attributable to various markets:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPT. 30,
------------------------------ ----------------
1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Automotive................ 44% 42% 47% 50% 49% 55%
Appliance, Manufacturing
and Construction......... 16% 14% 16% 16% 16% 16%
Distribution Centers and
Converters............... 40% 44% 37% 34% 35% 29%
</TABLE>
Consistent with management's strategy of concentrating on the high-end of
the flat rolled carbon steel market, shipments to the automotive market have
increased steadily since 1992. A major factor contributing to this increase
has been the growth in the number of U.S.-based plants of foreign automotive
manufacturers, whose production of cars and light trucks in North America has
increased from 1.2 million vehicles in 1989 to 2.3 million vehicles in 1995.
The Company supplies coated, cold rolled and hot rolled steel to nearly all of
these producers and is a major supplier to General Motors, Ford and Chrysler.
Shipments to General Motors, the Company's largest customer, accounted for
approximately 23%, 22% and 20% of net sales in 1993, 1994 and 1995,
respectively, and 18% of net sales in the first nine months of 1996. No other
customer accounted for more than 10% of net sales for these periods.
The Company also is a supplier of cold rolled and coated steel to the
appliance, manufacturing and construction markets, consisting principally of
the heating, ventilation and air conditioning market, home appliance market
and lighting industries. Shipments to these markets accounted for
approximately 16% of net sales in the first nine months of 1996.
Distribution centers and converters, the third category of the Company's
customers, purchase primarily hot rolled and cold rolled steel coils and may
process these further or simply sell them directly to third parties. Sales
generally are made on a spot market basis, with quality and delivery
capability also being factors in obtaining orders.
The New Facility, when fully operational, will enable the Company to
substantially increase its production of the premium grades of coated and cold
rolled steel most desired by its high-end customers, particularly the
automotive market. In addition, the New Facility will enable the Company to
further penetrate the market for flat rolled stainless steel, which is
associated with higher margins, less cyclicality and more favorable growth
characteristics than the carbon steel market. See "The New Facility."
RAW MATERIALS
The principal raw materials and commodities required in the Company's
manufacturing operations are coal, iron ore, electricity, natural gas, oxygen,
scrap metal, limestone and other commodity materials, all of which are
purchased at competitive or prevailing market prices. Adequate sources of
supply exist for all of the Company's material requirements.
25
<PAGE>
As more fully described under "The New Facility," following start-up of
production at the New Facility in 1999, the Company expects to supplement its
own production of carbon steel hot band with purchases from third parties and
to satisfy its stainless steel hot band requirements for the New Facility in a
similar manner. Management believes adequate sources of supply exist and will
continue to exist for both types of material, but intends to enter into long-
term contracts with several producers to assure availability.
EMPLOYEES
As of September 30, 1996, the Company had approximately 5,800 active
employees, of whom approximately 57% were represented by the Armco Employees
Independent Federation, Inc. (the "AEIF"), 18% by the United Steelworkers of
America (the "USWA") and 6% by the Oil, Chemical and Atomic Workers Union (the
"OCAW"). The AEIF represents all hourly employees and certain non-exempt
salaried employees at the Middletown Works. The USWA represents hourly
steelmaking employees and certain non-exempt salaried employees at the Ashland
Works. The OCAW represents hourly employees at the Ashland Works coke
manufacturing facility. In 1994, the USWA sought to become the collective
bargaining representative of the hourly employees at the Middletown Works, but
a majority of those employees voted to retain the AEIF as their
representative. No assurance can be given that the USWA will not seek to
represent the Middletown Works' employees at some future date.
The Company's agreements with the AEIF and the OCAW are effective through
February 29, 2000 and October 1, 1997, respectively. The expiration date of
its agreement with the USWA is presently the subject of dispute, with the
Company asserting that the agreement is effective until March 30, 2000 and the
USWA asserting that the agreement will expire March 30, 1997. No prediction
can be made as to whether or when this dispute will be resolved or as to the
possible consequences thereof.
LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to various legal proceedings
that, individually and in the aggregate, are not deemed material to its
consolidated financial position or results of operations. See Note 11 to the
consolidated financial statements for the year ended December 31, 1995 and
Note 6 to the condensed consolidated financial statements for the nine months
ended September 30, 1996 included elsewhere in this Prospectus.
ENVIRONMENTAL MATTERS
Domestic steel producers, including the Company, are subject to stringent
federal, state, and local laws and regulations relating to the protection of
human health and the environment.
The Company has expended the following for environmental related capital
investments and environmental compliance:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPT. 30,
--------------------------- ---------------
1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Environmental related capital
investments.................. $ 36.6 $ 16.4 $ 26.7 $ 19.1 $ 10.4 $ 4.7
Environmental compliance
costs........................ 37.7 43.3 46.4 51.7 37.8 39.5
</TABLE>
26
<PAGE>
The Clean Air Act Amendments of 1990 (the "Amendments") imposed new
standards designed to reduce air emissions. The Amendments have directly
affected many of the Company's operations, particularly its coke oven
batteries. As of September 30, 1996, the Company has incurred $64.2 million in
capital investments to bring its coke operations into compliance with the
Amendments' requirements. The Company does not expect capital investments for
compliance with these requirements to be material in 1996 or 1997.
The Company does not anticipate any material impact on its future recurring
operating costs or profitability as a result of its compliance with current
environmental regulations. Moreover, the Company believes that since all
domestic steel producers operate under the same set of environmental
regulations, the Company is under no competitive disadvantage resulting from
compliance with such regulations.
Environmental Remediation
The Company and its predecessors have been conducting steel manufacturing
and related operations for over 90 years. Although the Company believes that
its predecessors utilized operating practices that were standard in the
industry at the time, hazardous materials may have been released in or under
currently- or previously-operated sites. Consequently, the Company may be
required to remediate contamination at some of these sites. Although the
Company does not have sufficient information to estimate its potential
liability in connection with any potential future remediation, it believes
that if any such remediation is required, it will occur over an extended
period of time.
Pursuant to the Resource Conservation and Recovery Act ("RCRA"), which
governs the treatment, handling, and disposal of hazardous waste, the
Environmental Protection Agency ("EPA") and authorized state environmental
agencies may conduct inspections of RCRA-regulated facilities to identify
areas where there have been releases of hazardous waste or hazardous
constituents into the environment and order the facilities to take corrective
action to remediate such releases. The Middletown Works and the Ashland Works
are subject to RCRA inspections by environmental regulators. While the Company
cannot predict the future actions of these regulators, the potential exists
for required corrective action at these facilities.
Under the authority of the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), EPA and state environmental
authorities have conducted site investigations at certain of the Company's
facilities, portions of which previously had been used for disposal of tar
decanter sludge. While the results of these investigations are still pending,
the Company could, in the future, be directed to incur costs for remedial
activities at the former disposal areas. Given the uncertain status of these
investigations, however, the Company currently is unable to predict if and
when such costs might arise or, if they should arise, their magnitude.
Environmental Proceedings
In May 1996, an action was commenced against the Company in the United
States District Court, Southern District of Ohio, Western Division, on behalf
of eleven named plaintiffs seeking declaratory and injunctive relief and both
compensatory and punitive damages as a consequence of an underground coke oven
gas line leak at the Middletown Works.
Under the authority of CERCLA, the Kentucky Department of Environmental
Protection conducted a comprehensive review of the waste management control
systems and handling practices at the Ashland Works coke department and steel
making facility in July, August and September 1991. As a result of this
inspection, the Kentucky Natural Resources and Environmental Protection
Cabinet instituted an administrative proceeding against the Company in
November 1993, alleging certain regulatory violations. The Company is
vigorously contesting these allegations. To date, the EPA has not indicated
whether it will seek additional penalties for these or other alleged
violations as a result of the above inspection.
In March 1991, the Ohio Environmental Protection Agency notified the Company
that it had referred to the Ohio Attorney General for potential enforcement
action certain alleged violations of Ohio's hazardous waste regulations at the
Middletown Works. Although the Company believes it has a strong basis for
contesting the
27
<PAGE>
alleged violations, it is in the process of negotiating a consent order with
the Ohio Attorney General that will address the State's concerns.
In addition to the foregoing matters, the Company is or may be involved in
legal proceedings with various regulatory authorities that may require the
Company to pay fines relating to violations of environmental laws and
regulations, comply with more rigorous standards or other requirements, and
incur capital and operating expenses to meet such obligations.
The Company does not believe that the ultimate disposition of the foregoing
proceedings, individually or in the aggregate, will have a material adverse
effect on its financial condition, results of operations or cash flows.
28
<PAGE>
THE NEW FACILITY
OVERVIEW
The New Facility, together with the Company's existing tandem cold mill and
coating lines, will enable the Company to further process all of the hot
rolled carbon steel that it produces, as well as additional quantities of hot
band that it will purchase from other producers. The New Facility also will
enable the Company to significantly expand its presence in the stainless steel
market. The Company will continue to sell certain premium grades of hot rolled
carbon steel when appropriate in light of customer demand.
The New Facility, to be located on a currently undeveloped 1,700-acre site
in Spencer County, Indiana near the Ohio River community of Rockport, and to
be named Rockport Works, will consist of a state-of-the-art continuous cold
rolling mill, a hot dip galvanizing line, a continuous carbon and stainless
steel pickling line, a stainless steel annealing and pickling line, hydrogen
annealing facilities and a temper mill. Together with the Company's existing
tandem cold mill, the New Facility, when fully operational, will enable the
Company to cold roll all of the hot band it produces, as well as additional
quantities of hot band that it will purchase from other producers. All of this
material will be pickled, cold reduced and either annealed, tempered and
shipped as cold rolled product or galvanized or galvannealed and shipped as
coated product.
The Company currently cold rolls and aluminum coats approximately 80,000
tons per year of Series 400 stainless steel for sale primarily to
manufacturers of automotive exhaust systems. The New Facility will enable the
Company to substantially increase its shipments of Series 400 stainless steel
and to cold roll and sell Series 300 stainless steel, which is used in
restaurant and kitchen equipment and medical appliances, as well as the oil
refining, chemical production and food processing industries. Both of these
products are associated with substantially higher margins than coated carbon
steel. Hot rolled stainless steel coils in both series will be purchased from
other producers for processing at the New Facility. The Company believes that
there is and, for the forseeable future, there will be an adequate supply of
hot rolled stainless steel coils available for purchase in the open market.
Management expects that the New Facility will increase the Company's total
shipments by nearly 20%, with shipments of higher-margin stainless steel and
coated and cold rolled carbon steel growing from 65% in 1995 to 90% of the
Company's total carbon steel product mix.
PRINCIPAL COMPONENTS
The New Facility will consist of the following major units:
. Continuous cold mill. At the heart of the New Facility will be a 60,000
horsepower continuous cold mill, designed to cold reduce carbon steel hot
bands up to 80 inches in width at an estimated rate of 500 tons per hour.
A laser welder will join separate coils of hot band into a single strip,
which will be fed into a horizontal accumulator to allow the mill to
operate continuously as additional coils are welded to the strip. The
mill will also cold reduce stainless steel hot bands and cold bands in
widths up to 60 inches on a continuous basis. Cold rolling of both carbon
and stainless steel will be subject to continuous variable crown
management to assure precise product gauge and shape.
. Hot dip galvanizing line. This coating line will be capable of producing
the premium grades of galvanized and galvannealed steel desired by the
automotive market in widths up to 80 inches, a width currently
unavailable from any domestic producer. After cleaning, a continuous
strip of cold rolled carbon steel will enter a radiant tube furnace, free
of oxygen contamination, where new heating control technology will permit
instant adjustments for changes in material size and grade, resulting in
higher yield and quality consistency throughout the final coil. Nitrogen
finishing coating knives will assure precise coating weights. Material to
be galvannealed will also pass through an electrical induction furnace,
providing the precise heating necessary to control the alloy composition.
The unit will include a skin pass mill for shape control and an in-line
roll coater for organic and chemical coatings for additional corrosion
protection or paint pretreatment. The exit portion of the unit will
include a two-sided, in-line inspection station to permit both vertical
and horizontal inspection.
29
<PAGE>
. Continuous carbon and stainless steel pickling line. This unit cleans and
flattens carbon and Series 400 stainless steel hot band in preparation
for cold rolling. An advanced laser welder will join separate coils of
carbon hot band up to 80 inches in width and stainless steel hot band up
to 60 inches in width into a continuous strip. The strip will then be
passed through a tension leveler to enhance its flatness and surface
quality and promote descaling. Finally, the strip will be descaled in a
shallow hydrochloric acid bath in high-turbulence tanks.
. Continuous stainless steel annealing and pickling line. This unit cleans,
flattens and improves the physical qualities of stainless steel hot band
in preparation for cold rolling and shipment. Coils up to 60 inches in
width will be joined by a laser welder, proceed to an accumulator and
then enter a direct-fired annealing furnace and electrolytic and chemical
pickling operation to assure consistent mechanical properties and surface
cleanliness. Tension levelers and a skin pass mill will then produce
material ready for shipment or further processing through the continuous
cold mill.
. Hydrogen annealing facilities. High flow furnaces and rapid cooling will
assure that cold rolled carbon steel coils have consistent mechanical
properties and surface cleanliness.
. Temper mill. Cold rolled carbon steel will be subjected to computer
controlled hydraulic roll bending and continuous variable crown
management to assure surface quality and flatness for the most stringent
applications.
The New Facility also will include advanced storage, packaging, loading and
unloading facilities. The 1,700-acre site will be sufficient to permit future
expansion.
MARKETING STRATEGY
Carbon Steel
Galvanized steel, including galvannealed material, is particularly desired
by the automotive industry because of its superior corrosion resistance and
formability characteristics, and is associated with the highest margins of all
flat rolled carbon steel products. Demand for these products has been growing
steadily, primarily as a result of the expanding requirements of the U.S.-
based production facilities of foreign automotive manufacturers. In 1989,
foreign manufacturers produced 1.2 million cars and light trucks in North
America. In 1995, this number had increased to 2.3 million, a compound annual
growth rate of 8.8%. Over the past three years, the automotive industry's
demand for galvanized and galvannealed steel, primarily for exposed automotive
applications, has increased nearly 40%, from 4.3 million tons in 1992 to 6.0
million tons in 1995.
Management believes there currently is insufficient domestic capacity to
fully satisfy this growing demand from the automotive industry for quality
galvanized and galvannealed steel. Additional facilities recently completed
and those announced and scheduled to come on line within the next few years
are capable of processing materials only in widths of 60 inches or less, and
are targeted primarily to the construction market. To the knowledge of
management, there has been no announcement of new capacity targeted to the
market for exposed automotive steel. The cold mill and hot dip galvanizing
line at the New Facility, which will process material in widths up to 80
inches, is specifically targeted to this market. Wider material permits the
automotive manufacturer to produce more one-piece body panels, reducing the
costs associated with joining separate pieces to produce a single panel.
Management intends to produce approximately 800,000 tons of galvanized and
galvannealed material annually at the New Facility.
To date in 1996 because of the capacity limitations of its existing tandem
cold mill, the Company has allocated an increased percentage of the output of
that mill to its recently expanded coating lines, reducing its shipments of
cold rolled material to approximately 80% of the 1995 level. Management
believes there is and will continue to be unfulfilled demand for cold rolled
product, which, although having lower margins than coated material, is
associated with higher margins and more stable pricing than hot rolled steel.
New planned cold rolling facilities recently announced by other domestic
producers, including several mini-mills, will employ reversing mill
technology, which, unlike the Company's existing tandem cold mill and the
proposed continuous
30
<PAGE>
cold mill at the New Facility, are not physically able to maintain the stable
and uniform operating conditions needed to impart the mechanical properties
and surface quality needed, or to produce the greater widths desired, for
exposed automotive applications. Management intends to produce approximately
600,000 tons of cold rolled product annually at the New Facility.
Stainless Steel
During 1995, domestic consumption of flat rolled stainless steel totalled
nearly 1.6 million tons, of which approximately 500,000 tons consisted of
Series 400 stainless steel, with the balance consisting primarily of Series
300 stainless steel. Although domestic consumption on a per capita basis has
increased in recent years, it remains substantially below that of other major
industrial nations. According to industry analysts, domestic consumption is
projected to continue to grow steadily at a compounded annual rate of 5%.
Approximately 22% of the flat rolled stainless steel sold in the United
States in 1995 was produced abroad. Two domestic producers have announced
planned capacity expansions aggregating approximately 335,000 tons per year.
The Company believes that there is sufficient projected demand for high
quality flat rolled stainless steel to absorb this additional capacity as well
as the projected capacity of the New Facility.
The New Facility will cold roll and finish both Series 400 and Series 300
stainless steel in widths up to 60 inches. Series 400 stainless steel is
primarily employed for high-temperature, high-corrosion environments, such as
automotive exhaust systems. Series 300 stainless, which includes nickel within
the alloy to increase its hardness, surface quality and impact resistance, has
applications in the manufacturing of restaurant and kitchen equipment and
medical appliances, as well as in the oil refining, chemical production and
food processing industries.
The Company is currently cold rolling and aluminum coating Series 400
stainless steel at its Middletown Works at the rate of approximately 80,000
tons per year. Because of its metallurgical properties, stainless steel must
be cold reduced at slower speeds than carbon steel and, therefore, requires
two and sometimes three passes through the rolling mill to achieve the same
gauge that can be realized by only a single pass of carbon steel.
Nevertheless, the rolling technology employed at the Company's existing tandem
cold mill and to be employed at its proposed continuous cold mill is expected
to permit far more efficient and less costly reduction than is possible with
the technology currently used by most domestic stainless producers. The
Company plans initially to cold roll and finish Series 400 and Series 300
stainless steel at the New Facility at annual rates of approximately 200,000
tons and 185,000 tons, respectively.
CONSTRUCTION AND START-UP
Construction and equipping of the New Facility, including acquisition and
development of the site and all required support facilities, is expected to
cost approximately $1.1 billion. To effectively manage equipment lead times
and requirements during the construction period, and reduce risks,
construction and start-up of the various major components of the New Facility
will be independent of each other and will be staggered over a period of
approximately three years. Funding requirements for the project will begin in
the first quarter of 1997, peak in the second half of 1997 and the first half
of 1998, tapering off steadily thereafter through the end of 1999.
The first production component to begin commercial operation will be the
galvanizing line, which is projected to be at full production of anticipated
customer shipment levels of approximately 800,000 tons per year, beginning in
December 1998. The continuous cold mill is scheduled to achieve its targeted
production of cold rolled carbon steel in March 1999. The hydrogen annealing
facilities and the temper mill are expected to be capable of supporting
approximately 600,000 tons per year of cold rolled product shipments by June
1999. The continuous carbon and stainless steel pickling line is scheduled to
be at its targeted production level in September 1999. Lastly, the continuous
stainless steel annealing and pickling line is scheduled to be at its targeted
annual customer shipment levels of 200,000 tons of Series 400 stainless and
185,000 tons of Series 300 stainless in December 1999. The staggered start-up
of the various components of the New Facility should also enable the Company
to begin generating revenue from the New Facility prior to the end of the
construction period.
31
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and principal position with the
Company of each of its executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Thomas C. Graham........ 69 Director and Chairman of the Board
Richard M. Wardrop,
Jr..................... 51 Director, President and Chief Executive Officer
Mark G. Essig........... 39 Executive Vice President--Commercial
Richard E. Newsted...... 39 Senior Vice President, Chief Financial Officer
Thomas C. Graham, Jr. .. 42 Vice President--Research and Design Engineering
John G. Hritz........... 42 Vice President, General Counsel and Secretary
Ronald S. Mulhauser..... 61 Vice President--Purchasing and Transportation
James W. Stanley........ 52 Vice President--Safety and Health
James L. Wainscott...... 39 Vice President and Treasurer
James F. Walsh.......... 43 Vice President--Manufacturing
Donald B. Korade........ 54 Controller
Allen Born.............. 63 Director
John A. Georges......... 65 Director
Dr. Bonnie Guiton Hill.. 55 Director
Robert H. Jenkins....... 53 Director
Lawrence A. Leser....... 61 Director
Robert E. Northam....... 66 Director
Cyrus Tang.............. 67 Director
James A. Thomson, Ph.D.. 51 Director
</TABLE>
Thomas C. Graham was elected Chairman and Chief Executive Officer of the
Company on April 7, 1994 and served as its Chief Executive Officer until May
16, 1995. From June 1992 until April 1994, he served as President and Chief
Executive Officer of the Partnership. Prior to joining the Partnership, Mr.
Graham served as Chairman and Chief Executive of Washington Steel Corporation
from July 1991 to May 1992, and, for more than five years prior thereto, Mr.
Graham was a senior executive with the U.S. Steel Group of USX Corporation and
its predecessor, U.S. Steel Corporation. Mr. Graham also is a director of
International Paper Company and Hershey Foods Corporation. Mr. Graham has
indicated his intention to retire as an officer and director of the Company in
February 1997.
Richard M. Wardrop, Jr. was elected a director of the Company on March 2,
1995 and on May 17, 1995 he was elected Chief Executive Officer in addition to
his role as President. He had been President and Chief Operating Officer of
the Company since April 7, 1994, having previously served from June 1992 as
Vice President--Manufacturing of the Partnership. Prior to joining the
Partnership, Mr. Wardrop served from January 1992 to May 1992 as Corporate
Vice President, Engineering & Purchasing, of Washington Steel Corporation,
from July 1990 to December 1991 as Consultant to the President for Quigley
Company, Inc., a subsidiary of Pfizer, Inc., and from February 1988 to June
1990 as General Manager, Mon Valley Works, U.S. Steel Corporation.
Mark G. Essig has been Executive Vice President--Commercial since April
1994. Mr. Essig joined the Partnership in July 1992 as Vice President,
Employee Relations and Assistant to the President and was named Vice
President, Sales and Marketing in April 1993. Mr. Essig was Vice President and
Chief Financial Officer of Washington Steel Corporation from July 1991 to June
1992.
Richard E. Newsted has been Senior Vice President, Chief Financial Officer
of the Company since August 1994. In addition, he was Treasurer from August
1994 through March 1995. From January 1993 until June 1994, Mr. Newsted was
Vice President, Chief Financial Officer and Secretary and from May 1991 to
December 1992, Vice President, Finance and Treasurer of National Steel
Corporation.
32
<PAGE>
Thomas C. Graham, Jr. joined the Company as its Vice President--Research and
Design Engineering in June 1996. From early 1994 until that date, he was
General Manager Sales--Construction for National Steel Corporation, having
previously held various positions in Project Engineering, Process and
Technology, and Operations Management at that company.
John G. Hritz has been Vice President, General Counsel and Secretary since
August 1996. Mr. Hritz joined the Company in 1989 as counsel in the law
department, and was named Assistant General Counsel in 1993 and Assistant
Secretary in 1994. Since June 1996, Mr. Hritz also has had responsibility for
the Company's employee and labor relations.
Ronald S. Mulhauser has been Vice President--Purchasing and Transportation
of the Company since August 1994. For more than ten years prior to joining the
Company, Mr. Mulhauser held various purchasing and management positions with
U.S. Steel Corporation.
James W. Stanley was named Vice President--Safety and Health in January
1996. Prior to joining the Company, Mr. Stanley held various management
positions with the U.S. Department of Labor's Occupational Safety and Health
Administration since its inception in 1971.
James L. Wainscott was named Vice President and Treasurer in April 1995. For
more than ten years prior to joining the Company, Mr. Wainscott held various
financial positions with National Steel Corporation.
James F. Walsh was named Vice President--Manufacturing in January 1996. Mr.
Walsh joined the Partnership in January 1993 as Manager, Maintenance
Technology, and in April 1994 was named General Manager, Middletown Works. He
was elected Vice President--Research and Design Engineering in August 1995.
From 1987 to 1993 Mr. Walsh held various management positions at Qualimatrix,
Inc.
Donald B. Korade has been Controller since September 1995. Mr. Korade was
Assistant Controller--Financial Accounting from June 1989 to September 1995.
Allen Born was elected a director of the Company on March 2, 1995. He is
Chairman and Chief Executive Officer of Alumax Inc. and Co-Chairman of Cyprus
Amax Minerals Company, having served in those positions since November 1993.
For more than five years prior thereto he served as Chairman and Chief
Executive Officer of Amax Inc. Mr. Born also is a director of Amax Gold Inc.,
the American Mining Congress, the Aluminum Association and the International
Primary Aluminum Institute.
John A. Georges has been a director of the Company since April 7, 1994. He
is the Retired Chairman and Chief Executive Officer of International Paper
Company, having served in that position from 1985 to March 1996. He is also a
director of International Paper Company, Ryder System Inc., and Warner-Lambert
Company. Mr. Georges is a member of The Business Council and a member of the
Trilateral Commission. He is President of the University of Illinois
Foundation.
Dr. Bonnie Guiton Hill has been a director of the Company since April 7,
1994. She has been Dean of the McIntire School of Commerce at the University
of Virginia since July 1992. She served as Secretary of the State and Consumer
Services Agency for the State of California from April 1991 to June 1992. From
September 1990 to March 1991, Dr. Hill was the President and Chief Executive
Officer of Earth Conservation Corporation. From April 1989 to September 1990,
she served as Director of the United States Office of Consumer Affairs and
Special Advisor to the President for Consumer Affairs, and has previously
served as the Assistant Secretary of the United States Department of Education
and as Vice-Chair of the United States Postal Rate Commission. She also is a
director of Niagara Mohawk Corporation, Hershey Foods Corporation, Louisiana-
Pacific Corporation and Crestar Financial Corporation.
Robert H. Jenkins was elected a director of the Company effective January
24, 1996. He is President and Chief Executive Officer of Sundstrand
Corporation having been named to this position in September 1995. For more
than five years prior thereto, Mr. Jenkins was employed by Illinois Tool Works
as its Executive Vice President and in other senior management positions. Mr.
Jenkins also serves as a member of the board of trustees of the Manufacturers
Alliance and the National Association of Manufacturers.
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Lawrence A. Leser was elected a director of the Company on May 17, 1995 and
is Chairman of the E.W. Scripps Company. Mr. Leser was elected Chairman in
August 1994 and was also Chief Executive Officer of the E.W. Scripps Company
from July 1985 to May 1996. Mr. Leser also serves as a director of Union
Central Life Insurance Company and the Newspaper Association of America, Inc.
and is a Trustee of Xavier University and a member of the National Advisory
Board of Chemical Bank.
Robert E. Northam has been a director of the Company since April 7, 1994. He
retired as Executive Vice President and Chief Financial Officer of J.C. Penney
Company, Inc. in January 1996, having served in that position since February
1982. He also served in the office of the chairman of J.C. Penney Company,
Inc. from June 1992 until his retirement. Mr. Northam is a member of the
Financial Executives Institute, the American Institute of Certified Public
Accountants, and the New York State Society of Certified Public Accountants.
Cyrus Tang has been a director of the Company since April 7, 1994. Since
1971, he has served as President and Chief Executive Officer of Tang
Industries, Inc., which, together with its affiliates of which National
Materials Limited Partnership is one, operates various businesses, including
steel distribution and processing, metal stamping and fabrication, ferrous and
non-ferrous scrap trading and processing, aluminum die casting, extrusions and
recycling, wood and steel office furniture manufacturings and pharmaceuticals.
James A. Thomson, Ph.D, was elected a director of the Company on March 18,
1996. He is the President and Chief Executive Officer of The Rand Corporation,
having served in that capacity since August 1989. Dr. Thomson is a member of
the Council on Foreign Relations in New York, the International Institute for
Strategic Studies in London, the governing board of the Los Angeles World
Affairs Council, and the Council of Economic Advisors to the Governor of
California.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit and Finance Committee, a
Compensation Committee, a Public Affairs Committee and a Nominating and
Governance Committee. The Board may establish such additional committees as it
deems advisable.
The functions of the Audit and Finance Committee are to recommend to the
Board of Directors the appointment of the independent public accountants of
the Company, review and approve the scope and fees of the annual audit and
review the results thereof with the Company's independent accountants. The
Audit and Finance Committee also assists the Board in fulfilling its fiduciary
responsibilities relating to accounting and reporting policies, practices and
procedures, and reviews the continuing effectiveness of the Company's business
ethics and conflicts of interest policies. The current members of the Audit
and Finance Committee are Mr. Georges (Chairperson), Mr. Northam, Mr. Tang and
Mr. Born.
The functions of the Compensation Committee are to review and recommend to
the Board of Directors compensation of the principal officers, review the
duties and responsibilities of the Company's principal officers, review
compensation and personnel policies, administer the Company's Stock Incentive
Plan (as described below) and certain other employee benefit plans, and review
and make recommendations to the Board with respect to the Company's incentive
compensation plans, pension and savings plans and its employee retirement and
benefit policies and plans. The current members of the Compensation Committee
are Mr. Northam (Chairperson), Mr. Born, Mr. Leser and Dr. Hill.
The functions of the Public Affairs Committee are to review and make
recommendations to the Board of Directors regarding the Company's policies and
practices related to public affairs, including its policies with respect to
environmental compliance, employee safety and health and equal employment
opportunity. The current members of the Public Affairs Committee are Dr. Hill
(Chairperson), Mr. Georges, Mr. Jenkins and Dr. Thomson.
The functions of the Nominating and Governance Committee are to review and
make recommendations to the Board of Directors regarding the size,
organization, membership requirements, compensation and other practices and
policies of the Board. The current members of the Nominating and Governance
Committee are Mr. Leser (Chairperson), Mr. Tang, Mr. Jenkins, and Dr. Thomson.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes that are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1997; provided, however, that if the Company,
in its sole discretion, has extended the period of time during which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $550,000,000 aggregate principal amount
of Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
The Company expressly reserves the right, at any time and from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby to delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders of the Old Notes as described
below. During any such extension, all Old Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Company. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holders thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of $1,000
or any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted
for exchange, upon the occurrence of any of the conditions to the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to The
Bank of New York (the "Exchange Agent") at one of the addresses set forth
below under "Exchange Agent" on or prior to the Expiration Date. In addition,
either (i) certificates for such Old Notes must be received by the Exchange
Agent along with the Letter of Transmittal, (ii) a timely confirmation of a
book-entry transfer ("a Book-Entry Confirmation") of such Old Notes, if such
procedure is available, into the Exchange Agent's account at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedure
for book-entry transfer described below, must be received by the Exchange
Agent prior to the Expiration Date, or (iii) the holder must comply with the
guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD
NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL,
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IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY.
Any beneficial owner of Old Notes whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender such Old Notes in the Exchange Offer should contact the
registered holder promptly and instruct such registered holder to tender on
such beneficial owner's behalf. If such beneficial owner wishes to tender on
its own behalf, such owner must, prior to completing and executing the Letter
of Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of such Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal Rights"), as the case may be, must be guaranteed (see
"--Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of these Old
Notes who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution (as defined below). 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 guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder exactly as the name or names of the
registered holder or holders appear on the Old Notes with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined
by the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes not properly tendered or the acceptance of which might,
in the judgment of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility
of any holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation by the Company of the terms and conditions of the Exchange
Offer as to any particular Old Notes either before or after the Expiration
Date (including the Letter of Transmittal and the instructions thereto) shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such reasonable period of time as the Company shall determine.
None of the Company, the Exchange Agent or any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Old Notes for exchange, nor shall any of them incur any liability
for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted with the Letter of Transmittal.
By tendering Old Notes for exchange, each holder will represent to the
Company that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to engage or participate in a distribution
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of the New Notes. If any holder or any such other person is an "affiliate", as
defined under Rule 405 of the Securities Act, of the Company or is engaged in
or intends to engage in, or has an arrangement or understanding with any
person to participate in, a distribution of such New Notes to be acquired
pursuant to the Exchange Offer, such holder or any such other person (i) may
not rely on the applicable interpretation of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New 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 activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." 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.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of
the Old Notes. See "--Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company will be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive as set forth below under "Description of the Notes--Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid on the Old Notes or, if no
interest has been paid, from December 17, 1996. Old Notes accepted for
exchange will cease to accrue interest from and after the date of consummation
of the Exchange Offer. Holders whose Old Notes are accepted for exchange will
not receive any payment in respect of accrued interest on such Old Notes
otherwise payable on any interest payment date for which the record date
occurs on or after consummation of the Exchange Offer. If the Exchange Offer
is not consummated by June 17, 1997, the Notes will bear additional interest
of 0.5% per annum from and including June 17, 1997 until but excluding the
date of consummation of the Exchange Offer. Old Notes not tendered or not
accepted for exchange will continue to accrue interest from and after the date
of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-
Entry Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering holder thereof (or, in
the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, such non-exchanged Old Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through
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book-entry transfer at the Book-Entry Transfer Facility, the Letter of
Transmittal or a facsimile thereof, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and
received by the Exchange Agent at the addresses set forth below under "--
Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) on or prior to 5:00 P.M., New York
City time, on the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of the Old Notes and the amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteed that within three
New York Stock Exchange ("NYSE") trading days after the date of execution of
the Notice of Guaranteed Delivery, the certificates for all physically
tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation,
as the case may be, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution within three NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must specify the name of the person having tendered the Old Notes
to be withdrawn, identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes), and (where certificate for Old Notes have
been transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates the withdrawing holder must also submit
the serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such holder is an Eligible Institution in which case such guarantee
will not be required. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Old Notes and otherwise comply with
the procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination will be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Notes) as soon
as practicable after withdrawal, rejection of tender of termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described under "--Procedures for Tendering Old Notes"
above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company
shall not be required to accept for exchange, or to issue New Notes
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in exchange for, any Old Notes, and may terminate or amend the Exchange Offer,
if, at any time before the acceptance of such New Notes for exchange, any of
the following events shall occur:
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any applicable
interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time
in its sole discretion. The failure by the Company at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order is threatened by the Commission or in effect
with respect to the Registration Statement of which this Prospectus is a part
or the qualification of the Indenture under the Trust Indenture Act of 1939,
as amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests or Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
The Bank of New York, Exchange Agent
By Mail:
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Enrique Lopez,
Reorganization Section -- 7 East
By Hand or Overnight Courier:
The Bank of New York
101 Barclay Street
New York, New York 10286
Securities Window, Street Level
Attention: Enrique Lopez,
Reorganization Section -- 7 East
By Facsimile:
(212) 571-3080
Confirm by Telephone:
(212) 815-2742
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
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FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the Exchange Offer be returned to, a person
other than the registered tendering holder will be responsible for the payment
of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon
as a consequence of the issuance of the Old Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act. The Company does not currently anticipate
that it will register Old Notes under the Securities Act. See "Description of
the Notes--Exchange Offer; Registration Rights." Based on interpretations by
the staff of the Commission, as set forth in no-action letters issued to third
parties, the Company believes that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by a holder thereof (other than a holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course or such holder's business and such holder, other than a broker-dealer,
has no arrangement or understanding with any person to engage or participate
in a distribution of such New Notes. However, the Commission has not
considered the Exchange Offer in the context of a no-action letter request by
the Company and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in
such other circumstances. Each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If any holder is an affiliate of
the Company or is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) may not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes pursuant to the Exchange
Offer must acknowledge that such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities and that
it will deliver a prospectus in connection with any resale of such New 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 New Notes received in exchange for Old
Notes where such Old Notes were acquired by such broker-dealer 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 available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
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DESCRIPTION OF THE NOTES
The Old Notes were issued under an Indenture dated as of December 17, 1996
(the "Indenture") among AK Steel, Holding and The Bank of New York, as trustee
(the "Trustee"). The New Notes also will be issued under the Indenture. The
Old Notes and the New Notes will be treated as a single class of securities
under the Indenture.
The following is a summary of certain provisions of the Indenture and the
Notes. A copy of the Indenture, including the form of the Notes, has been
filed as an exhibit to the Registration Statement of which this Prospectus is
a part.
The following summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the
Indenture, including the definitions therein of certain terms and those terms
made a part of the Indenture by the Trust Indenture Act of 1939, as amended.
Certain terms used herein and in the Indenture are defined below under "--
Certain Definitions." As used herein, the term "Notes" means the New Notes and
the Old Notes, treated as a single class. Capitalized terms used but not
otherwise defined herein have the respective meanings ascribed to them in the
Indenture.
GENERAL
The Notes are senior unsecured obligations of AK Steel, limited to $550.0
million in aggregate principal amount and will mature on December 15, 2006.
The New Notes will bear interest at the rate per annum shown on the cover page
of this Prospectus from December 17, 1996 or from the most recent Interest
Payment Date (as defined) to which interest on the Old Notes has been paid,
payable semi-annually on June 15 and December 15 (each an "Interest Payment
Date") of each year, commencing June 15, 1997 to each Person in whose name a
Note is registered at the close of business on the preceding June 1 or
December 1, as the case may be. Accordingly, registered holders of New Notes
on the relevant record date for the first Interest Payment Date following the
consummation of the Exchange Offer will receive interest from the most recent
Interest Payment Date to which interest has been paid on the Old Notes or, if
no interest has been paid, from December 17, 1996. Old Notes accepted for
exchange will cease to accrue interest from and after the date of the
consummation of the Exchange Offer. Holders whose Old Notes are accepted for
exchange will not receive any payment in respect of interest on such Old Notes
otherwise payable on any Interest Payment Date for which the record date
occurs on or after the consummation of the Exchange Offer. Interest on the
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
For so long as Notes are represented by a Global Security (as defined), all
payments made in respect of those Notes (including principal, premium, if any,
and interest) will be payable by the Paying Agent (as defined) to The
Depository Trust Company, New York, New York (the "Depository"), or its
nominee, by wire transfer of immediately available funds for payment to its
participants for subsequent disbursement to the beneficial owners. See "--
Book-Entry, Delivery and Form." AK Steel will make all payments in respect of
a certificated Note (including principal, premium, if any, and interest) by
mailing a check to the address of the registered holder thereof; provided,
however, that payments on the Notes may also be made, in the case of a holder
of certificated Notes of at least $1,000,000 aggregate principal amount, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and whole multiples thereof. No service charge will be
made for any registration of transfer or exchange of Notes, but AK Steel may
require payment of a sum sufficient to cover any taxes, assessments or other
governmental charges payable in connection therewith.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note.
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The interest rate on the Notes is subject to increase in certain
circumstances if the Registration Statement ceases to be effective as further
described under "--Exchange Offer; Registration Rights."
OPTIONAL REDEMPTION
The Notes will be redeemable at AK Steel's option, at any time on or after
December 15, 2001 as a whole or from time to time in part, upon not less than
30 nor more than 60 days' notice mailed to each holder of Notes to be redeemed
at the holder's address appearing in the register, at the following redemption
prices (expressed as percentages of principal amount) if redeemed during the
12-month period beginning December 15 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001.......................................................... 104.56%
2002.......................................................... 103.04%
2003.......................................................... 101.52%
2004 and thereafter........................................... 100.00%
</TABLE>
together in the case of any such redemption with accrued interest (if any) to
the redemption date.
Notwithstanding the foregoing, at any time and from time to time prior to
December 15, 1999, AK Steel may redeem up to $175.0 million aggregate
principal amount of the Notes with the proceeds of one or more Public Equity
Offerings, at a redemption price of 109.125% of the principal amount thereof
plus accrued interest to the redemption date; provided, however that at least
$375.0 million aggregate principal amount of the Notes remains outstanding
after each such redemption.
If less than all of the Notes are to be redeemed, the Notes will be chosen
for redemption by the Trustee and the Depository on a pro rata basis or by lot
or by a method that complies with applicable legal and securities exchange
requirements.
CHANGE IN CONTROL OFFER
Under the Indenture, within 30 days following any Change in Control, AK
Steel shall notify the Trustee and each holder in writing of the occurrence of
the Change in Control and shall make an offer to repurchase (the "Change in
Control Offer") the Notes for cash at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest thereon to and
including the Change in Control Payment Date (as defined below) (such price,
the "Change in Control Payment Price") on the Change in Control Payment Date.
The "Change in Control Payment Date" shall be a date no earlier than 45 days
nor later than 60 days from the date the Change in Control Offer is mailed. AK
Steel shall purchase all Notes properly tendered in the Change in Control
Offer and not withdrawn in accordance with the procedures set forth in the
Indenture. The Change in Control Offer shall state, among other things, the
procedures that holders must follow to accept the Change in Control Offer.
If a Change in Control Offer is made, there can be no assurance that AK
Steel will have funds sufficient to pay the Change in Control Payment Price
for all the Notes that might be delivered by holders seeking to accept the
Change in Control Offer. See "Risk Factors--Factors Relating to the Company--
Substantial Leverage." The failure of AK Steel to repurchase Notes in
accordance with this provision constitutes an Event of Default. See "--Events
of Default."
AK Steel will comply with the applicable tender offer rules, including Rule
14e-1 under the Exchange Act, and any other applicable securities laws or
regulations in connection with a Change in Control Offer. The existence of a
holder's right to require AK Steel to repurchase such holder's Notes upon a
Change in Control may deter a third party from acquiring AK Steel in a
transaction that constitutes a Change in Control.
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RANKING
The Old Notes are, and the New Notes will be, senior unsecured obligations
of AK Steel ranking pari passu with other senior unsecured Debt of AK Steel
and senior to all Subordinated Obligations. At September 30, 1996, after
giving pro forma effect to the sale of the Old Notes and the Secured Notes,
the aggregate amount of senior indebtedness of AK Steel would have been
approximately $1,125.0 million. AK Steel will have the ability to incur
additional senior indebtedness, subject to certain limitations contained in
the Indenture. See "--Certain Covenants--Limitation on Liens" and "--
Limitation on Debt."
The Holding Guarantee will be an unsecured senior obligation of Holding and
will rank pari passu with other senior unsecured indebtedness of Holding,
including its guarantee of the Old Notes, the Secured Notes and the 10 3/4%
Notes. The principal asset of Holding is all of the outstanding shares of
securities of AK Steel, and virtually all of Holding's operations are
conducted through AK Steel. In the Indenture, Holding has agreed not to engage
in any activities other than holding the outstanding securities of AK Steel as
well as those activities incidental to its status as a public company, and not
to incur any liabilities other than those relating to its guarantees of the
Notes and certain other indebtedness of AK Steel as well as those liabilities
incidental to its status as a public company. See "--Certain Covenants--
Restrictive Covenant of Holding."
NOTE GUARANTEES
Holding and any Person that becomes a Subsidiary (other than a Non-Recourse
Subsidiary) after the date on which the Old Notes were originally issued (see
"--When AK Steel or Any of Its Subsidiaries May Merge or Transfer Assets")
will guarantee on a joint and several basis the payment and performance by AK
Steel of the Obligations (the "Note Guarantees") and will pay all expenses
(including, without limitation, fees and disbursements of counsel) paid or
incurred by the Trustee or the holders in enforcing their rights under the
Note Guarantees. Each of the Note Guarantees will be a senior unsecured
obligation of the Person providing such Note Guarantee, and will rank pari
passu with other senior unsecured Debt of such Guarantor.
Claims of creditors of the Subsidiaries, including trade creditors, will
have priority over the equity interests of AK Steel and creditors of AK Steel,
including holders of the Notes. Although holders of the Notes will be direct
creditors of each Guarantor Subsidiary by virtue of the Note Guarantees,
existing or future creditors of a Guarantor Subsidiary could attempt to avoid
or subordinate Note Guarantees, in whole or in part, under fraudulent
conveyance laws. To the extent any Note Guarantee is avoided as a fraudulent
conveyance or held unenforceable for any other reason with respect to any
Notes, the holders thereof would cease to be creditors of such Guarantor
Subsidiary and would be solely creditors of AK Steel and of any Guarantor
Subsidiary whose Note Guarantee was not voided or held unenforceable.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the New Notes will be issued in the form of a
global certificate (the "Global Security"). The Global Security will be
deposited with, or on behalf of, the Depository and registered in the name of
the Depository or its nominee. Except as set forth below, the Global Security
may be transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. Investors may hold their beneficial
interests in the Global Security directly through the Depository if they have
an account with the Depository or indirectly through organizations which have
accounts with the Depository.
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers (which may include the Initial
43
<PAGE>
Purchasers), banks, trust companies, clearing corporations and certain other
organizations. Access to the Depository's book-entry system is also available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, whether
directly or indirectly.
Upon the issuance of the Global Security, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the New
Notes represented by such Global Security to the accounts of participants.
Ownership of beneficial interests in the Global Security will be limited to
participants or persons that may hold interests through participants.
Ownership of beneficial interests in the Global Security will be shown on, and
the transfer of those ownership interests will be effected only through,
records maintained by the Depository (with respect to participants' interests)
and such participants (with respect to the owners of beneficial interests in
the Global Security other than participants). The laws of some jurisdictions
may require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limits and laws may impair the
ability to transfer or pledge beneficial interests in the Global Security.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Security, the Depository or such nominee, as the case may
be, will be considered the sole legal owner and holder of the related New
Notes for all purposes of such New Notes and the Indenture. Except as set
forth below, owners of beneficial interests in the Global Security will not be
entitled to have the New Notes represented by the Global Security registered
in their names, will not receive or be entitled to receive physical delivery
of certificated Notes in definitive form and will not be considered to be the
owners or holders of any New Notes under the Global Security. The Company
understands that, under existing industry practice, in the event an owner of a
beneficial interest in the Global Security desires to take any action that the
Depository, as the holder of the Global Security, is entitled to take, the
Depository would authorize the participants to take such action, and the
participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions
of beneficial owners owning through them.
Payment of principal of and interest on New Notes represented by the Global
Security registered in the name of and held by the Depository or its nominee
will be made to the Depository or its nominee, as the case may be, as the
registered owner and holder of the Global Security.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Security, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Security
as shown on the records of the Depository or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Security held through such participants will be governed by standing
instructions and customary practices and will be the responsibility of such
participants. Neither the Company nor the Initial Purchasers will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global
Security for any New Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other
aspect of the relationship between the Depository and its participants or the
relationship between such participants and the owners of beneficial interests
in the Global Security owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Security may not be transferred except as a
whole by the Depository to a nominee of such Depository or by a nominee of
such Depository to such Depository or another nominee of such Depository.
Beneficial owners of New Notes registered in the name of the Depository or
its nominee will be entitled, upon request, to be issued New Notes in
definitive certificated form.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Security among participants of
the Depository, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Trustee nor the Company will have any responsibility for the performance
by the Depository or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
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<PAGE>
CERTIFICATED NOTES
The New Notes represented by the Global Security are exchangeable for
certificated New Notes in definitive form of like tenor as such New Notes in
denominations of U.S. $1,000 and integral multiples thereof if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Security or if at any time the Depository ceases to
be a clearing agency registered under the Exchange Act, (ii) the Company in
its discretion at any time determines not to have all of the New Notes
represented by the Global Security or (iii) a default entitling the holders of
the New Notes to accelerate the maturity thereof has occurred and is
continuing. Any Note that is exchangeable pursuant to the preceding sentence
is exchangeable for certificated New Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Security is not exchangeable, except for
a Global Security of the same aggregate denomination to be registered in the
name of the Depository or its nominee.
EXCHANGE OFFER; REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company agreed, for the
benefit of the holders of the Notes, that the Company will, at its cost, (i)
to file the Registration Statement of which this Prospectus is a part with the
Commission on or before February 17, 1997, (ii) to use its reasonable efforts
to cause the Registration Statement to be declared effective under the
Securities Act no later than May 16, 1997 and (iii) upon the effectiveness of
the Registration Statement, to commence the Exchange Offer and to keep the
Exchange Offer open for not less than 20 business days (or longer if required
by applicable law) after the date notice of the Exchange Offer is mailed to
the holders of the Old Notes.
In the event the Exchange Offer is not consummated by June 16, 1997, or, in
accordance with the Registration Rights Agreement, or if either of the Initial
Purchasers or any affiliate thereof so requests with respect to Old Notes held
by it following consummation of the Registered Exchange Offer as part of an
unsold allotment from the original offering of the Old Notes, or if any holder
of Old Notes is not eligible by reason of any law or any rules, policies or
pronouncements of the Commission or other governmental authority (including
any self-regulatory organization) to participate in the Exchange Offer or does
not receive freely tradeable New Notes in the Exchange Offer, the Company
will, at its own cost, (a) as promptly as practicable (but in no event more
than 30 days after having been so required or so requested), file a
registration statement (a "Shelf Registration Statement") covering resales of
the Old Notes or the New Notes, as the case may be, (b) use its reasonable
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act and (c) keep the Shelf Registration Statement
effective for a period of three years from the effectiveness thereof or such
shorter period that will terminate when all of the Notes covered by the Shelf
Registration Statement have been sold pursuant thereto. In the event a Shelf
Registration Statement is filed, the Company will, among other things, provide
to each holder for whom such Shelf Registration Statement was filed copies of
the prospectus that is a part of the Shelf Registration Statement, notify each
such holder when the Shelf Registration Statement has become effective and
take certain other actions as are required to permit unrestricted resales of
the Notes that are the subject of such Shelf Registration Statement. A holder
selling Notes pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related prospectus
and to deliver a prospectus to purchasers, will be subject to certain of the
civil liability provisions of the Securities Act in connection with such sales
and will be bound by those provisions of the Registration Rights Agreement
that are applicable to such holder (including certain indemnification
obligations).
The Registration Rights Agreement provides that if (i) by June 16, 1997,
neither the Exchange Offer has been consummated nor the Shelf Registration
Statement has been declared effective or (ii) after either the Registration
Statement of which this Prospectus is a part or the Shelf Registration
Statement is declared effective, such registration statement thereafter ceases
to be effective or usable (subject to certain exceptions) in connection with
resales of Notes in accordance with and during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (ii) a "Registration Default"), additional interest will accrue on the
Notes at the rate of 0.50% per annum from and including the date on which any
such Registration Default shall occur to but excluding the date on which all
Registration Defaults have been cured. Such interest is payable in addition to
any other interest payable from time to time with respect to the Notes.
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<PAGE>
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an Exhibit to the Registration
Statement of which this Prospectus forms a part.
CERTAIN COVENANTS
The Indenture contains certain covenants, including the ones summarized
below, which covenants will be applicable (unless waived or amended) so long
as any of the Notes are outstanding.
Commission Reports. Notwithstanding that Holding may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, Holding
shall file with the Commission and provide the Trustee and Holders with such
annual reports and such information, documents and other reports specified in
Sections 13 and 15(d) of the Exchange Act.
Limitation on Liens. AK Steel shall not, and shall not permit any Subsidiary
to, create or permit to exist any Lien upon any of its property or assets, now
owned or hereafter acquired, securing any obligation unless concurrently with
the creation of such Lien effective provision is made to secure the Notes
equally and ratably with such obligation for so long as such obligation is so
secured; provided that if such obligation is a Subordinated Obligation, the
Lien securing such obligation shall be subordinated and junior to the Lien
securing the Notes with the same or lesser relative priority as such
Subordinated Obligation shall have with respect to the Notes. The preceding
restriction shall not require AK Steel or any Subsidiary to equally and
ratably secure the Notes if the Lien consists of the following:
(i) Liens created by the Indenture, Liens existing as of the date on
which the Notes were originally issued and Liens to secure Debt in respect
of the Secured Notes as described under "Description of Certain
Indebtedness--The Secured Notes";
(ii) Permitted Liens;
(iii) Liens to secure Debt issued by AK Steel for the purpose of
financing all or a part of the purchase price of assets or property
acquired or constructed in the ordinary course of business after the date
on which the Notes were originally issued; provided, however, that (a) the
aggregate principal amount (or accreted value in the case of Debt issued at
a discount) of Debt so issued shall not exceed the lesser of cost or Fair
Market Value, as determined in good faith by the Board of Directors of
Holding, of the assets or property so acquired or constructed, (b) either
(1) the Debt secured by such Liens shall have been permitted to be issued
under clause (iv) of "Limitation on Debt" or (2) additional Debt secured by
such Liens, at the time of determination on a pro forma basis, would not
exceed, in the case of Normal Replacement Assets, 50%, or in the case of
Special Assets, 100%, of the aggregate principal amount of Debt which AK
Steel would have been permitted to issue at such time under the
Consolidated EBITDA Coverage Ratio as set forth in the first paragraph of
"Limitation on Debt" at an interest rate equal to the rate of interest on
the additional Debt to be secured by such Liens and (c) such Liens shall
not encumber any other assets or property of AK Steel or any of its
Subsidiaries other than such assets or property or any improvement on such
assets or property and shall attach to such assets or property within 90
days of the construction or acquisition of such assets or property;
(iv) Liens on the assets or property of a Subsidiary existing at the time
such Subsidiary became a Subsidiary and not issued as a result of (or in
connection with or in anticipation of) such Subsidiary becoming a
Subsidiary; provided, however, that such Liens do not extend to or cover
any other property or assets of AK Steel or any of its other Subsidiaries;
(v) Liens on the Inventory or Accounts Receivable of AK Steel or any
Significant Subsidiary that is a Guarantor Subsidiary securing Debt under
any Permitted Credit Facility; provided that any Lien on Intangible
Property shall limit the rights of the holder of such Lien to the use of
such Intangible Property to manufacture, process and sell the Inventory
with respect to which such holder has a Lien;
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(vi) Liens securing industrial revenue or pollution control bonds issued
by AK Steel; provided, however, that (a) the aggregate principal amount of
Debt secured by such Liens shall not exceed the lesser of cost or Fair
Market Value, as determined in good faith by the Board of Directors of
Holding, of the assets or property so financed, and (b) such Liens do not
encumber any other property or assets of AK Steel or any of its
Subsidiaries;
(vii) Liens securing Debt issued to refinance Debt which has been secured
by a Lien permitted under the Indenture and is permitted to be refinanced
under the Indenture; provided, however, that such Liens do not extend to or
cover any property or assets of AK Steel or any of its Subsidiaries not
securing the Debt so refinanced, and the principal amount (or accreted
value) of the Debt so secured is not increased except as otherwise
permitted pursuant to the Indenture;
(viii) Liens on the Equity Interests, assets or property of a Non-
Recourse Subsidiary securing Non-Recourse Debt; or
(ix) Liens securing Debt which, together with all other Debt secured by
Liens (excluding Debt secured by Liens permitted by clauses (i) through
(viii) above) at the time of determination do not exceed $100.0 million;
provided, however, that the Attributable Debt in connection with
Sale/Leaseback Transactions permitted under clause (iii) of "Limitation on
Sale/Leaseback Transactions" will be included in the determination and
treated as Debt secured by a Lien not otherwise permitted by clauses (i)
through (viii) above.
For the avoidance of ambiguity, it is understood that Liens referred to in
clauses (i) through (ix) of this covenant description may secure, in addition
to the principal of and premium (if any) on Debt referred to in such clauses,
interest and all other obligations on and in respect of such Debt.
Limitation on Sale/Leaseback Transactions. AK Steel shall not, and shall not
permit any Subsidiary to, enter into, Guarantee or otherwise become liable
with respect to any Sale/Leaseback Transaction unless at least one of the
following conditions is satisfied:
(i) the lease is between AK Steel and a Wholly Owned Guarantor
Subsidiary, or between Wholly Owned Guarantor Subsidiaries; provided,
however, that upon either (a) the transfer or other disposition by such
Wholly Owned Guarantor Subsidiary of any such lease to a Person other than
AK Steel or another Wholly Owned Guarantor Subsidiary or (b) the issuance,
sale, lease, transfer or other disposition of Equity Interests (including
by consolidation or merger) of such Wholly Owned Guarantor Subsidiary to a
Person other than AK Steel or another such Wholly Owned Guarantor
Subsidiary, the provisions of this clause (i) shall no longer be applicable
to such lease and such lease shall be deemed for purposes of this paragraph
to constitute the entering into of such Sale/Leaseback Transaction by the
parties thereto;
(ii) AK Steel or such Subsidiary under clauses (ii) through (viii) of
"Limitation on Liens" could create a Lien on the property to secure Debt in
an amount at least equal to the Attributable Debt in respect of such
Sale/Leaseback Transaction and AK Steel or such Subsidiary, as the case may
be, receives consideration at least equal to the Fair Market Value, as
determined in good faith by the Board of Directors of Holding, of the
property transferred;
(iii) AK Steel or such Subsidiary could create a Lien under clause (ix)
of "Limitation on Liens" above on the property to secure Debt at least
equal to the Attributable Debt in respect of such Sale/Leaseback
Transaction and AK Steel or such Subsidiary, as the case may be, receives
consideration at least equal to the Fair Market Value, as determined in
good faith by the Board of Directors of Holding, of the property
transferred; or
(iv) the Sale/Leaseback Transaction is treated as an Asset Disposition
and all the conditions of "Limitation on Sales of Assets and Equity
Interests of Subsidiaries" are satisfied with respect to such
Sale/Leaseback Transaction (without giving effect to the exceptions for Net
Available Cash in amounts less than $25.0 million or $10.0 million, as set
forth in the last paragraph of "Limitation on Sales of Assets and Equity
Interests of Subsidiaries").
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Limitation on Debt. AK Steel shall not issue, directly or indirectly, any
Debt unless, immediately after giving effect to the issuance of such Debt and
the receipt and application of the proceeds thereof, the pro forma
Consolidated EBITDA Coverage Ratio would be greater than 2.5 to 1.0.
Notwithstanding the foregoing limitation, AK Steel may issue the following
Debt:
(i) The Notes, the Secured Notes, Debt issued by AK Steel pursuant to
Permitted Credit Facilities and Guarantees by AK Steel of obligations in
respect of bonds or notes (in an aggregate principal amount not exceeding
$60.0 million) payable solely from the proceeds of (a) taxes payable by AK
Steel on real or depreciable personal property relating to the New Facility
or (b) charges payable by AK Steel for sewer and water services relating to
the New Facility and, to the extent that such taxes or charges are
insufficient to make such payments, payments under such Guarantees
(provided that the payments under such bonds or notes or such Guarantees
are not required to be prefunded by more than an aggregate amount equal to
one year of debt service on such bonds or notes and are not subject to
acceleration by the express terms thereof or otherwise);
(ii) Debt issued by AK Steel owed to and held by a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of
any Equity Interests that results in such Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary or any transfer of such Debt (other than to
another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Debt by AK Steel;
(iii) The Notes issued by AK Steel and Debt issued in exchange for, or
the proceeds of which are used to refund or refinance, any Debt permitted
by this clause (iv); provided, however, that (a) the principal amount of
the Debt so issued shall not exceed the principal amount of the Debt so
exchanged, refunded or refinanced, and (b) the Debt so issued (1) shall not
mature prior to the Stated Maturity of the Debt so exchanged, refunded or
refinanced and (2) shall have an Average Life equal to or greater than the
remaining Average Life of the Debt so exchanged refunded or refinanced;
(iv) Debt issued by AK Steel, whether or not secured by a Lien,
constituting all or a part of the purchase price of assets or property
acquired or constructed in the ordinary course of business after the date
on which the Notes were originally issued; provided, however, that Debt
issued under this clause (iv) in any calendar year shall not exceed in
aggregate principal amount the sum of (a) $50.0 million for each of 1997,
1998 and 1999, and $35.0 million for each calendar year from and including
2000 to and including 2005 plus (b) the excess of the aggregate principal
amount otherwise permitted to be issued under this clause (iv) in all
previous calendar years to and including the calendar year in which the
Notes were originally issued over the aggregate principal amount actually
issued by AK Steel during such period under this clause (iv) and Debt
issued by AK Steel in exchange for, or the proceeds of which are used to
refund or refinance, any then outstanding Debt permitted by this clause
(iv); provided, however, that (1) the principal amount of the Debt so
issued shall not exceed the principal amount of the Debt so exchanged,
refunded or refinanced, and (2) the Debt so issued (A) shall not mature
prior to the Stated Maturity of the Debt so exchanged, refunded or
refinanced and (B) shall have an Average Life equal to or greater than the
remaining Average Life of the Debt so exchanged, refunded or refinanced;
(v) Debt (other than Debt described in clause (i), (ii), (iii) or (iv) of
this covenant description) outstanding on the date on which the Notes were
originally issued, and Debt issued by AK Steel in exchange for, or the
proceeds of which are used to refund or refinance, any Debt permitted by
this clause (v) or permitted as described in the first paragraph of
"Limitation on Debt"; provided, however, that (a) the principal amount of
the Debt so issued shall not exceed the principal amount of the Debt so
exchanged, refunded or refinanced and (b) the Debt so issued (1) shall not
mature prior to the Stated Maturity of the Debt so exchanged, refunded or
refinanced and (2) shall have an Average Life equal to or greater than the
remaining Average Life of the Debt so exchanged, refunded or refinanced;
(vi) Obligations of AK Steel pursuant to (a) interest rate swap or
similar agreements designed to protect AK Steel against fluctuations in
interest rates in respect of Debt of AK Steel to the extent the
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notional principal amount of such obligation does not exceed the aggregate
principal amount of the Debt to which such interest rate contracts relate,
and (b) foreign exchange or commodity hedge, exchange or similar agreements
designed to protect AK Steel against fluctuations in foreign currency
exchange rates or commodity prices in respect of foreign exchange or
commodity exposures incurred by AK Steel in the ordinary course of its
business; or
(vii) Debt (not otherwise permitted to be issued pursuant to clauses (i)
through (vi) of this covenant description) in an aggregate principal amount
which, together with (a) any other outstanding Debt issued by AK Steel
pursuant to this clause (vii) and (b) Debt issued and Preferred Equity
Interests then outstanding and issued by Subsidiaries pursuant to clause
(viii) of "Limitation on Debt and Preferred Equity Interests of
Subsidiaries," does not exceed $100.0 million.
Notwithstanding the foregoing, AK Steel shall not issue any Debt if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Debt shall be subordinated to the Notes to at least the same extent as such
Subordinated Obligations.
Limitation on Debt and Preferred Equity Interests of Subsidiaries. AK Steel
shall not permit any Subsidiary to issue, directly or indirectly, any Debt or
Preferred Equity Interests except:
(i) Debt or Preferred Equity Interests issued to and held by AK Steel or
a Wholly Owned Subsidiary; provided, however, that (a) any subsequent
issuance or transfer of any Equity Interests that results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or (b) any
subsequent transfer of such Debt or Preferred Equity Interests (other than
to AK Steel or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Debt or Preferred Equity Interests by the
issuer thereof;
(ii) Debt or Preferred Equity Interests, other than any described in
clause (i), outstanding on the date on which the Notes were originally
issued;
(iii) Debt or Preferred Equity Interests of a Subsidiary issued and
outstanding on or prior to the date on which such Subsidiary became a
Subsidiary (other than Debt or Preferred Equity Interests issued as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary);
(iv) Debt or Preferred Equity Interests issued in exchange for, or the
proceeds of which are used to refund or refinance, Debt or Preferred Equity
Interests referred to in clause (ii) or (iii); provided, however, (a) the
principal amount or liquidation value of such Debt or Preferred Equity
Interests so issued shall not exceed the principal amount or the
liquidation value of the Debt or Preferred Equity Interests so refunded or
refinanced and (b) the Debt or Preferred Equity Interests so issued (1)
shall have a Stated Maturity later than the Stated Maturity of the Debt or
Preferred Equity Interests being exchanged or refinanced and (2) shall have
an Average Life equal to or greater than the remaining Average Life of the
Debt or Preferred Equity Interests being exchanged or refinanced;
(v) Non-Recourse Debt or Preferred Equity Interests of a Non-Recourse
Subsidiary issued after the date on which the Notes were originally issued;
provided, however, that if any such Debt or Preferred Equity Interests
thereafter ceases to be Non-Recourse Debt or Preferred Equity Interests of
a Non-Recourse Subsidiary, then such event will be deemed to constitute the
issuance of such Debt or Preferred Equity Interests by the issuer thereof;
(vi) Guarantees of the Notes or any other Debt as permitted in clause
(iii) of "Limitation on Debt" above;
(vii) Guarantees issued by any Guarantor Subsidiary of any Debt issued by
AK Steel as permitted under "Limitation on Debt" above; or
(viii) Debt or Preferred Equity Interests not otherwise permitted to be
issued pursuant to clauses (i) through (vii) above, which, together with
(a) any other outstanding Debt or Preferred Equity Interests issued
pursuant to this clause (viii) and (b) Debt issued by AK Steel pursuant to
clause (vii) under "Limitation on Debt," does not exceed $60.0 million.
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Limitation on Restricted Payments. Holding shall not, and shall not permit
any Subsidiary of Holding to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on or in respect of, or make any
distribution to the holders of, Equity Interests of Holding (except dividends
or distributions payable solely in its Non-Convertible Equity Interests or in
options, warrants or other rights to acquire its Non-Convertible Equity
Interests and except dividends or distributions payable to a Wholly Owned
Guarantor Subsidiary), (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of Holding, (iii) declare or pay any dividend
or make any distribution on or in respect of, or make any distribution to
holders of, Equity Interests of any Subsidiary of Holding (other than with
respect to any such Equity Interests held by Holding, AK Steel, any Wholly
Owned Guarantor Subsidiary or any Wholly Owned Non-Recourse Subsidiary) or
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of any Subsidiary of Holding (other than such Equity Interests held by
Holding, AK Steel, any Wholly Owned Guarantor Subsidiary or any Wholly Owned
Non-Recourse Subsidiary), (iv) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Obligations
(other than the purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of acquisition), or (v) make any Investment other than Permitted
Investments (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement or Investment being
herein referred to as a "Restricted Payment") if:
(a) a Default shall have occurred and be continuing (or would result
therefrom);
(b) upon giving effect to such Restricted Payment, on a pro forma basis,
AK Steel is not able to issue an additional $1.00 of Debt pursuant to the
Consolidated EBITDA Coverage Ratio as set forth in the first paragraph of
"Limitation on Debt"; or
(c) upon giving effect to such Restricted Payment, the aggregate amount
of such Restricted Payment and all other Restricted Payments since the date
on which the Notes were originally issued would exceed the sum of (1) 50%
of the Consolidated Net Income of Holding accrued during the period
(treated as one accounting period) from the first day of the first month of
the fiscal quarter in which the Notes were originally issued through the
last full fiscal quarter for which quarterly or annual financial statements
are available prior to the date of such Restricted Payment (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such
deficit), plus (2) the aggregate Net Cash Proceeds received by AK Steel
from the issue or sale of its Equity Interests (other than Redeemable
Equity Interests or Exchangeable Equity Interests) subsequent to the date
on which the Notes were originally issued (other than to a Subsidiary of AK
Steel or an employee stock ownership plan or similar trust), plus (3) the
aggregate Net Cash Proceeds received by AK Steel from the issue or sale of
its Equity Interests (other than Redeemable Equity Interests or
Exchangeable Equity Interests) to an employee stock ownership plan
subsequent to the date on which the Notes were originally issued, provided,
that, if such employee stock ownership plan issues any Debt only to the
extent that any such proceeds are equal to any increase in the Consolidated
Net Worth of Holding resulting from principal repayments made by such
employee stock ownership plan with respect to Debt issued by it to finance
the purchase of such Equity Interests, plus (4) the amount by which
consolidated Debt of AK Steel is reduced on Holding's balance sheet upon
the conversion or exchange (other than by a Subsidiary), subsequent to the
date on which the Notes were originally issued, of any Debt of AK Steel or
any of its Subsidiaries convertible or exchangeable for Equity Interests
(other than Redeemable Equity Interests or Exchangeable Equity Interests)
of AK Steel (less the amount of any cash, or other property, distributed by
AK Steel or any of its Subsidiaries upon such conversion or exchange).
So long as no Default shall have occurred and be continuing (or would result
therefrom), the foregoing limitations on Restricted Payments shall not
prohibit (A) any purchase or redemption of Equity Interests of Holding or
Subordinated Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Equity Interests of Holding (other than
Redeemable Equity Interests or Exchangeable Equity Interests and other than
Equity Interests issued or sold to a Subsidiary or an employee stock ownership
plan); provided,
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however, that (x) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (y) the Net Cash Proceeds
from such sale shall be excluded from clauses (c)(2) and (c)(3) of the
preceding paragraph; (B) any purchase or redemption of Subordinated
Obligations (other than Redeemable Equity Interests) made by exchange for, or
out of the proceeds of the substantially concurrent sale of, Debt of AK Steel
other than to a Subsidiary; provided, however, that such Debt (x) shall be
subordinated to the Notes to at least the same extent as the Subordinated
Obligations so exchanged, purchased or redeemed, (y) shall have a Stated
Maturity later than the Stated Maturity of the Notes and (z) shall have an
Average Life greater than the remaining Average Life of the Notes; provided
further, however, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments; (C) any purchase or
redemption of Subordinated Obligations from Net Available Cash to the extent
permitted under "Limitation on Sales of Assets and Equity Interests of
Subsidiaries"; provided, however, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments; (D)
dividends paid within 60 days after the date of declaration if at such date of
declaration such dividend would have complied with this provision; provided,
however, that at the time of payment of such dividend, no Default shall have
occurred and be continuing (or would result therefrom); provided further,
however, that such dividend shall be included in the calculation of the amount
of Restricted Payments; (E) any repurchase by Holding of employee stock
granted under an employee stock option plan; provided, however, that the
aggregate amount of such repurchase in any calendar year shall not exceed $1.0
million per employee and the aggregate amount of all repurchases in any
calendar year shall not exceed $5.0 million (it being understood that the
excess of any such amounts permitted to be expended under this clause (E)
during any calendar year over the amount actually expended during such period
shall not be carried forward); provided further, however, that such repurchase
shall be included in the calculation of the amount of Restricted Payments; or
(F) any purchase, repurchase, redemption, defeasance or other acquisition by
any Non-Recourse Subsidiary of Non-Recourse Debt of such Non-Recourse
Subsidiary; provided, however, that the amount of such purchase, repurchase,
redemption, defeasance or other acquisition shall be excluded in the
calculation of the amount of Restricted Payments.
So long as none of the conditions described above in clauses (a) and (b)
exists, the foregoing limitations on Restricted Payments shall not prohibit
the declaration and payment of one or more dividends on or before December 31,
1998 in an aggregate amount not to exceed $50,000,000; provided, however, that
all such dividends shall be excluded in the calculation of the amount of
Restricted Payments.
Limitation on Issuance and Sale of Equity Interests of Subsidiaries. AK
Steel shall not permit any Subsidiary to issue or sell any Equity Interests to
any Person, or permit any Person in either case, other than AK Steel and its
Subsidiaries, to own or hold an interest, other than any interest owned or
held on the date on which the Notes were originally issued by a Person other
than AK Steel and its Subsidiaries, in any Equity Interests, of any Subsidiary
(other than a Non-Recourse Subsidiary or a JV Subsidiary); provided, however,
that the foregoing limitation shall not apply to (i) the sale of all but not
less than all of the Equity Interests of any Subsidiary made in accordance
with "Limitation on Sales of Assets and Equity Interests of Subsidiaries,"
(ii) issuances of Preferred Equity Interests permitted pursuant to clauses
(iii), (v) and (vii) under the heading "Limitation on Debt and Preferred
Equity Interests of Subsidiaries," and (iii) the ownership or holding of an
interest by any Person, other than AK Steel and its Subsidiaries, in any
Equity Interests of any Subsidiary issued pursuant to clause (ii) above.
Limitation on Restrictions on Distributions from Subsidiaries. AK Steel
shall not, and shall not permit any Subsidiary to, create or permit to exist
or become effective any consensual encumbrance or restriction on the ability
of any Subsidiary to (i) pay dividends or make any other distributions on its
Equity Interests or pay any Debt or other obligation owed to AK Steel or any
Subsidiary, (ii) make any Investment in AK Steel or any Subsidiary or (iii)
transfer any of its property or assets to AK Steel or any Subsidiary.
Notwithstanding the foregoing, AK Steel may, and may permit any Subsidiary
of AK Steel to, suffer to exist any such encumbrance or restriction (a)
pursuant to an agreement in effect at or entered into on the date on which the
Notes were originally issued, (b) with respect to a Subsidiary pursuant to an
agreement relating to any
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Debt issued by such Subsidiary on or prior to the date on which such
Subsidiary became a Subsidiary (other than Debt issued as consideration in, or
to provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary) and outstanding on such date, (c) pursuant to
an agreement effecting a refinancing of Debt issued pursuant to an agreement
referred to in clause (a) or (b) or contained in any amendment to an agreement
referred to in clause (a) or (b), provided, however, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are no
less favorable to the holders of Notes than encumbrances and restrictions
contained in such agreements, (d) consisting of customary nonassignment
provisions in leases governing leasehold interests to the extent such
provisions restrict the transfer of the lease, (e) in the case of clause (iii)
above, restrictions contained in security agreements securing Debt of a
Subsidiary otherwise permitted under the Indenture, to the extent such
restrictions restrict the transfer of the property subject to such security
agreements or (f) relating to a Non-Recourse Subsidiary.
Limitation on Sales of Assets and Equity Interests of Subsidiaries. AK Steel
shall not, and shall not permit any Subsidiary (other than Non-Recourse
Subsidiaries) to, make any Asset Disposition unless:
(i) AK Steel or such Subsidiary receives consideration at the time of
such Asset Disposition at least equal to the Fair Market Value, as
determined in good faith by the Board of Directors of Holding (including as
to the value of all non-cash consideration), of the shares and assets
subject to such Asset Disposition and at least 75% of such consideration is
in the form of cash or Cash Equivalents; and
(ii) An amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by AK Steel or such Subsidiary, as the case may be,
(a) first, to the extent AK Steel elects (or is required by the terms of
any Debt), to prepay, repay or purchase Debt (other than any Redeemable
Equity Interests or Non-Recourse Debt) of AK Steel, such Subsidiary or a
Wholly Owned Guarantor Subsidiary (in each case other than Debt owed to AK
Steel or an Affiliate of AK Steel) within 60 days from the later of the
date of such Asset Disposition or the receipt of such Net Available Cash;
(b) second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (a), at AK Steel's election, to the
investment by AK Steel or such Subsidiary or any Wholly Owned Guarantor
Subsidiary in assets to replace the assets that were the subject of such
Asset Disposition or an asset that (as determined by the Board of Directors
of Holding) will be used in the business of AK Steel and the Wholly Owned
Guarantor Subsidiaries existing on the date on which the Notes were
originally issued or in businesses reasonably related thereto, in each case
within the later of one year from the date of such Asset Disposition or the
receipt of such Net Available Cash; and (c) third, to the extent of the
balance of such Net Available Cash after application in accordance with
clauses (a) and (b), to make an offer to purchase Notes at par; provided,
however, that in connection with any prepayment, repayment or purchase of
Debt pursuant to clause (a) above, AK Steel shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.
Notwithstanding the requirement in clause (i) above that at least 75% of
consideration consist of cash or Cash Equivalents, AK Steel and its
Subsidiaries may make one or more Asset Dispositions for which the
consideration, in addition to the non-cash consideration permitted by such
clause, consists of or includes (A) non-cash consideration, the aggregate Fair
Market Value (as determined in good faith by the Board of Directors of
Holding) of which, for all Asset Dispositions made after the date on which the
Notes were originally issued, does not exceed $10.0 million, and (B) non-cash
consideration, the aggregate Fair Market Value (as determined in good faith by
the Board of Directors of Holding) of which, for all Asset Dispositions made
after the date on which the Notes were originally issued, does not exceed
$50.0 million, consisting of the cancellation of Debt of AK Steel or any
Subsidiary existing on the date on which the Notes were originally issued;
provided, however, that in connection with any such cancellation of Debt, AK
Steel or such Subsidiary shall cause the related loan commitment (if any) to
be permanently reduced in an amount equal to the principal so canceled.
Notwithstanding the provisions of clause (ii) above, in the event that the
Net Available Cash resulting from any Asset Disposition is less than $25.0
million, the application of an amount equal to such Net Available Cash in
accordance with this Section may be deferred until such time as such Net
Available Cash from any prior or
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subsequent Asset Dispositions not otherwise applied in accordance with this
Section, is at least equal to $25.0 million. In the event that the Net
Available Cash resulting from any Asset Disposition, after giving effect to
clauses (a) and (b) above, is less than $10.0 million, the application of such
amount equal to such Net Available Cash to make an offer to purchase Notes in
accordance with clause (c) may be deferred until such time as such Net
Available Cash, together with Net Available Cash from any prior or subsequent
Asset Dispositions not otherwise applied in accordance with this Section, is
at least equal to $10.0 million. Pending application of Net Available Cash
pursuant to this Section, such Net Available Cash shall be invested in Cash
Equivalents. To the extent any portion of the amount of Net Available Cash
remains after compliance with this Section, and provided that all holders of
Notes have been given the opportunity to tender their Notes for repurchase as
provided in clause (c) above, AK Steel may use such remaining amount for
general corporate purposes.
Limitation on Transactions with Affiliates. AK Steel shall not, and shall
not permit any Subsidiary to, conduct any business or enter into any
transaction or series of similar transactions (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of AK Steel or any legal or beneficial owner of 5% or more of any
class of Equity Interests of Holding or with an Affiliate of any such owner
(other than a Wholly Owned Subsidiary or any employee stock ownership plan for
the benefit of AK Steel or a Subsidiary's employees) unless the terms of such
business, transaction or series of transactions are (i) set forth in writing,
(ii) not less favorable to AK Steel or such Subsidiary, as the case may be,
than terms that would be obtainable at the time for a comparable transaction
or series of similar transactions in arms-length dealings with an unrelated
third Person, (iii) if such business or transaction or series of transactions
involves in excess of (a) $5.0 million, the Board of Directors of Holding has,
by resolution, determined in good faith that such business or transaction or
series of transactions meets the criteria set forth in clause (ii) above, and
(b) $25.0 million and as to which there are no disinterested directors, AK
Steel has obtained an opinion of a nationally recognized expert with
experience in appraising the terms and conditions of the type of business or
transaction or series of transactions stating that such business or
transaction or series of transactions is fair (from a financial point of view)
to AK Steel or such Subsidiary, as the case may be; provided, however, that
the provisions of this paragraph do not apply to performance of contractual
obligations with respect to Eveleth Mines existing as of the date of the
Indenture under which the Notes were originally issued.
Lines of Business. AK Steel shall not, and shall not permit any of its
Subsidiaries to, enter into any business, either directly or through any
Subsidiary, except for those businesses in which AK Steel and its Subsidiaries
were engaged on the date on which the Notes were originally issued or
businesses reasonably related thereto.
Restrictive Covenant of Holding. Holding (i) shall not engage in any
activities or hold any assets other than (a) holding 100% of the Equity
Interests of AK Steel and debt securities of AK Steel that were held by
Holding at the date of the Indenture and (b) those activities incidental to
maintaining its status as a public company, and (ii) it will not incur any
liabilities other than liabilities relating to the Holding Guarantee or any
Guarantees by Holding of any Permitted Credit Facility, any other Debt of AK
Steel or any Debt of any Significant Subsidiary that is Guaranteed by AK Steel
and any other obligations or liabilities incidental to holding 100% of the
Equity Interests of AK Steel and those liabilities incidental to its status as
a public company; provided, however, that, for purposes of this covenant, the
term "liabilities" shall not include any liability for the declaration and
payment of dividends on any Equity Interests of Holding; and provided further,
however, that if Holding merges into AK Steel, this "Restrictive Covenant of
Holding" shall no longer be applicable.
CERTAIN DEFINITIONS
Certain terms to be defined in the Indenture are summarized below. Reference
is made to the Indenture for the full definition of all such terms, as well as
any other terms used herein for which no definition is provided.
"Accounts Receivable" means any and all accounts, contract rights, chattel
paper, instruments, documents, general intangibles and other obligations of
any kind relating to the sale or lease of goods and the rendering of services,
all rights relating thereto, all deposit accounts containing the proceeds
thereof, all books and records relating thereto and the proceeds thereof.
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"Affiliate" of any specified Person means (i) any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (ii) any other Person who is a director
or officer (a) of such specified Person, (b) of any Subsidiary of such
specified Person or (c) of any Person described in clause (i) above. For
purposes of this definition, control of a Person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) of Equity
Interests of a Subsidiary (other than directors' qualifying shares), property
or other assets (each referred to for the purposes of this definition as a
"disposition") by AK Steel or any of its Subsidiaries, including any
disposition by means of a merger, consolidation or similar transaction, other
than (i) a disposition by AK Steel or a Subsidiary to AK Steel or a Wholly
Owned Guarantor Subsidiary, (ii) a disposition of property or assets at Fair
Market Value (as determined in good faith by the Board of Directors of
Holding) in the ordinary course of business, (iii) a disposition of obsolete
assets in the ordinary course of business, (iv) a disposition that constitutes
a Restricted Payment or a Sale/Leaseback Transaction, (v) a sale of Accounts
Receivable under a Permitted Credit Facility and (vi) a transfer of Accounts
Receivable that constitutes a Permitted Investment under clause (e) or (f) of
the definition of Permitted Investments.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as of
the date of determination, the present value (discounted at the lower of the
interest rate of such Sale/Leaseback Transaction and the interest rate borne
by the Notes, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Debt, the quotient obtained by dividing (i) the sum of the products of the
numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such Debt multiplied by the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" of a Person means the Board of Directors of that Person
or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means any day that is not a Saturday, a Sunday or a day on
which banking institutions are required to close in the State of New York.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of
a balance sheet of such Person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of
a penalty.
"Cash Equivalents" means:
(i) Investments in U.S. Government Obligations maturing within 365 days
of the date of acquisition thereof;
(ii) Investments in certificates of deposit or Eurodollar deposits
maturing within 365 days of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United
States or any state thereof and which has a combined capital and surplus of
at least $1.0 billion and rated at least A3 by Moody's Investors Service,
Inc.;
(iii) Investments in repurchase agreements, involving Investments in U.S.
Government Obligations or other Cash Equivalents entered into with any
bank, trust company or investment bank rated at least A- and A-1 by
Standard & Poor's and at least A3 and P-1 by Moody's Investors Service,
Inc.;
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(iv) Investments in commercial paper maturing not more than 90 days from
the date of acquisition thereof and rated at least A-1 by Standard & Poor's
and at least P-1 by Moody's Investors Service, Inc. issued by a corporation
(except AK Steel or an Affiliate of AK Steel) that is organized under the
laws of any state of the United States or the District of Columbia; and
(v) Investments in money market accounts or funds whose assets consist
solely of cash or Cash Equivalents.
"Change in Control" means the occurrence of any of the following events:
(i) any "Person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the beneficial owner (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 40% of the
total voting power of the Voting Equity Interests of Holding; provided,
however, that the Person shall not be deemed the "beneficial owner" of
shares tendered pursuant to a tender or exchange offer made by that Person
or any Affiliate of that Person until the tendered shares are accepted for
purchase or exchange;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holding
(together with any new directors whose election by such Board of Directors
of Holding, or whose nomination for election by the shareholders of
Holding, as the case may be, was approved by a vote of 66 2/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board of
Directors of Holding then in office; or
(iii) Holding fails to own 100% of the Equity Interests of AK Steel;
provided, however, that it shall not be deemed a Change in Control if
Holding merges into AK Steel except that, in such case, AK Steel shall be
substituted for Holding for purposes of this definition of "Change in
Control" and clause (iii) shall no longer be applicable.
"Consolidated EBITDA Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (a) if AK Steel or any Subsidiary has
issued any Debt since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio is an issuance of Debt, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Debt as if such Debt had been issued on the first day
of such period and the discharge of any other Debt repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Debt as if such
discharge had occurred on the first day of such period, (b) if since the
beginning of such period AK Steel or any Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative), directly attributable thereto for such
period, and Consolidated Interest Expense for such period shall be reduced by
an amount equal to the Consolidated Interest Expense directly attributable to
any Debt of AK Steel or any Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to AK Steel and its continuing Subsidiaries
in connection with such Asset Dispositions for such period (or, if the Equity
Interests of any Subsidiary are sold, the Consolidated Interest Expense for
such period directly attributable to the Debt of such Subsidiary to the extent
AK Steel and its continuing Subsidiaries are no longer liable for such Debt
after such sale), (c) if since the beginning of such period AK Steel or any
Subsidiary (by merger or otherwise) shall have made an Investment in any
Subsidiary (or any Person that becomes a Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, that constitutes all
or substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto (including the issuance of any Debt) as if such
Investment or acquisition occurred on the first day of such period, and (d) if
since the beginning of such period any Person (that subsequently became a
Subsidiary or
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was merged with or into AK Steel or any Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment that would
have required an adjustment pursuant to clause (b) or (c) above if made by AK
Steel or a Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition or Investment occurred on the first day
of such period. For purposes of this definition, whenever pro forma effect is
to be given to an acquisition of assets, the amount of income or earnings
relating thereto, and the amount of Consolidated Interest Expense associated
with any Debt issued in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer
of AK Steel. If any Debt bears a floating rate of interest and is being given
pro forma effect, the interest on such Debt shall be calculated as if the rate
in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Protection Agreement
applicable to such Debt if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of Holding and its consolidated Subsidiaries (other than Non-Recourse
Subsidiaries), including (i) interest expense attributable to capital leases,
(ii) amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest payments, (v) commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (vi) net costs under Interest Rate Protection Agreements
(including amortization of fees), (vii) Preferred Equity Interests dividends
or distributions in respect of all Preferred Equity Interests held by Persons
other than AK Steel or a Wholly Owned Subsidiary, (viii) interest allocated in
connection with investments in discontinued operations and (ix) interest
actually paid by Holding or any of its consolidated Subsidiaries (other than
Non-Recourse Subsidiaries) under any guarantee of Debt or other obligation of
any other Person.
"Consolidated Net Income" means, for any period, the net income (or loss) of
Holding and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(i) any net income (or loss) of any Person if such Person is not a
Subsidiary of AK Steel, except that AK Steel's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to AK Steel or a Subsidiary (other than a Non-
Recourse Subsidiary) as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Subsidiary, to the
limitations contained in clause (iii) below);
(ii) any net income (or loss) of any Person acquired by AK Steel or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Subsidiary, directly or indirectly, to AK
Steel, except that (A) AK Steel's equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Subsidiary during such period to AK Steel or another Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to another Subsidiary, to the limitation contained in this
clause) and (B) AK Steel's equity in a net loss of any such Subsidiary for
such period shall be included in determining such Consolidated Net Income;
(iv) any gain or loss realized upon the sale or other disposition of any
property, plant or equipment of AK Steel or its consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Equity Interests of
any Person;
(v) any net income (or loss) of any Non-Recourse Subsidiary, except that
AK Steel's equity in the net income of any such Non-Recourse Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Non-Recourse
Subsidiary during such period to AK Steel as a dividend or other
distribution; and
(vi) the cumulative effect of a change in accounting principles.
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"Consolidated Net Tangible Assets" of any Person means the total assets of
such Person and its consolidated subsidiaries after deducting therefrom all
intangible assets, current liabilities (excluding any thereof which are by
their terms extendible or renewable at the option of the obligor thereon to a
time more than 12 months after the time as of which the amount thereof is
being computed) and minority interests, if any, in any assets of such Person's
subsidiaries.
"Consolidated Net Worth" of any Person means the total of the amounts shown
on the balance sheet of such Person and its consolidated subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, as of the end of the most recent fiscal quarter of such
Person ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated
value of all outstanding Equity Interests of such Person plus (ii) paid-in
capital or capital surplus relating to such Equity Interests plus (iii) any
retained earnings or earned surplus less (a) any accumulated deficit, (b) any
amounts attributable to Redeemable Equity Interests and (c) any amounts
attributable to Exchangeable Equity Interests.
"Debt" of any Person means, without duplication,
(i) the principal of and premium (if any) in respect of (a) indebtedness
of such Person for money borrowed and (b) indebtedness evidenced by notes,
debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(iv) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Equity
Interests (but excluding any accrued dividends);
(vi) all obligations of such Person under interest rate swap or similar
agreements, or foreign currency or commodity hedge, exchange or similar
agreements of such Person;
(vii) all obligations of the type referred to in clauses (i) through (vi)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee; and
(viii) all obligations of the type referred to in clauses (i) through
(vii) of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"EBITDA" for any period means the Consolidated Net Income of Holding for
such period (but without giving effect to adjustments, accruals, deductions or
entries resulting from purchase accounting, extraordinary losses or gains and
any gains or losses from any Asset Dispositions), plus (a) the following to
the extent deducted in calculating such Consolidated Net Income: (i) income
tax expense, (ii) Consolidated Interest Expense, (iii) depreciation expense,
(iv) amortization expense, (v) the non-cash portion of postretirement benefits
other than pensions, (vi) special charges taken after December 31, 1996 in
respect of which Holding has delivered to
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the Trustee (A) an Officers' Certificate setting forth estimates, made in good
faith by a responsible financial or accounting Officer of Holding, of the cash
costs estimated, at the time such special charges are recorded, to be paid
during any period for such special charges and containing an undertaking of
Holding to deliver to the Trustee, as soon as practicable after Holding
determines that such estimates are not appropriate, a supplemental Officers'
Certificate setting forth appropriate adjustments to such estimates and (B)
together with any Officers' Certificate or supplemental Officers' Certificate
referred to in clause (A), a report prepared by Holding's independent auditors
setting forth the procedures performed by such auditors in connection with
such special charges and the related cash costs estimated to be paid during
any period for such charges minus (b) to the extent not deducted in
calculating such Consolidated Net Income, cash costs estimated to be paid
during such period for special charges taken during any period as set forth in
the Officers' Certificate most recently delivered to the Trustee in respect of
such special charges pursuant to clause (a)(vi) of this definition.
"Equity Interests" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock or other equity participations, including
partnership interests, whether general or limited, including any Preferred
Equity Interests.
"Exchangeable Equity Interests" of any Person means any Equity Interest
which is exchangeable for or convertible into another security (other than any
Equity Interest of such Person which is neither an Exchangeable Equity
Interest nor a Redeemable Equity Interest).
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt or other obligation of any other
Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation of such other Person
(whether such obligation to purchase or pay such Debt or other obligation of
such other Person arises by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Subsidiary" means any Subsidiary (other than a Non-Recourse
Subsidiary) that executes a supplement to the Indenture pursuant to which such
Subsidiary jointly and severally unconditionally guarantees the due and
punctual payment and performance of the Obligations and assumes the other
obligations of a Guarantor Subsidiary pursuant to the Indenture, in the manner
provided by the Indenture.
"Interest Rate Protection Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement
designed to protect AK Steel or any Subsidiary against fluctuations in
interest rates.
"Inventory" of any Person means any and all inventory of any kind of such
Person, including without limitation any or all of the following: inventory,
merchandise, goods and other tangible personal property that are held for sale
or lease by such Person; all materials used or consumed in the business of
such Person, but excluding from the foregoing equipment of such Person; all
trademarks, servicemarks, trade names and similar intangible property owned or
used by such Person in its business, together with the goodwill of the
business symbolized thereby and all rights relating thereto ("Intangible
Property"); and all books and records relating to the foregoing and the
proceeds thereof.
"Investment" in any Person means any loan or advance to, any acquisition of
Equity Interests, equity interest, obligation or other security of, or capital
contribution or other investment in, such Person.
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"Issue" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Equity Interests of a Person existing
at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
"JV Subsidiary" means a Guarantor Subsidiary which (i) was created or became
a Subsidiary after the date on which the Notes were originally issued and (ii)
has not acquired any assets directly or indirectly from AK Steel or any
Subsidiary, other than (a) cash constituting a Restricted Payment or (b)
assets, in an Asset Disposition, which were acquired by AK Steel and its
Subsidiaries within one year prior to such Asset Disposition.
"Lien" means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien or encumbrance of any
kind.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and
when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to
such properties or assets or received in any other noncash form) therefrom, in
each case net of all legal, title and recording tax expenses, commissions and
other fees and expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be accrued as a liability under generally accepted
accounting principles, as a consequence of such Asset Disposition, and in each
case net of all payments made on any Debt that is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any lien
upon or other security agreement of any kind with respect to such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be repaid out of the proceeds from
such Asset Disposition, and net of all distributions and other payments
required to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Equity Interests
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Convertible Equity Interests" means, with respect to any Person, any
non-convertible Equity Interests of such Person and any Equity Interests of
such Person convertible solely into non-convertible Equity Interests of such
Person; provided, however, that Non-Convertible Equity Interests shall not
include any Redeemable Equity Interests or Exchangeable Equity Interests.
"Non-Recourse Debt" means Debt or that portion of Debt (i) issued to a
Person other than Holding, AK Steel or any Subsidiary (other than a Non-
Recourse Subsidiary) and (ii) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against a
Non-Recourse Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Debt of Holding, AK Steel or any Subsidiary (other than a
Non-Recourse Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of AK Steel in respect of any
obligation of which neither Holding, AK Steel nor any Subsidiary (other than
another Non-Recourse Subsidiary) has issued a Guarantee, and which (i) has not
acquired any assets directly or indirectly from Holding, AK Steel or any
Subsidiary (other than (a) cash constituting a Restricted Payment and (b)
Accounts Receivable that have been sold or otherwise transferred to such
Subsidiary in an Accounts Receivable financing for AK Steel or such other
Subsidiary), (ii) only owns properties acquired after the date on which the
Notes were originally issued and (iii) has no Debt other than Non-Recourse
Debt and Debt issued to AK Steel or a Significant Subsidiary which constitutes
a Permitted Investment under (e) of the definition of Permitted Investment.
"Normal Replacement Assets" means any assets other than Special Assets.
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"Obligations" means the principal of, premium, if any, and interest on the
Notes and all other amounts due and payable under the Indenture and the Notes
and all other obligations and liabilities of AK Steel whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter issued, which may arise under, out of or in connection with the
Indenture and the Notes or any other documents made, delivered or given in
connection therewith, whether on account of principal, premium, if any,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including without limitation all fees and disbursements of counsel to the
Trustee or the holders for which AK Steel has become obligated pursuant to the
terms of the Indenture) or otherwise whether or not an allowable claim against
AK Steel under the Bankruptcy Law or otherwise enforceable against AK Steel,
and including, in any event, interest and other liabilities accruing or
arising after the filing by or against AK Steel of a petition under the
Bankruptcy Law or that would have so accrued or arisen but for the filing of
such a petition.
"Permitted Credit Facility" or "Facilities" means any agreement or
agreements providing for (i) the making of a loan or loans or the advancing of
credit, (ii) the sale of Accounts Receivable of AK Steel or any Significant
Subsidiary under any asset securitization facility or other financing facility
for the financing of Accounts Receivable of AK Steel or any Significant
Subsidiary or (iii) the issuance of letters of credit and/or the creation of
bankers' acceptances, under which the aggregate amount that may be issued or
otherwise obtained, in the case of clauses (i), (ii) and (iii), is based upon
eligible Accounts Receivable and eligible Inventory and the aggregate
principal amount of Debt, or (in the case of clause (ii)) aggregate
Investments outstanding, excluding Permitted Investments under clause (e) or
(f) of the definition of "Permitted Investments" in respect of any such asset
securitization facility, shall not at any time exceed the greater of (i) $75.0
million and (ii) an amount equal to (1) 100% of the book value of the
consolidated Accounts Receivable of AK Steel and its Significant Subsidiaries
that are Guarantor Subsidiaries or Non-Recourse Subsidiaries plus (2) 100% of
the book value (excluding last-in-first-out reserves) of the consolidated
Inventory of AK Steel and its Subsidiaries that are Guarantor Subsidiaries,
minus (3) the aggregate principal amount of outstanding Debt secured by any
Accounts Receivable or Inventory of AK Steel or any of its Subsidiaries, other
than Debt outstanding under any Permitted Credit Facility, minus (4) other
outstanding Investments (other than Debt under a Permitted Credit Facility or
Debt described in (3) above or Permitted Investments under (e) and (f) of the
definition of "Permitted Investments") under any asset securitization or
similar facility in respect of Accounts Receivable or Inventory of AK Steel or
any of its Subsidiaries.
"Permitted Investments" means:
(a) Cash Equivalents;
(b) Investments in AK Steel or a Wholly Owned Guarantor Subsidiary (or
any Person which will become a Wholly Owned Guarantor Subsidiary as a
result of such Investment);
(c) loans and reasonable advances to employees of AK Steel or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(d) Investments in obligations the interest on which is excluded from
income for Federal income tax purposes and that have been issued or
guaranteed by any state of the United States of America, the District of
Columbia or the Commonwealth of Puerto Rico or any political subdivision,
agency, authority or instrumentality of any of the foregoing, provided,
that at the date of acquisition of any such obligation (i) its remaining
life to maturity shall be less than one year and (ii) the issuer or
guarantor thereof shall have a short-term debt rating of at least A-1 from
Standard & Poor's and at least P-1 from Moody's Investors Service, Inc.;
(e) Investments resulting from the transfer of Accounts Receivable of AK
Steel or its Significant Subsidiaries that are Guarantor Subsidiaries to a
Non-Recourse Subsidiary, the only business of which is the acquisition and
financing of such Accounts Receivable under a Permitted Credit Facility;
(f) Investments resulting from the transfer of Accounts Receivable of AK
Steel or its Significant Subsidiaries that are Guarantor Subsidiaries (or
Non-Recourse Subsidiaries) to a trust, the only purpose of which is the
acquisition and financing of such Accounts Receivable, provided that the
aggregate amount of
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outstanding Debt issued by such trust to, and outstanding Investments in
such trust made by, Persons other than AK Steel and its Significant
Subsidiaries that are Guarantor Subsidiaries or Non-Recourse Subsidiaries
shall not at any time exceed the greater of (i) $75.0 million and (ii) an
amount equal to (1) 85% of the book value of the consolidated Accounts
Receivable of AK Steel and its Significant Subsidiaries that are Guarantor
Subsidiaries or Non-Recourse Subsidiaries plus (2) 100% of the book value
(excluding last-in-first-out reserves) of the consolidated Inventory of AK
Steel and its Subsidiaries that are Guarantor Subsidiaries, minus (3) the
aggregate principal amount of outstanding Debt secured by any Accounts
Receivable or Inventory of AK Steel or any of its Subsidiaries, other than
to the extent included in clause (4) below, minus (4) other outstanding
Investments (other than Investments in such trust) under any asset
securitization or similar facility in respect of Accounts Receivable or
Inventory of AK Steel or any of its Subsidiaries; and
(g) until December 31, 1999, Investments, not to exceed $200.0 million at
any time, in publicly traded debt obligations issued or guaranteed by a
corporation (other than AK Steel) organized under the laws of any state of
the United States of America and subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, provided that (i) such debt
obligations are acquired by AK Steel in the open market and not directly
from the issuer thereof or an affiliate of such issuer or from an
underwriter thereof, (ii) such debt obligations, at the date of acquisition
thereof by AK Steel, shall have a remaining life to maturity of not more
than five years, shall provide for payments of principal and interest
solely in cash and shall be rated at least BB by Standard & Poor's and Ba2
by Moody's Investors Service, Inc. and (iii) not more than $15.0 million of
such Investments at any time shall consist of debt obligations issued or
guaranteed by the same corporation and not more than 20% of such
Investments at any time shall consist of debt obligations issued or
guaranteed by corporations within the same industry (as determined by
Primary Standard Industrial Classification Code).
"Permitted Liens" means, with respect to any Person, (a) pledges or deposits
by such Person under workers' compensation laws, unemployment insurance laws
or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which
such Person is a party, or deposits to secure public or statutory obligations
of such Person or deposits or cash or United States government bonds 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, in
each case incurred in the ordinary course of business; (b) Liens imposed by
law, such as carriers', warehousemen's and mechanics' Liens, in each case for
sums not yet due or being contested in good faith by appropriate proceedings;
or other Liens arising out of judgments or awards against such Person with
respect to which such Person shall then be proceeding with an appeal or other
proceedings for review or time for appeal has not yet expired; (c) Liens for
property taxes not yet subject to penalties for non-payment or which are being
contested in good faith by appropriate proceedings; (d) Liens in favor of
issuers of surety bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
provided, however, that such letters of credit do not constitute Debt; (e)
survey exceptions, encumbrances, easements or reservations of, or rights of
others for, licenses, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real properties or liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were not
incurred in connection with Debt and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use
in the operation of the business of such Person; (f) Liens securing an
Interest Rate Protection Agreement so long as the related Debt is, and is
permitted to be under the Indenture, secured by a Lien on the same property
securing the Interest Rate Protection Agreement; and (g) leases and subleases
of real property which do not interfere with the ordinary conduct of the
business of AK Steel or any of its Subsidiaries, and which are made on
customary and usual terms applicable to similar properties.
"Preferred Equity Interests" as applied to the Equity Interests of any
Person means Equity Interests of any class or classes (however designated)
which is preferred as to the payment of dividends or distributions, or as to
the distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Equity Interests of any other class of such
Person.
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"Public Equity Offering" means an underwritten primary public offering of
common stock of Holding pursuant to an effective registration statement under
the Securities Act.
"Redeemable Equity Interests" means any Equity Interest that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of
the Stated Maturity of the Notes or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated
Maturity of the Notes.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby AK Steel or a Subsidiary transfers such
property to a Person and AK Steel or a Subsidiary leases it from such Person.
"Significant Subsidiary" means (i) any domestic Subsidiary of AK Steel
(other than a Non-Recourse Subsidiary) that, at the time of determination,
either (a) had assets that, as of the date of the Holding's most recent
quarterly consolidated balance sheet, constituted at least 5% of Holding's
total assets on a consolidated basis as of such date, or (b) had revenues for
the 12-month period ending on the date of Holding's most recent quarterly
consolidated statement of income which constituted at least 5% of Holding's
total revenues on a consolidated basis for such period, (ii) any foreign
Subsidiary (other than a Non-Recourse Subsidiary) of AK Steel that at the time
of determination either (a) had assets which, as of the date of Holding's most
recent quarterly consolidated balance sheet, constituted at least 5% of
Holding's total assets on a consolidated basis as of such date, in each case
determined in accordance with generally accepted accounting principles or (b)
had revenues for the 12-month period ending on the date of Holding's most
recent quarterly consolidated statement of income which constituted at least
5% of Holding's total revenues on a consolidated basis for such period, or
(iii) any Subsidiary (other than a Non-Recourse Subsidiary) of AK Steel that,
if merged with all Defaulting Subsidiaries of AK Steel, would at the time of
determination either (a) have had assets which, as of the date of Holding's
most recent quarterly consolidated balance sheet, would have constituted at
least 10% of Holding's total assets on a consolidated basis as of such date or
(b) have had revenues for the 12-month period ending on the date of Holding's
most recent quarterly consolidated statement of income which would have
constituted at least 10% of Holding's total revenues on a consolidated basis
for such period (each such determination being made in accordance with
generally accepted accounting principles). "Defaulting Subsidiary" means any
Subsidiary of AK Steel (other than a Non-Recourse Subsidiary) with respect to
which a Default has occurred.
"Special Assets" means a capital asset, or series of related capital assets,
with an aggregate purchase price in excess of $20.0 million that enhances the
competitiveness or productivity of the business of AK Steel and its
Subsidiaries or is required so that AK Steel and its Subsidiaries will be able
to remain in compliance with all material requirements of applicable law.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the principal of such security is due
and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at the
option of the holder thereof upon the happening of any contingency unless such
contingency has occurred).
"Subordinated Obligation" means any Debt of AK Steel (whether outstanding on
the date on which the Notes were originally issued or thereafter issued) which
is subordinate or junior in right of payment to the Notes.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
Equity Interests or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" shall refer to a Subsidiary or Subsidiaries of AK Steel.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
of America (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States of America is pledged
and which are not callable at the issuer's option.
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"Voting Equity Interests" of a corporation or other entity means all classes
of Equity Interests of a corporation or other entity then outstanding and
normally entitled to vote in the election of directors or other governing body
of such corporation or other entity.
"Wholly Owned Guarantor Subsidiary" means any Wholly Owned Subsidiary that
is a Guarantor Subsidiary.
"Wholly Owned Subsidiary" of a Person means a Subsidiary of such Person
(other than a Non-Recourse Subsidiary) all the Equity Interests (other than
non-voting, money market preferred shares) of which (other than directors'
qualifying shares) are owned by such Person or another Wholly Owned Subsidiary
of such Person. Unless otherwise qualified, all references to a "Wholly Owned
Subsidiary" or to "Wholly Owned Subsidiaries" shall refer to a Wholly Owned
Subsidiary or Wholly Owned Subsidiaries of AK Steel.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in any payment of interest on any Note when the same becomes
due and payable, and such default continues for a period of 30 days;
(ii) default in the payment of the principal of any Note when the same
becomes due and payable at its Stated Maturity, upon redemption, upon
declaration or otherwise;
(iii) failure to redeem or purchase Notes when required pursuant to the
Indenture and the Notes;
(iv) failure to (a) comply with the covenant described under "--When AK
Steel or Any of Its Subsidiaries May Merge or Transfer Assets," (b) make or
consummate an Offer in accordance with the provisions of "--Certain
Covenants--Limitation on Sales of Assets and Equity Interests of
Subsidiaries" or (c) make or consummate a Change in Control Offer in
accordance with the provisions of "--Change in Control Offer";
(v) failure to observe or comply with any of the agreements in the Notes
or the Indenture (other than those referred to in clauses (i), (ii), (iii)
or (iv) above), which continues for 60 days after there has been given to
AK Steel by the Trustee or to AK Steel and the Trustee by the holders of at
least 25% in principal amount of Notes then outstanding a written notice
specifying such failure;
(vi) Debt of AK Steel or any Significant Subsidiary is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default, and the total amount of such Debt
unpaid or accelerated exceeds $10.0 million or its foreign currency
equivalent;
(vii) any Note Guarantee issued by Holding or any Significant Subsidiary
ceases to be in full force and effect other than in accordance with its
terms, or Holding or any Significant Subsidiary or any Person acting on
behalf of Holding or such Significant Subsidiary shall deny or disaffirm
its obligations under its Note Guarantee;
(viii) certain events in bankruptcy, insolvency or reorganization with
respect to Holding, AK Steel or any Significant Subsidiary; and
(ix) any judgment or decree for the payment of money in excess of $10.0
million is rendered against Holding, AK Steel or any Significant Subsidiary
and is not discharged and either (a) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (b) there is a
period of 60 days following such judgment during which such judgment or
decree is not discharged, waived or the execution thereof stayed.
If an Event of Default shall occur and be continuing, either the Trustee or
the holders of at least 25% in principal amount of the Notes then outstanding
may accelerate the maturity of all Notes and thereupon the principal of,
premium, if any, and any accrued and unpaid interest on the Notes shall become
due and payable immediately; provided, that in the case of any bankruptcy,
insolvency or reorganization Event of Default, such amount shall become
immediately due and payable without any declaration or other act on the part
of the Trustee or any holder. The holders of at least a majority in principal
amount of the then outstanding Notes may, under
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certain circumstances, rescind such acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all Events of
Default, other than the nonpayment of accelerated principal of, premium, if
any, and interest on Notes, have been cured or waived as provided in the
Indenture. The holders of at least a majority in principal amount of the then
outstanding Notes may waive any past default under the Indenture, except a
default in the payment of principal, premium or interest on a Note or default
with respect to certain covenants under the Indenture.
Subject to provisions for the indemnification of the Trustee, the holders of
at least a majority in principal amount of the Notes will 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, subject to certain limitations contained in the Indenture.
No holder of any Note will have any right to pursue any remedy with respect
to the Indenture or the Notes unless (i) such holder shall have previously
given to the Trustee written notice of a continuing Event of Default, (ii) the
holders of at least 25% in principal amount of the Notes shall have made
written request to the Trustee to pursue the remedy, (iii) such holder shall
have offered the Trustee reasonable indemnity against any liability, (iv) the
Trustee shall have failed to comply with the request within 60 days after the
receipt of such request and the offer of indemnity, and (v) no written
direction inconsistent with such request shall have been given to the Trustee
during such 60-day period by the holders of at least a majority in principal
amount of the Notes.
AK Steel and the Guarantors will be required to furnish to the Trustee
annually a statement as to the performance by AK Steel and such Guarantor of
certain of the obligations under the Indenture and as to any default in such
performance. Upon becoming aware of any default, AK Steel and each Guarantor
will be required to deliver an Officers' Certificate to the Trustee setting
forth the details of such default and the action which Holding, AK Steel or
any Guarantor proposes to take with respect thereto.
MODIFICATION AND WAIVER
Amendments of the Indenture or the Notes may be made by AK Steel, the
Guarantors and the Trustee with the consent of the holders of at least a
majority in principal amount of the Notes; provided, however, that no such
modification or amendment may, without the consent of the holder of each Note
affected thereby, (i) reduce the amount of Notes whose holders must consent to
an amendment, (ii) reduce the rate or extend the interest payment time of any
Note, (iii) reduce the principal amount of or extend the Stated Maturity of
any Note, (iv) reduce the premium payable upon redemption or change the time
at which any Note may be redeemed, (v) change the currency of payment of any
Note, (vi) make any change in the provisions concerning waiver of Defaults by
holders of the Notes or the rights of holders to receive payments of principal
or interest, (vii) make any change in provisions regarding Change in Control,
or (viii) make any change in this provision.
Without the consent of any holder of the Notes, AK Steel, the Guarantors and
the Trustee may amend the Indenture or the Notes (i) to cure any ambiguity,
omission, defect or inconsistency, (ii) to comply with, among other things,
the provisions discussed under "--When AK Steel or Any of Its Subsidiaries May
Merge or Transfer Assets," (iii) to provide for uncertificated Notes in
addition to or in place of certificated Notes as provided in the Indenture
(iv) to add guarantees with respect to the Securities, (v) to add to the
covenants of AK Steel or the Guarantors for the benefit of the holders or to
surrender any right or power conferred upon AK Steel or the Guarantors in the
Indenture, (vi) to reflect the release or addition of a Guarantor pursuant to
the terms of the Indenture, (vii) to comply with any requirements of the
Commission in connection with qualifying the Indenture under the Trust
Indenture Act, or (viii) to make any change that does not adversely affect the
rights of any holder of the Notes.
WHEN AK STEEL OR ANY OF ITS SUBSIDIARIES MAY MERGE OR TRANSFER ASSETS
AK Steel shall not (i) consolidate with or merge with or into any other
Person, (ii) permit any other Person to consolidate with or merge into (a) AK
Steel or (b) any of its Subsidiaries in a transaction in which such Subsidiary
(or successor Person) remains (or becomes) a Subsidiary, (iii) directly or
indirectly, transfer, convey,
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sell, lease or otherwise dispose of all or substantially all of its properties
and assets, (iv) directly or indirectly, (a) acquire Equity Interests or other
ownership interests of any other Person, other than as a Permitted Investment
as defined in clause (e) of the definition of Permitted Investments, such that
such Person becomes a Subsidiary or (b) purchase, lease or otherwise acquire
all or substantially all of the property and assets of any Person or any
existing business (whether existing as a separate entity, subsidiary,
division, unit or otherwise) of any Person, or (v) permit any of its
Subsidiaries to enter into any such transaction unless:
(1) AK Steel or such Subsidiary shall be the continuing entity or the
resulting, surviving or transferee Person (if not AK Steel or such
Subsidiary) shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
such Person shall expressly assume, by an indenture supplemental to the
Indenture, executed and delivered to the Trustee, all the obligations of AK
Steel or such Subsidiary, as the case may be, under the Notes and the
Indenture;
(2) Immediately after giving effect to such transaction (and treating any
Debt which becomes an obligation of the resulting, surviving or transferee
Person or any Subsidiary as a result of such transaction as having been
issued by such Person or such Subsidiary at the time of such transaction),
no Default shall have occurred and be continuing;
(3) Immediately after giving effect to such transaction, on a pro forma
basis, AK Steel (or the resulting, surviving or transferee Person (if not
AK Steel)) would be able to issue at least $1.00 of Debt pursuant to the
Consolidated EBITDA Coverage Ratio set forth in the first paragraph of "--
Certain Covenants--Limitation on Debt";
(4) Immediately after giving effect to such transaction, Holding shall
have Consolidated Net Worth which is not less than the Consolidated Net
Worth of Holding immediately prior to such transaction;
(5) Each Guarantor, unless it is the other party to the transactions
described above, shall expressly confirm, by an indenture supplemental to
the Indenture, executed and delivered to the Trustee, that its Guarantee
shall apply to such Person's obligations under the Notes; and
(6) AK Steel shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and such supplemental indentures (if any) comply with the
Indenture;
provided, however, that clauses (3) and (4) shall not apply to (A) the
consolidation or merger of any Wholly Owned Subsidiary with or into any other
Wholly Owned Subsidiary or AK Steel, (B) the transfer, conveyance, sale, lease
or other disposal (including any disposition by means of a merger,
consolidation or similar transaction) of all or substantially all of the
properties or assets of a Non-Recourse Subsidiary or a Subsidiary which is not
a Significant Subsidiary or (C) the merger of Holding into AK Steel.
If after the date on which the Notes were originally issued any Person shall
become a Subsidiary (other than a Non-Recourse Subsidiary), such Person shall
(a) unconditionally guarantee, by an indenture supplemental to the Indenture,
executed and delivered to the Trustee, all of AK Steel's obligations under the
Notes on the terms set forth in the Indenture and (b) deliver to the Trustee
an Opinion of Counsel stating that such supplemental indenture has been duly
authorized and constitutes the enforceable obligations of such Person.
DEFEASANCE
AK Steel at any time may terminate all its obligations under the Notes and
the Indenture ("legal defeasance"), except for certain obligations, including
those respecting the defeasance trust and obligations to register the transfer
or exchange of the Notes, to replace mutilated, destroyed, lost or stolen
Notes and to maintain a registrar and paying agent in respect of the Notes. AK
Steel at any time may terminate its obligations under the covenants described
under "--Certain Covenants" and "--Change in Control Offer" above ("covenant
defeasance"). AK Steel may exercise the legal defeasance option
notwithstanding the prior exercise of the covenant defeasance option. If AK
Steel exercises the legal defeasance option, payment of the Notes may not be
accelerated because of an Event of Default. If AK Steel exercises the covenant
defeasance option, payment of the Notes may not be accelerated because of
certain Events of Default by AK Steel specified in clause (iv) or (v) of the
first paragraph of "Events of Default" above.
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In order to exercise its defeasance options, AK Steel must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal of, premium, if any, and
interest on the Notes to maturity or redemption, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
opinion of counsel to the effect that holders of the Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
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
defeasance had not occurred (and, in the case of legal defeasance only, such
opinion of counsel must be based on a ruling of the Internal Revenue Service
or other change in applicable federal income tax law).
CONCERNING THE TRUSTEE
The Trustee may become owner or pledgee of Notes and may otherwise deal with
either Holding or Affiliates of Holding with the same rights it would have if
it were not Trustee.
The Indenture provides that in case an Event of Default shall occur and be
continuing, the Trustee will exercise the rights and powers vested in it by
the Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
The Bank of New York also serves as Trustee under the indenture governing AK
Steel's 10 3/4% Notes.
GOVERNING LAW
The rights and duties of AK Steel, Holding and the Trustee under the
Indenture, the Notes, the Note Guarantees and the Registration Rights
Agreement are governed by the law of the State of New York.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
THE SECURED NOTES
An aggregate of $250.0 million principal amount of Secured Notes will be
issued, of which $92.5 million will be issued in June 1997, $20.0 million will
be issued in September 1997 and $137.5 million will be issued no earlier than
December 1997. An aggregate of $87.5 million principal amount of the Secured
Notes, of which $80.0 million will be issued in June 1997 and $7.5 million
will be issued no earlier than December 1997, will bear interest at a rate of
8.98% per annum. The remaining $162.5 million of Secured Notes will bear
interest at a fixed annual rate equal to the yield on the 5.75% U.S. Treasury
Note due August 2003 reported at 10:00 a.m., New York City time, on the second
business day immediately preceding the date of issuance of such Secured Notes
plus 2.73%. The principal of the Secured Notes will be payable in four
consecutive annual installments of $62.5 million commencing in December 2001
with the final installment due in December 2004. The Secured Notes will be
secured by a first priority lien on the continuous cold mill and hot dip
galvanizing line at the New Facility and a first mortgage on the approximately
three acres of land upon which those two components of the New Facility will
be constructed. Until construction of those two units is completed, the
Secured Notes will prohibit AK Steel from granting any liens on any of its
inventories, whether or not permitted to do so under the Indenture governing
the Notes offered hereby or the indenture governing the 10 3/4% Notes. The
Secured Notes may be prepaid, in whole or in part, at any time, at AK Steel's
option, at 100% of their principal amount plus a customary "make-whole"
premium.
The Secured Notes will be subject to the terms of a Note Purchase Agreement,
dated December 17, 1996, between the Company and the purchasers of the Secured
Notes, containing covenants substantially similar to those contained in the
Indenture with respect to limitations on, among other things, (i) liens, (ii)
sale/leaseback transactions, (iii) the incurrence of debt and the issuance of
preferred equity interests by AK Steel's subsidiaries, (iv) transactions with
affiliates, (v) dividends and other restricted payments, (vi) sales of assets,
including stock of subsidiaries, (vii) lines of business, (viii) restrictions
on distributions from AK Steel's subsidiaries and (ix) mergers and
consolidations. In addition, the Note Purchase Agreement requires that AK
Steel maintain (i) Consolidated Net Worth (as defined therein) of not less
than the sum of $500.0 million plus an aggregate amount equal to 25% of
Consolidated Net Income (as defined) for each completed fiscal year beginning
after December 31, 1996 and (ii) a ratio of Consolidated Debt (as defined) to
Consolidated Capitalization (as defined) of not more than .65 to 1.00 through
December 31, 2001 and .55 to 1.00 thereafter until repayment in full of the
Secured Notes. The Secured Notes also will be subject to events of default
that are substantially similar to those applicable to the Notes. A copy of the
form of the Note Purchase Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
THE 10 3/4% NOTES
The 10 3/4% Notes, of which $325.0 million aggregate principal amount are
outstanding, are non-callable prior to April 1, 1999. Thereafter, the 10 3/4%
Notes are callable at the option of AK Steel at an initial redemption price of
104.031% of their principal amount, declining annually thereafter to 100%
beginning April 1, 2002 together with accrued interest to the redemption date.
The 10 3/4% Notes include Change in Control repurchase provisions that are
identical to those applicable to the Notes and have the benefit of a guarantee
by Holding that is identical to the Holding Guarantee. The indenture relating
to the 10 3/4% Notes (a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part) contains
covenants substantially similar to those contained in the Indenture, including
limitations on, among other things, (i) liens, (ii) sale/leaseback
transactions, (iii) the incurrence of additional debt, (iv) the incurrence of
debt and the issuance of equity interests by AK Steel's subsidiaries, (v)
restrictions on distributions from AK Steel's subsidiaries, (vi) sales of
assets, including subsidiary stock, (vii) dividends and other restricted
payments, (viii) transactions with affiliates, (ix) lines of business, (x)
mergers and consolidations and (xi) activities and liabilities of Holding. The
10 3/4% Notes also are subject to events of default that are identical to
those applicable to the Notes.
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ACCOUNTS RECEIVABLE FACILITY
A wholly-owned special purpose subsidiary of AK Steel is party to a
Receivables Purchase and Servicing Agreement with a group of banks, providing
for an aggregate financing commitment of $125.0 million, inclusive of up to
$40.0 million of letters of credit. The banks' commitments will expire
December 1, 2000. This subsidiary purchases accounts receivable of AK Steel
and funds those purchases with cash collections on the purchased accounts
receivable and the proceeds realized from selling interests in those accounts
receivable to the participating banks. AK Steel acts as servicer of the
accounts receivable sold to its subsidiary, including processing of
collections. At September 30, 1996, the participating banks had no interests
in any outstanding accounts receivable of AK Steel and the subsidiary held a
pool of eligible accounts receivable that was sufficient to fully utilize the
available commitment. A copy of the Receivables Purchase and Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes certain of the material U.S.
federal income tax aspects of the acquisition, ownership and disposition of
the New Notes. This discussion is a summary for general information only and
does not consider all aspects of U.S. federal income tax that may be relevant
to the purchase, ownership, and disposition of the New Notes by a prospective
holder in light of that holder's personal circumstances. This discussion also
does not address the federal income tax consequences of ownership of New Notes
not held as capital assets within the meaning of Section 1221 of the U.S.
Internal Revenue Code of 1986, as amended (the "Code"), or the federal income
tax consequences to investors subject to special treatment under the federal
income tax laws, such as dealers in securities or foreign currency, tax-exempt
entities, banks, thrifts, insurance companies, persons that hold the New Notes
as part of a "straddle," a "hedge" against currency risk or a "conversion
transaction," persons that have a "functional currency" other than the U.S.
dollar, and investors in pass-through entities. In addition, this discussion
is generally limited to the tax consequences to initial holders. It does not
describe any tax consequences arising out of the tax laws of any state, local
or foreign jurisdiction.
This discussion is based upon the Code, existing and proposed regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing are subject to change, possibly on a retroactive basis and any such
change could affect the continuing validity of this discussion.
PROSPECTIVE HOLDERS OF NEW NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF
ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION TO THEIR PARTICULAR
SITUATIONS.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Note that is (i) a citizen or resident
(as defined in Section 7701(b)(1) of the Code) of the United States,
(ii) a corporation organized under the laws of the United States or any
political subdivision thereof or therein, or (iii) an estate or trust, the
income of which is subject to U.S. federal income tax regardless of the source
(a "U.S. Holder"). Certain U.S. federal income tax consequences relevant to a
holder other than a U.S. Holder (a "Non-U.S. Holder") are discussed separately
below.
EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not be a taxable exchange for federal income tax purposes. As a result,
there should be no federal income tax consequences to holders exchanging the
Old Notes for New Notes pursuant to the Exchange Offer. The Company is
obligated to pay additional interest to the holders of Notes under certain
circumstances described elsewhere in this Prospectus. Such payments should be
taxable to a U.S. Holder at the time it accrues or is received in accordance
with such holder's method of accounting.
STATED INTEREST
Interest on a New Note will be taxable to a U.S. Holder as ordinary interest
income at the time it accrues or is received in accordance with such holder's
method of accounting for tax purposes.
MARKET DISCOUNT
If a New Note is acquired at a "market discount," some or all of any gain
realized upon a sale or other disposition or payment at maturity, or some or
all of a partial principal payment, of such New Note may be treated as
ordinary income, as described below. For this purpose, "market discount" is
the excess (if any) of the stated redemption price at maturity over the
purchase price, subject to a statutory de minimis exception. Unless a U.S.
Holder has elected to include the market discount in income as it accrues, any
gain realized on any subsequent disposition of such New Note (other than in
connection with certain nonrecognition transactions) or payment at maturity,
or some or all of any partial principal payment with respect to such New Note,
will be treated as ordinary income to the extent of the market discount that
is treated as having accrued during the period such Note was held.
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The amount of the market discount treated as having accrued will be
determined either (i) on a ratable basis by multiplying the market discount
times a fraction, the numerator of which is the number of days the New Note
was held by the U.S. Holder and the denominator of which is the total number
of days after the date such U.S. Holder acquired the New Note up to and
including the date of its maturity, or (ii) if the U.S. Holder so elects, on a
constant interest rate method. A U.S. Holder may make that election with
respect to any Note but, once made, such election is irrevocable.
In lieu of recharacterizing gain upon disposition as ordinary income to the
extent of accrued market discount at the time of disposition, a U.S. Holder of
a New Note acquired at a market discount may elect to include market discount
in income currently, through the use of either the ratable inclusion method or
the elective constant interest method. Once made, the election to include
market discount in income currently applies to all Notes and other obligations
of the U.S. Holder that are purchased at a market discount during the taxable
year for which the election is made, and all subsequent taxable years of the
U.S. Holder, unless the Internal Revenue Service (the "Service") consents to a
revocation of the election. If an election is made to include market discount
in income currently, the basis of the New Note in the hands of the U.S. Holder
will be increased by the market discount thereon as it is included in income.
Unless a U.S. Holder who acquires a New Note at a market discount elects to
include market discount in income currently, such U.S. Holder may be required
to defer deductions for any interest paid on indebtedness allocable to such
New Notes in an amount not exceeding the deferred income until such income is
realized.
BOND PREMIUM
If a U.S. Holder purchases a New Note and immediately after the purchase the
adjusted basis of the New Note exceeds the sum of all amounts payable on the
instrument after the purchase date (other than qualified stated interest) the
New Note has "bond premium." A U.S. Holder may elect to amortize such bond
premium over the remaining term of such Note (or, in certain circumstances,
until an earlier call date).
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an interest payment date
or at stated maturity, as the case may be, will be reduced by the portion of
premium allocable to such period based on the New Note's yield to maturity. If
such an election to amortize bond premium is not made, a U.S. Holder must
include the full amount of each interest payment in income in accordance with
its regular method of accounting and will receive a tax benefit from the
premium only in computing its gain or loss upon the sale or other disposition
or payment of the principal amount of the New Note.
An election to amortize premium will apply to amortizable bond premium on
all New Notes and other bonds, the interest on which is includible in the U.S.
Holder's gross income, held at the beginning of the U.S. Holder's first
taxable year to which the election applies or thereafter acquired, and may be
revoked only with the consent of the Service.
SALE, EXCHANGE OR REDEMPTION OF NEW NOTES
Upon the disposition of a New Note by sale, exchange or redemption, the U.S.
Holder will generally recognize gain or loss equal to the difference between
(i) the amount realized on the disposition (other than amounts attributable to
accrued interest) and (ii) the U.S. Holder's tax basis in the New Note. A U.S.
Holder's tax basis in a New Note generally will equal the cost of the New Note
(net of accrued interest) to the U.S. Holder increased by amounts includible
in income as market discount (if the holder elects to include market discount
on a current basis) and reduced by any amortized bond premium and any payments
other than payments of qualified stated interest made on such New Note.
Assuming the New Note is held as a capital asset, such gain or loss (except
to the extent that the market discount rules otherwise provide) will generally
constitute capital gain or loss and will be long-term capital gain or loss if
the U.S. Holder has held such New Note for longer than one year.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
Under the Code, a U.S. Holder of a New Note may be subject, under certain
circumstances, to information reporting and/or backup withholding at a 31%
rate with respect to cash payments in respect of interest or the gross
proceeds from dispositions thereof. This withholding applies only if the
holder (i) fails to furnish its social security or other taxpayer
identification number ("TIN") within a reasonable time after a request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to report interest
properly, or (iv) fails, under certain circumstances, to provide a certified
statement, signed under penalty of perjury, that the TIN provided is its
correct number and that it is not subject to backup withholding. Any amount
withheld from a payment to a U.S. Holder under the backup withholding rules is
allowable as a credit and (and may entitle such holder to a refund) against
such holder's U.S. federal income tax liability, provided that the required
information is furnished to the Service. Certain persons are exempt from
backup withholding, including corporations and financial institutions. Holders
of New Notes should consult their tax advisors as to their qualification for
exemption from withholding and the procedure for obtaining such exemption.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a New Note that is not a (i) a citizen or
resident of the United States, (ii) a corporation organized under the laws of
the United States or any political subdivision thereof or therein, or (iii) an
estate or trust, the income of which is subject to U.S. federal income tax
regardless of the source (a "Non-U.S. Holder").
This discussion does not deal with all aspects of U.S. federal income and
estate taxation that may be relevant to the purchase, ownership or disposition
of the New Notes by any particular Non-U.S. Holder in light of that Holder's
personal circumstances, including holding the New Notes through a partnership.
For example, persons who are partners in foreign partnerships and
beneficiaries of foreign trusts or estates who are subject to U.S. federal
income tax because of their own status, such as United States residents or
foreign persons engaged in a trade or business in the United States, may be
subject to U.S. federal income tax even though the entity is not subject to
income tax on the disposition of its New Note.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of the New Note will be considered "U.S. trade
or business income" if such income or gain is (i) effectively connected with
the conduct of a U.S. trade or business or (ii) in the case of a treaty
resident, attributable to a U.S. permanent establishment (or to a fixed base)
in the United States.
STATED INTEREST
Generally, any interest paid to a Non-U.S. Holder of a New Note that is not
"U.S. trade or business income" will not be subject to United States tax if
the interest qualifies as "portfolio interest." Generally, interest on the New
Notes will qualify as portfolio interest if (i) the Non-U.S. Holder does not
actually or constructively own 10% or more of the total voting power of all
voting stock of the Company and is not a controlled foreign corporation with
respect to which the Company is a "related person" within the meaning of the
Code, and (ii) the beneficial owner, under penalty of perjury, certifies that
the beneficial owner is not a United States person and such certificate
provides the beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exception and that are not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding.
U.S. trade or business income will be taxed at regular U.S. rates rather than
the 30% gross rate. To claim the benefit of a tax treaty or to claim exemption
from withholding because the income is U.S. trade or business income, the Non-
U.S. Holder must provide a properly executed Form 1001 or 4224, as applicable,
prior to the payment of interest. The Forms 1001 and 4224 must be periodically
updated.
71
<PAGE>
SALE, EXCHANGE OR REDEMPTION OF NEW NOTES
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a New Note generally will not be subject to U.S. federal income
tax, unless (i) such gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the New
Note as a capital asset and is present in the United States for 183 days or
more in the taxable year of the disposition, or (iii) the Non-U.S. Holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to
certain U.S. expatriates.
FEDERAL ESTATE TAX
Notes held (or treated as held) by an individual who is a Non-U.S. Holder at
the time of his death will not be subject to U.S. federal estate tax provided
that the individual does not actually or constructively own 10% or more of the
total voting power of all voting stock of the Company and income on the New
Notes was not U.S. trade or business income.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the Service and to each Non-U.S. Holder
any interest that is subject to withholding or that is exempt from U.S.
withholding tax pursuant to a tax treaty or the portfolio interest exception.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-U.S. Holder resides.
In the case of payments of principal on the New Notes by the Company to a
Non-U.S. Holder, the regulations provide that backup withholding and
information reporting will not apply to payments if the Holder certifies to
its non-U.S. status under penalties of perjury or otherwise establishes an
exemption (provided that neither the Company nor its paying agent has actual
knowledge that the holder is a United States person or that the conditions of
any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of New Notes to or through
the United States office of any broker, U.S. or foreign, will be subject to
information reporting and possible backup withholding unless the owner
certifies its non-U.S. status under penalty of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the Holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of a New Note or through a non-U.S. office of a non-U.S. broker
that is not a U.S. related person will not be subject to information reporting
or backup withholding. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for U.S. federal income tax purposes, or (ii)
a foreign person 50% or more of whose gross income from all sources for the
three-year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the broker has been in existence)
is derived from activities that are effectively connected with the conduct of
a United States trade or business.
In the case of the payment of proceeds from the disposition of New Notes to
or through a non-U.S. office of a broker that is either a U.S. person or a
"U.S. related person," regulations require information reporting on the
payment, unless the broker has documentary evidence in its files that the
owner is a Non-U.S. Holder and the broker has no knowledge to the contrary.
Backup withholding will not apply to payments made through foreign offices of
a broker that is a U.S. person or a U.S. related person (absent actual
knowledge that the payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
72
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New 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 New 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 amended or
supplemented, available to any broker-dealer for use in connection with any
such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New 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 New 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 or the purchasers of any such New Notes. Any broker-
dealer that resells New 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 New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commission or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has agreed, pursuant to the Registration Rights Agreement, to
pay all expenses incident to the Exchange Offer (including the expenses of one
counsel for all the holders of the Notes as a single class) 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.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the New Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Company prepare and file
a prospectus with the securities regulatory authorities in each province where
trades of New Notes are effected. Accordingly, any resale of the Notes in
Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to
be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the New Notes.
REPRESENTATION OF PURCHASERS
Each purchaser of New Notes in Canada who receives a purchase confirmation
will be deemed to represent to the Company and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such New Notes without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a
73
<PAGE>
result, Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws. Following a recent decision of the U.S. Supreme Court, it is possible
that Ontario purchasers will not be able to rely upon the remedies set out in
Section 12(2) of the Securities Act if the securities are being offered under
a U.S. private placement memorandum.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such person
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of New Notes to whom the Securities Act (British Columbia)
applies is advised that such purchaser is requested to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Notes acquired by such purchaser pursuant to this offering. Such report must
be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of New Notes acquired on the same date
and under the same prospectus exemption.
LEGAL MATTERS
The validity of the New Notes and certain other legal matters will be passed
upon for the Company by Weil, Gotshal & Manges LLP, New York, New York.
INDEPENDENT AUDITORS
The consolidated financial statements of AK Steel Holding Corporation as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995, included in this Prospectus, have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report appearing
herein.
74
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Statements of Operations for the Years Ended December 31,
1993, 1994 and 1995..................................................... F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995............. F-4
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995..................................................... F-5
Consolidated Statements of Stockholders' Equity/Partners' Deficit for the
Years Ended December 31, 1993, 1994 and 1995............................ F-6
Notes to Consolidated Financial Statements............................... F-7
Condensed Consolidated Statements of Operations for the Three and Nine-
Month Periods Ended September 30, 1995 and 1996 (Unaudited)............. F-20
Condensed Consolidated Balance Sheets as of December 31, 1995 and
September 30, 1996 (Unaudited).......................................... F-21
Condensed Consolidated Statements of Cash Flows for the Nine-Month
Periods Ended September 30, 1995 and 1996 (Unaudited)................... F-22
Notes to Condensed Consolidated Financial Statements (Unaudited)......... F-23
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of AK Steel Holding Corporation:
We have audited the accompanying consolidated balance sheets of AK Steel
Holding Corporation and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity/partners'
deficit and cash flows for each of the three years in the period ended
December 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Cincinnati, Ohio
January 23, 1996
F-2
<PAGE>
AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net Sales:
Customers...................................... $1,458.3 $1,848.0 $2,205.0
Affiliates (Note 7)............................ 136.2 168.6 52.3
-------- -------- --------
Total Net Sales............................ 1,594.5 2,016.6 2,257.3
Operating Costs:
Cost of products sold (Notes 1, 7 and 11)...... 1,380.3 1,655.2 1,768.1
Selling and administrative expenses (Note 7)... 111.2 113.7 116.5
Depreciation (Note 1).......................... 73.5 70.7 74.6
Special charges and unusual items (Note 9)..... 17.6 (15.9) --
-------- -------- --------
Total Operating Costs...................... 1,582.6 1,823.7 1,959.2
-------- -------- --------
Operating Profit................................. 11.9 192.9 298.1
Interest Expense (Note 4)........................ 58.1 48.2 35.6
Other Income..................................... 3.5 7.3 19.0
-------- -------- --------
Income (Loss) Before Income Taxes and
Extraordinary Item.............................. (42.7) 152.0 281.5
Current income tax provision (Note 3)............ -- -- 6.2
Deferred income tax provision (benefit) (Note
3).............................................. -- (120.5) 6.7
-------- -------- --------
Income (Loss) Before Extraordinary Item.......... (42.7) 272.5 268.6
Extraordinary Item (Note 10)..................... -- (14.9) --
-------- -------- --------
Net Income (Loss)................................ $ (42.7) 257.6 268.6
========
Preferred Stock Dividends (Note 2)............... n/a 4.0 15.3
-------- --------
Net Income Applicable to Common Shareholders..... n/a $ 253.6 $ 253.3
======== ========
Earnings per common and common equivalent share:
(Note 2)
Primary earnings per share:
Income before extraordinary item............. n/a $ 10.19 $ 9.56
Extraordinary item........................... n/a (.57) --
Net income................................... n/a 9.62 9.56
Fully diluted earnings per share:
Income before extraordinary item............. n/a $ 8.30 $ 8.14
Extraordinary item........................... n/a (.45) --
Net income................................... n/a 7.85 8.14
Cash dividends per common share................ n/a -- $ .15
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
AK STEEL HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (Note 1)....................... $ 261.8 $ 137.0
Short-term investments................................... -- 175.8
Accounts receivable--net (Notes 1 and 4)................. 249.1 217.0
Inventories--net (Note 1)................................ 323.0 340.7
Deferred taxes (Note 3).................................. 47.8 14.8
Other.................................................... 2.8 1.9
-------- --------
Total Current Assets................................... 884.5 887.2
-------- --------
Property, plant and equipment (Note 1):
Land, land improvements and leaseholds................... 39.5 44.5
Buildings................................................ 81.0 81.2
Machinery and equipment.................................. 1,109.5 1,258.4
Construction in progress................................. 79.8 67.5
-------- --------
Total.................................................. 1,309.8 1,451.6
Less accumulated depreciation............................ (428.7) (478.0)
-------- --------
Property, plant and equipment--net....................... 881.1 973.6
Prepaid pension (Note 6)................................... 23.5 138.8
Other (Notes 3 and 6)...................................... 144.1 115.9
-------- --------
Total Assets........................................... $1,933.2 $2,115.5
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable......................................... $ 212.0 $ 255.9
Accrued salary and wages................................. 46.7 76.8
Other accruals (Note 2).................................. 72.0 64.6
Current portion of long-term debt (Note 4)............... -- --
Current portion of pension obligation (Note 6)........... 73.1 0.1
Current portion of postretirement benefit obligation
(Note 6)................................................ 37.2 --
-------- --------
Total Current Liabilities.............................. 441.0 397.4
-------- --------
Noncurrent Liabilities:
Long-term debt (Note 4).................................. 330.0 325.0
Pension obligation (Note 6).............................. -- --
Postretirement benefit obligation (Note 6)............... 638.3 655.7
Other liabilities........................................ 74.9 63.2
Commitments and contingencies (Notes 4, 8 and 11)........ -- --
-------- --------
Total Noncurrent Liabilities........................... 1,043.2 1,043.9
-------- --------
Total Liabilities...................................... 1,484.2 1,441.3
-------- --------
Stockholders' Equity:
Preferred stock--Authorized 25,000,000 shares of $.01 par
value each; issued--7,479,674 shares; outstanding--1994,
7,479,674 shares; 1995, 5,915,974 shares (Note 2)....... 0.1 0.1
Common stock--Authorized 75,000,000 shares of $.01 par
value each; issued--1994, 26,061,399 shares; 1995,
26,476,297 shares; outstanding--1994, 26,061,399 shares;
1995, 25,838,862 shares (Note 2)........................ 0.3 0.3
Additional paid-in capital............................... 752.7 715.0
Treasury stock--common shares at cost--1995, 637,435
shares (Note 2)......................................... -- (21.5)
Retained earnings........................................ (304.1) (19.7)
-------- --------
Total Stockholders' Equity............................. 449.0 674.2
-------- --------
Total Liabilities and Stockholders' Equity............. $1,933.2 $2,115.5
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss).................................... $(42.7) $257.6 $268.6
------ ------ ------
Adjustments to reconcile net income (loss) to cash
flows from operating activities:
Depreciation....................................... 73.5 70.7 74.6
Loss on retirement of debt......................... -- 14.9 --
Special charges and unusual items.................. 17.6 (15.9) --
Deferred income taxes.............................. 0.1 (120.5) 6.7
Other--net......................................... 51.6 20.3 2.3
Changes in Assets and Liabilities:
Accounts and notes receivable.................... (14.7) (99.1) 32.4
Inventories...................................... 18.4 (67.9) (17.6)
Current liabilities.............................. 4.8 59.2 67.5
Other assets..................................... (6.8) (13.5) (30.5)
Pension obligation............................... 7.8 (272.4) (75.6)
Postretirement benefit obligation................ 28.3 16.4 (19.8)
Other liabilities................................ (40.5) (3.7) (8.5)
------ ------ ------
Total Adjustments.................................. 140.1 (411.5) 31.5
------ ------ ------
Net cash flows from operating activities....... 97.4 (153.9) 300.1
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments.................................. (40.2) (87.5) (175.7)
Net purchase of short-term investments............... -- -- (175.8)
Proceeds from sale of plant, property and equipment.. 7.3 4.3 5.8
Proceeds from sale of Eveleth notes.................. 7.7 7.7 7.7
Advances to investees................................ (23.0) (17.1) (5.5)
Proceeds--asset sales................................ 18.2 46.1 10.5
Other................................................ (2.8) (0.3) (1.2)
------ ------ ------
Net cash flows from investing activities....... (32.8) (46.8) (334.2)
------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock............... -- 430.9 8.1
Proceeds from issuance of preferred stock............ -- 223.1 --
Principal payments on long-term debt................. (104.6) (629.4) (5.0)
Proceeds from issuance of long-term debt............. 166.0 325.0 --
Purchase of treasury stock........................... -- -- (21.5)
Purchase of preferred stock.......................... -- -- (52.3)
Preferred stock dividends paid....................... -- -- (16.1)
Common stock dividends paid.......................... -- -- (3.9)
Debt prepayment fees................................. -- (14.9) --
Underwriting discount and stock issuance expense..... -- (13.3) --
Partners' contributions--net......................... 19.4 -- --
Other--net........................................... (2.4) (3.1) --
------ ------ ------
Net cash flows from financing activities....... 78.4 318.3 (90.7)
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... 143.0 117.6 (124.8)
Cash and cash equivalents, beginning of period....... 1.2 144.2 261.8
------ ------ ------
Cash and cash equivalents, end of period............. $144.2 $261.8 $137.0
====== ====== ======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)............... $ 52.8 $ 42.4 $ 33.7
Income taxes....................................... 0.1 0.1 4.2
Supplemental schedule of noncash investing and
financing activities:
Seller financed capital investments (Note 4)....... -- 5.0 --
Value of shares of common stock issued in exchange
for debt, services rendered and Partnership
interests during the Recapitalization (Note 1).... -- 102.0 --
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AK STEEL HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/PARTNERS' DEFICIT
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONAL
PARTNERS' PREFERRED COMMON PAID IN TREASURY RETAINED
DEFICIT STOCK STOCK CAPITAL STOCK EARNINGS TOTAL
--------- --------- ------ ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... $(449.7) $(449.7)
Net Loss................ (42.7) (42.7)
Contributions by
partners............... 19.4 19.4
Minimum accumulated
benefit obligation..... (113.2) (113.2)
------- ---- ---- ------ ------ ------- -------
Balance, December 31,
1993................... (586.2) (586.2)
Recapitalize
Partnership............ $ 586.2 $(586.2)
Minimum accumulated
benefit obligation--net
of tax (Notes 3 and
6)..................... 28.5 28.5
Net Income.............. 257.6 257.6
Preferred stock issued,
7,479,674 shares at
$.01 par value each.... $0.1 $222.2 222.3
Common stock issued,
26,061,399 shares at
$.01 par value each.... $0.3 534.1 534.4
Cash dividend--Preferred
stock $.538 cash
dividend per quarter... (4.0) (4.0)
Unamortized restricted
stock (Note 2)......... (3.6) (3.6)
------- ---- ---- ------ ------ ------- -------
Balance, December 31,
1994................... -- 0.1 0.3 752.7 (304.1) 449.0
Minimum accumulated
benefit obligation--net
of tax (Notes 3 and
6)..................... 39.3 39.3
Net income.............. 268.6 268.6
Stock options
exercised.............. 8.1 8.1
Tax benefit from
exercise of stock
options (Note 3)....... 1.1 1.1
Purchase of stock....... (48.0) $(21.5) (4.3) (73.8)
Cash dividend:
Preferred stock $.538
cash dividend per
quarter.............. (15.3) (15.3)
Common stock $.15 cash
dividend per quar-
ter.................. (3.9) (3.9)
Issuance of restricted
stock.................. 2.1 2.1
Unamortized restricted
stock (Note 2)......... (1.0) (1.0)
------- ---- ---- ------ ------ ------- -------
Balance, December 31,
1995................... -- $0.1 $0.3 $715.0 $(21.5) $ (19.7) $ 674.2
======= ==== ==== ====== ====== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--AK Steel Holding Corporation ("AK Holding") and its
wholly-owned subsidiary AK Steel Corporation ("AK Steel," collectively the
"Company") were formed effective March 29, 1994 as a result of the
recapitalization of Armco Steel Company, L.P. ("the Partnership"). The
recapitalization occurred on April 7, 1994, effective as of March 29, 1994, in
a series of transactions (collectively, the "Recapitalization"), pursuant to
which (i) Armco Inc. ("Armco") and a subsidiary of Kawasaki Steel Corporation
("Kawasaki"), the limited partners of the Partnership and the owners of all of
the outstanding shares of AK Steel (the general partner of the Partnership),
transferred to AK Holding solely in exchange for Common Stock of AK Holding
(the "Common Stock"), all of the shares of AK Steel and their limited
partnership interests in the Partnership, (ii) AK Holding transferred to AK
Steel the limited partnership interests in the partnership that it acquired
from Armco and the Kawasaki subsidiary and, thereupon, AK Steel as owner of
the entire equity interest in the Partnership, succeeded by operation of law
to the assets and business of the Partnership, (iii) AK Holding consummated a
public offering of $458.4 of its Common Stock and AK Steel consummated a
public offering of $325.0 principal amount of its 10 3/4% Senior Notes due
2004 (the "Senior Notes"), (iv) proceeds from the public offerings of the
Common Stock and Senior Notes were applied to repay $619.5 of indebtedness of
the Company, to fund a $100.0 contribution to the Company's pension trust with
the remaining $63.9 used for expenses, fees, and general corporate purposes,
and (v) AK Holding issued to an affiliate of Kawasaki additional shares of
Common Stock in exchange for a $100.0 subordinated note of the Company
previously held by that affiliate.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management estimates.
The results of operations and financial position of AK Steel approximates
the results of operations and financial position of AK Holding.
For comparison purposes certain 1993 and 1994 items have been reclassified
to conform with 1995 classifications.
The Company consists of the operations and accounts of the Middletown Works,
Ashland Works, Headquarters, AK Steel Receivables, Inc. ("AKR") and AKS
Investments, Inc. and its group of wholly-owned subsidiaries, (the "AKSII
Group"). The Company is an integrated steel producer of carbon flat-rolled
steel for the automotive, appliance, manufacturing and other markets. The
Company has one major customer that accounted for 23%, 22%, and 20% of its net
sales in 1993, 1994, and 1995, respectively.
Employees--As of December 31, 1995, the Company had 5,762 active employees,
of whom 58% were represented by the Armco Employees Independent Federation
("AEIF"), 6% by the Oil, Chemical and Atomic Workers ("OCAW") and 18% by the
United Steelworkers of America ("USWA"). None of these collective bargaining
agreements expire within one year.
Cash Equivalents--Cash equivalents include short-term, highly liquid
investments that are readily convertible to known amounts of cash and are of
an original maturity of three months or less.
Fair Value of Financial Instruments--The carrying value of the Company's
financial instruments does not differ materially from their estimated fair
value (quoted market prices) in 1994 or 1995 with the exception of the 10 3/4%
Senior Notes, whose fair value approximates $363.2 at December 31, 1995.
Accounts receivable--The allowance for doubtful accounts was $4.0 and $2.5
at December 31, 1994 and 1995, respectively.
F-7
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Inventories--Inventories are valued at the lower of cost or market. The cost
of the majority of inventories is measured on the last in, first out ("LIFO")
method. Other inventories are measured principally at average cost.
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Inventories on LIFO:
Finished and semifinished....................... $234.0 $192.3
Raw materials and supplies...................... 104.8 150.0
Adjustment to state inventories at LIFO value... (19.7) (15.7)
------ ------
Total......................................... 319.1 326.6
Other inventories................................. 3.9 14.1
------ ------
Total inventories............................. $323.0 $340.7
====== ======
</TABLE>
Liquidation of LIFO inventory layers caused by certain inventory reductions
reduced the net loss in 1993 by $10.4. There was no liquidation of LIFO
inventory layers in 1994 or 1995.
Investments--The Company has investments in associated companies (joint
ventures and an entity that the Company does not control). These investments
are accounted for under the equity method. Because these companies are
directly integrated in the basic steelmaking facilities, the Company includes
its proportionate share of the income (loss) of these associated companies in
cost of products sold.
Virginia Horn Taconite Company ("Virginia Horn"), a member of the AKSII
Group, owns a 56% equity interest in Eveleth Expansion Company ("Eveleth"), a
partnership that produces iron ore pellets, which equates to a 35% interest in
Eveleth Mines. In connection with such investment, Virginia Horn has certain
commitments to Eveleth. Because, under Eveleth's partnership agreement,
Virginia Horn does not control Eveleth, the investment is accounted for under
the equity method (see Note 8).
The Company records its proportionate share of the losses of Eveleth. These
losses, which are included in the Company's cost of products sold, were $14.0,
$10.2 and $0.2 in 1993, 1994 and 1995, respectively. In addition, the Company
has fully impaired its investment in Eveleth to recognize the Company's
estimate of the net realizable value of the fixed assets of Eveleth.
Property, Plant and Equipment--Steelmaking plant and equipment are
depreciated under the straight line method over their estimated lives ranging
from 3 to 31 years. Maintenance and repair expenses for 1993, 1994 and 1995
were $261.3, $325.6 and $322.9, respectively.
Accounting Policies--The Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of". The effect of this
standard on the consolidated financial statements was not material.
SFAS No. 123, "Accounting for Stock-Based Compensation" is effective for
fiscal years beginning after December 15, 1995. The Company has not yet fully
determined the effect of SFAS No. 123.
2. STOCKHOLDERS' EQUITY
Preferred Stock--In October 1994, the Company completed the public offering
of 7,479,674 shares of its Convertible Preferred Stock, Shared Appreciation
Income Linked Securities (the "SAILS") which constitute a series of the
Company's Preferred Stock and rank prior to the Common Stock as to payment of
dividends and distribution of assets upon liquidation.
F-8
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Dividends, at a rate of 7% per annum of the stated value of $30.75 per
share, are cumulative from the date of original issuance on October 15, 1994,
and are payable quarterly in arrears.
The shares of SAILS are convertible into shares of Common Stock at the
option of the holder at any time prior to the mandatory conversion date of
October 15, 1998, and, unless previously redeemed, are convertible into .8621
of a share of Common Stock, equivalent to a conversion price of $35.67 per
share of Common Stock, subject to adjustment upon certain events.
On the mandatory conversion date, unless previously redeemed or converted,
each of the shares of SAILS will convert into one share of Common Stock and,
at the option of the Company, the right to receive cash or Common Stock (based
on current market price) equal to all accrued and unpaid dividends.
At any time on or after October 16, 1997 until immediately prior to the
mandatory conversion date, the Company may redeem any or all of the
outstanding SAILS.
The holders of SAILS will not have voting rights except as required by law
and except as follows: (i) in the event that dividends on the SAILS or any
other series of Preferred Stock with like voting rights are in arrears and
unpaid for six quarterly dividend periods, and in certain other circumstances,
the holders of SAILS (voting separately as a class with holders of all other
series of outstanding Preferred Stock with like voting rights) will be
entitled to vote, on the basis of one vote for each of the SAILS, for the
election of two directors of the Company, such directors to be in addition to
the number of directors constituting the Board of Directors immediately prior
to the accrual of such right, and (ii) the holders of SAILS will have voting
rights with respect to certain alterations of the Company's Certificate of
Incorporation and certain other matters, voting on the same basis or
separately as a series.
Common Stock--In April 1994, the Company consummated a public offering of
its $.01 par value Common Stock. The holders of Common Stock will be entitled
to receive dividends when and as dividends are declared by the Board of
Directors out of funds legally available. The holders of Common Stock are
entitled to one vote per share and are not entitled to preemptive or
subscription rights.
Dividends--On October 9, 1995 the Board of Directors declared an initial
quarterly dividend of $0.15 per share of Common Stock, which was paid on
November 15, to shareholders of record on October 20, 1995. The Company has
paid and intends to continue to pay dividends on its SAILS in accordance with
the terms thereof. While there are restrictions in the declaration and payment
of cash dividends and other distributions on or in respect to its capital
stock by covenants contained in the Company's Senior Note indentures, as of
December 31, 1995, the Company had $366.7 available for dividends or
restricted payments.
Stock Repurchase Plan--On October 9, 1995, the Board of Directors approved a
plan to repurchase from time to time up to $100.0 of its outstanding equity
securities. As of December 31, 1995, the Company had repurchased 637,435
shares of Common Stock for $21.5, an average of $33.62 per share to be held as
treasury stock at cost. In addition, the Company purchased and retired
1,563,700 shares of SAILS for $52.3, an average of $33.43 per share.
Shareholder Rights Plan--On January 23, 1996, the Board of Directors adopted
a Shareholder Rights Plan pursuant to which the Board declared a dividend of
one Preferred Share Purchase Right (collectively, the "Rights") for each share
of Common Stock outstanding at the close of business on February 5, 1996. The
Rights are generally not exercisable until 10 days after any person or group
of affiliated or associated persons acquires beneficial ownership of 20% or
more of the Company's voting stock or announces a tender offer that could
result in the acquisition of 30% or more of such voting stock. Each Right,
should it become exercisable, will entitle the holder to buy 1/100th of a
share of a new series of the Company's Preferred Stock, designated as Series A
Junior Preferred Stock (the "Preferred Stock"), at an exercise price of $130.
F-9
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Unless the Rights are sooner redeemed, if any person or group of affiliated
or associated persons, with certain exceptions, becomes the beneficial owner
of 20% or more of the Company's voting stock (other than pursuant to a tender
offer or exchange offer for all outstanding shares of the Company's Common
Stock that is approved by the Board of Directors with the approval of the
Continuing Directors (as defined in the Rights Plan) after taking into account
the long term value of the Company and all other factors they consider
relevant), each Right not owned by the acquirer would become exercisable for a
fraction of a share of the Company's Preferred Stock having a market value
equal to two times the exercise price of the Right.
In addition, unless the Rights are sooner redeemed or the transaction is
approved by the Board of Directors and the Continuing Directors, if the
Company were to be acquired in a merger or other business combination (in
which any shares of the Company's Common Stock are changed into or exchanged
for other securities or assets), or if more than 50% of the Company's assets
or earning power were to be sold in one or a series of related transactions,
the holders of the Rights would be entitled, after the Rights become
exercisable, to buy, for each Right, such number of shares of common stock of
the acquiring company as have a market value equal to two times the exercise
price of the Right.
The Rights are redeemable, in whole but not in part, at the option of the
Board of Directors with the approval of a majority of the Continuing
Directors, at any time prior to the earlier of (i) the close of business on
the tenth day after a public announcement of an acquisition of beneficial
ownership of 20% or more of the Company's voting stock by any person or group
of affiliated or associated persons (or at such later date as may be
authorized by the Board of Directors and a majority of the Continuing
Directors) or (ii) at any time prior to January 23, 2006, their final
expiration date.
Common Stock Options--On January 13, 1994, the stockholders of the Company
approved the AK Steel Holding Corporation 1994 Stock Incentive Plan (the
"SIP"). The SIP, which is administered by the Compensation Committee of the
Board of Directors, permits the granting of Nonqualified Stock Options and
Restricted Stock to directors and to executive and key management employees of
the Company. Grants of stock options exercisable for up to 1,916,667 shares of
the Company's Common Stock may be made by means of an award agreement
specifying the option price, duration, number of shares subject to the option
and conditions of exercise. The option price may not be less than the fair
market value of a share on the date of the grant. Awards may not be exercised
during the first six months following the date of grant (or such longer period
as may be specified in the award agreement) or after the tenth anniversary of
the date of grant. Payment upon exercise may be made in cash or its equivalent
or by tendering shares held for at least six months. Cashless exercises are
permitted if in accordance with Regulation T of the Federal Reserve Board and
applicable securities laws. Changes in options outstanding during 1994 and
1995 under the SIP are as follows:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF OPTIONS OR RANGE
---------- --------------------
<S> <C> <C>
Balance, December 31, 1993................... -- n/a
Granted in 1994.............................. 1,380,000 $30 1/8 to $23 1/2
Terminated or Cancelled...................... -- n/a
---------
Balance, December 31, 1994................... 1,380,000 $30 1/8 to $23 1/2
Granted in 1995.............................. 427,000 $31 1/2 to $25 13/16
Terminated or cancelled...................... 21,333 $27 11/16 to $23 1/2
Exercised.................................... 346,675 $24 1/2 to $23 1/2
---------
Balance, December 31, 1995................... 1,438,992 $31 1/2 to $23 1/2
=========
</TABLE>
546,668 options were exercisable at December 31, 1995.
F-10
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Earnings Per Common Share--The computation of earnings per common share and
common equivalent shares is based upon the weighted average number of common
shares outstanding plus (in periods in which they have a dilutive effect)
common share equivalents from stock options using the treasury stock method.
Net income was reduced for preferred dividends. The fully diluted per share
computation assumes conversion of the SAILS into Common Stock using the if-
converted method and outstanding the full year. The weighted average number of
common shares and common equivalent shares used to compute earnings per share
is:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
---- ---------- ----------
<S> <C> <C> <C>
Weighted average:
For earnings per common and common equivalent
share:
Common shares outstanding.................. n/a 26,064,733 26,232,806
Common equivalent shares................... n/a 276,834 346,305
Treasury stock............................. n/a -- (63,908)
For primary earnings per share............. n/a 26,341,567 26,515,203
For earnings per share assuming full
dilution.................................. n/a 32,826,287 32,987,506
</TABLE>
3. INCOME TAXES
The Company and its subsidiaries file a consolidated federal tax return. The
income and losses of the subsidiaries were included in the 1994 return
commencing April 7, 1994.
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryovers............................ $ 114.4 $ 51.3
Postretirement reserves.................................. 270.2 252.5
Other reserves........................................... 61.6 60.5
Valuation reserve........................................ (121.5) (15.4)
------- -------
Total deferred assets.................................. 324.7 348.9
------- -------
Deferred tax liabilities:
Depreciable assets....................................... (149.2) (177.1)
Inventories.............................................. (44.1) (45.2)
Pension assets........................................... (30.0) (57.2)
------- -------
Total deferred liabilities............................. (223.3) (279.5)
------- -------
Net asset................................................ $ 101.4 $ 69.4
======= =======
</TABLE>
Temporary differences represent the cumulative taxable or deductible amounts
recorded in the financial statements in different years than recognized in the
tax returns. The postretirement benefit difference includes amounts expensed
in the financial statements for health care, life insurance and other
postretirement benefits which become deductible in the tax return upon payment
or funding in qualified trusts. Other temporary differences represent
principally various expenses accrued for financial reporting purposes which
are not deductible for tax reporting purposes until paid. The depreciable
assets temporary difference represents generally tax depreciation in excess of
financial statement depreciation. The inventory difference relates primarily
to differences in the LIFO reserve, reduced by tax overhead capitalized in
excess of book amounts. At
F-11
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
December 31, 1994, the Company had a regular tax net operating loss ("NOL")
carryforward of $251.0 and an alternative minimum tax ("AMT") loss
carryforward of $215.5 generated in 1994. At December 31, 1995, the regular
tax NOL carryover remaining was $96.4 and the AMT carryover was $28.2. These
losses will expire in 2009 if not used by then.
The largest component of the Company's net deferred tax asset relates to the
financial statement deduction taken for postretirement benefits. No tax
deduction will be claimed until the benefits are actually paid or funded in
qualified trusts. Future annual financial statement expenses are expected to
continue to exceed tax deductible payments for several years. Because of the
long period of time over which this reserve will be paid (40 years or more),
and because any net operating losses generated by such payments can be carried
forward for 15 years, the Company will have an extended period of time in
which to realize the tax benefit related to this asset.
At December 31, 1994, the Company recorded a valuation reserve of $121.5. At
December 31, 1995, the Company has recorded a valuation reserve of $15.4.
Management has concluded that the decrease in the valuation reserve is
appropriate in light of increased levels of operating income resulting from
the Recapitalization and from ongoing productivity improvement and cost
reduction programs.
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -----
<S> <C> <C>
Current:
Federal.................................................... -- $ 5.9
State...................................................... -- .3
Deferred:
Federal.................................................... $(105.5) 4.8
State...................................................... (15.0) 1.9
------- -----
Total tax provision/(benefit)............................ $(120.5) $12.9
======= =====
</TABLE>
The 1995 tax provision includes $1.1 of expense that results from allocating
the income tax benefit associated with stock option exercises directly to
additional paid-in-capital.
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Income at statutory rate................................. $ 48.0 $ 98.5
State tax provision...................................... -- 17.4
Reduction in deferred tax asset valuation reserve........ (168.9) (106.1)
Income earned by the Partnership prior to
Recapitalization........................................ (3.6) --
Losses limited by Internal Revenue Code Section 382 and
other permanent differences............................. 4.0 3.1
------- -------
Tax provision/(benefit)................................ $(120.5) $ 12.9
======= =======
</TABLE>
4. LONG-TERM DEBT AND OTHER FINANCING
On December 1, 1994, the Company entered into a Receivables Purchase
Agreement with AKR. On the same date, AKR entered into a Receivables Purchase
and Servicing Agreement (the "Purchase Agreement") with a group of six banks.
Under the Purchase Agreement, the total commitment of the banks is $125.0,
including
F-12
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
up to $40.0 in letters of credit. The Company sold substantially all of its
accounts receivable to AKR and will sell additional receivables to AKR as they
are generated. AKR will fund its purchase of receivables from cash collections
on the purchased receivables and proceeds from selling interests in the
receivables to the participating banks. The banks' commitments have been
extended one year and expire on December 1, 2000. The Company will continue to
act as servicer of the receivables sold and will continue to make billings and
collections in the ordinary course of business.
As of December 31, 1995, no funded interest was sold to the participating
banks, although $5.8 in letters of credit had been issued. At December 31,
1995, AKR had a sufficient pool of eligible receivables that could be sold to
utilize the available capacity of the participating banks' commitments.
At December 31, 1994 and 1995, the Company's long-term debt, less current
maturities, was as follows:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
10 3/4% Senior Notes due 2004................................. $325.0 $325.0
Floating Rate due 1996-2000................................... 5.0 --
------ ------
Total....................................................... $330.0 $325.0
====== ======
</TABLE>
At December 31, 1995, the maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996.................................................................. --
1997.................................................................. --
1998.................................................................. --
1999.................................................................. --
2000.................................................................. --
2001 and thereafter................................................... $325.0
------
Total............................................................... $325.0
======
</TABLE>
The Company has no involvement with derivative financial instruments.
The Company capitalized interest on projects under construction of $1.2,
$2.7, and $4.7 during 1993, 1994 and 1995, respectively.
5. OPERATING LEASES
Rental expense was $10.1, $10.3, and $14.1 for 1993, 1994 and 1995,
respectively.
At December 31, 1995, obligations to make future minimum lease payments were
as follows:
<TABLE>
<S> <C>
1996................................................................... $2.9
1997................................................................... 1.0
1998................................................................... 0.7
1999................................................................... 0.3
2000................................................................... --
----
Total lease obligations.............................................. $4.9
====
</TABLE>
F-13
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
6. EMPLOYEE AND RETIREE BENEFIT PLANS
Pension Plans--The Company provides noncontributory pension benefits to
virtually all employees. Benefits are based on the higher of several
calculations including years of service and earnings in the highest 60
consecutive months in the last 120 months prior to retirement, a minimum
amount per year of service, or a combination of both. The qualified plans are
funded in accordance with the minimum funding requirements of the Employee
Retirement Income Security Act of 1974, as amended, with additional amounts
contributed at the Company's discretion. The Company's pension contributions
for 1994 and 1995 were $315.7 and $93.0, respectively.
The details of the net periodic pension expense for 1993, 1994 and 1995 are
as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Economic assumptions:
Discount rate................................... 8.50% 7.50% 8.75%
Expected long-term rate of return on assets..... 9.25% 8.50% 9.50%
Rate of future compensation increases........... 5.0% 4.0% 4.0%
Pension cost:
Cost of benefits earned during the period....... $ 12.3 $ 14.9 $ 12.9
Interest cost on the projected benefit
obligation..................................... 80.7 86.6 88.3
Actual return on plan assets.................... (83.6) 11.0 (263.6)
Net amortization and deferral................... 26.2 (70.1) 181.5
------ ------ -------
Net periodic pension expense.................... $ 35.6 $ 42.4 $ 19.1
====== ====== =======
</TABLE>
The funded status of the plans at December 31, 1994 and 1995, using the
assumptions stated below for each period, was as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Economic assumptions:
Discount rate......................................... 8.75% 7.25%
Rate of future compensation increases................. 4.00% 4.00%
Actuarial present value of benefit obligations:
Vested benefits....................................... $ 944.0 $1,145.6
Nonvested benefits.................................... 54.9 45.2
-------- --------
Accumulated benefit obligation........................ $ 998.9 $1,190.8
======== ========
Projected benefit obligation.......................... $1,054.3 $1,247.2
Plan assets at fair value............................. 949.9 1,215.6
-------- --------
Reconciliation of funded status to recorded amounts:
Unfunded projected benefit obligation................. 104.4 31.6
Unrecognized prior service............................ (69.8) (68.1)
Unrecognized net loss................................. (97.7) (101.4)
Unrecognized net obligation........................... -- (.9)
-------- --------
Prepaid pension cost.................................. $ (63.1) $ (138.8)
======== ========
</TABLE>
The mix of pension assets held at December 31, 1995 was as follows:
<TABLE>
<S> <C>
Equities............................................................... 60%
Fixed income securities................................................ 32%
Cash and cash equivalents.............................................. 8%
</TABLE>
F-14
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The prepaid pension asset increased by $115.3 at December 31, 1995 of which
$112.7 was due to the full funding of the accumulated benefit obligation and
the subsequent reversal of the additional minimum liability. An intangible
asset of $47.0 and a charge to equity of $65.7 were reversed.
Retiree Health Care and Life Insurance Benefits--In addition to providing
pension benefits, the Company provides certain health and life insurance
benefits for retirees. Most employees become eligible for these benefits at
retirement. For 1993, 1994 and 1995, claims paid for retiree health and life
insurance benefits amounted to $32.2, $34.8, and $36.2, respectively.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions," in December 1993, retroactive to January 1,
1990. SFAS No. 106 requires accrual of retiree medical and life insurance
benefits as these benefits are earned rather than recognition of these costs
as claims are paid. In 1993, 1994 and 1995 the excess of total postretirement
benefit expense recorded under SFAS No. 106 over the Company's former method
of accounting for these benefits was $27.0, $16.2 and $21.2, respectively.
Effective June 30, 1995, the Company established a Welfare Benefit Master
Plan and Trust (the "Trust") and contributed $50.0 for the purpose of paying
medical and life insurance benefits to employees of the Company, retired
former employees and their eligible dependents. An additional contribution of
$20.0 was made in September 1995. Of the $70.0 total, $29.2 was allocated to
fund active employee benefits and $40.8 to fund retiree benefits. Benefits
were paid direct from Company assets during 1995; however, benefits payable
from and after January 1, 1996 will be paid from the Trust. The SFAS No. 106
expense for 1995 was reduced by approximately $1.9 as a result of these
contributions. Although no funding obligation exists, the Company may make
periodic contributions to the Trust at its discretion.
The Company has announced changes in the retiree medical coverage for the
non-represented salary group effective December 31, 1996. The Company's
portion of the health insurance premium for post 1983 salaried retirees will
be capped at 1996 levels. This change will apply to all current and future
retirees. In addition, for post 1996 retirees in this group only, the Company
provided health benefit will be reduced by six percent for each year of
retirement prior to age 62. These changes reduced the accumulated
postretirement benefit obligation for the Company by approximately $45.0 and
will reduce the related annual expense by approximately $7.0.
The following sets forth the plans' funded status, reconciled with amounts
recognized in the Company's statement of financial position at December 31,
1994 and 1995.
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.................................................... $364.8 $414.1
Fully eligible active plan participants..................... 124.7 75.9
Other active plan participants.............................. 126.9 117.0
------ ------
Total accumulated postretirement benefit obligation....... 616.4 607.0
Fair value of plan assets..................................... -- 45.5
------ ------
Accumulated postretirement benefit obligations in excess of
plan assets.................................................. 616.4 561.5
Prior service credit not yet recognized in net periodic
postretirement benefit cost.................................. 2.8 32.8
Unrecognized transition obligation............................ -- --
Unrecognized net gain......................................... 56.3 61.4
------ ------
Accrued postretirement benefit cost........................... $675.5 $655.7
====== ======
</TABLE>
F-15
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
The components of postretirement benefit costs are as
follows:
Service cost--benefits attributed to service during
the period........................................... $ 6.9 $ 6.1 $ 5.6
Interest cost on accumulated postretirement benefit
obligations.......................................... 52.3 44.9 52.6
Actual return on plan assets.......................... -- -- (4.5)
Net of other components............................... -- -- 3.7
----- ----- -----
Net periodic postretirement benefit cost.............. $59.2 $51.0 $57.4
===== ===== =====
</TABLE>
For measurement purposes, health care costs are assumed to increase 7.75% in
1996 grading down by 1% yearly to a constant level of 4.25% annual increase
for pre-65 benefits and 4.75% in 1996 grading down by 1% yearly to a constant
level of 4.25% annual increase for post-65 benefits. In concluding that health
care trend rates will decrease at a rate of 1% per year, the Company has
considered future rates of inflation, recent movements toward managed health
care programs in negotiated contracts and the trend among larger companies
toward the formation of coalitions in an effort to reduce health care costs.
The Company has finalized negotiations with health care providers in the
Cincinnati-Dayton corridor and is in the process of implementing similar
managed care programs in other geographic regions that contain a concentration
of its employees and retirees. These programs should be implemented by early
1996. The Company is also evaluating medicare risk contracts for its retired
employees. A one (1) percentage point increase in the assumed health care cost
trend rate for each year would increase the accumulated postretirement benefit
obligation as of January 1, 1996 by $64.8 and the aggregate of the service
cost and interest cost components of net period benefit cost for the year then
ended by $6.9. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 8.75% and 7.25% for 1994 and
1995, respectively.
Deferred Compensation Plan--The Company established a Deferred Compensation
Plan beginning in 1996 which permits certain key executives to defer a portion
of their compensation. The deferred compensation, together with Company
matching amounts and accumulated interest, is accrued but unfunded.
Participants have the choice of deferring receipt of income until retirement
or at a specified date in the future (at least five full calendar years from
the last day of the year in which the compensation would have been paid).
7. RELATED PARTY TRANSACTIONS
On May 4, 1995, Armco, of which James F. Will, a director of the Company at
December 31, 1995, is President and Chief Executive Officer, announced it had
completed the sale of 1,023,987 shares of the Company's Common Stock. With the
completion of the sale, Armco no longer owns any of the Company's stock.
In the ordinary course of its business, the Company regularly rolls certain
grades of steel produced by Armco for resale by Armco and, on December 21,
1993, Armco and the Company entered into a ten-year agreement with respect to
these services. During 1993, 1994, and 1995 the Company charged Armco
approximately $13.3, $14.9, and $18.8, respectively, for its rolling services.
Sales to Armco and its affiliates amounted to $36.7, $53.1, and $32.2 during
1993, 1994 and 1995, respectively. In addition, the Company purchased
stainless material in the amount of $20.2, $30.1 and $51.2 in 1993, 1994 and
1995, respectively.
Armco made capital contributions to the Company of $19.4 in 1993, which the
Company used for the purchase of certain specialized equipment used in rolling
steel, including stainless steel.
F-16
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
On August 31, 1992, the Company acquired a 50% ownership interest in
Southwestern Ohio Steel, L.P. ("SOS"), a joint venture to which Armco
transferred substantially all of the businesses of Southwestern Ohio Steel,
Inc. and SOS Leveling Company, Inc. Sales to SOS amounted to $99.5 and $110.2
for 1993 and 1994, respectively. In 1993 and 1994, the Company purchased
processing services and other materials of $3.6 and $3.7, respectively, from
SOS. The Company sold its interest in SOS on December 30, 1994 (see Note 9).
The Company is party to an agreement with Kawasaki providing for the shelf
registration under the Securities Act (at the Company's expense) of shares of
Common Stock owned by Kawasaki and a Registration Statement was filed with the
Securities and Exchange Commission and became effective. On August 9, 1995,
Kawasaki announced that it had completed the sale of 1,023,987 shares of the
Company's Common Stock and had completed option transactions with regard to an
additional 1,500,000 shares of the Company's Common Stock. In August 1995, the
Board Designation Agreement dated April 7, 1994 between the Company and
Kawasaki was terminated and Mr. Makota Iwahashi who had served as a director
of the Company pursuant to such Agreement resigned from the Company's Board of
Directors.
In the ordinary course of business, National Material Limited Partnership,
of which Cyrus Tang, a director of the Company, is President and Chief
Executive Officer, sells scrap to, and purchases steel from, the Company.
During 1994 and 1995, sales amounted to $5.4 and $20.3 and purchases amounted
to $0.3 and $0.4, respectively. Also, subsidiaries of Cyprus Amax Minerals
Company, of which Allen Born, a director of the Company, is Co-Chairman, sells
coal to the Company. During 1995, purchases amounted to $5.8.
8. COMMITMENTS
Virginia Horn is committed to fund its percentage share of certain defined
fixed costs of Eveleth which includes a guarantee of Virginia Horn's
performance to the other participants of Eveleth Mines. Under agreement with
another owner of Eveleth, the Company purchased 250,000 tons of iron ore from
this Eveleth partner in 1995 and is expected to purchase at least 250,000 tons
in 1996. During 1992, the Company concluded that its ability to recover its
investment in Eveleth was doubtful, and therefore, impaired its investment in
Eveleth Mines (see Note 1).
As of December 31, 1994, the Company had entered into an agreement with a
Brazilian iron ore company pursuant to which the Company agreed to purchase a
total of 1.3 million tons of iron ore pellets from the Brazilian iron ore
company through 1998. Pursuant to this agreement, the Company also has agreed
to purchase its sinter feed ore requirements from the same Brazilian company.
In addition, the Company has agreed to purchase at least 5.0 million tons
through 1996 from a North American pellet producer.
As of December 31, 1995, the Company had committed to purchase property,
plant and equipment amounting to approximately $51.1.
9. SPECIAL CHARGES AND UNUSUAL ITEMS
In 1993, the Company recorded charges of $12.6 for restructuring of
facilities, and $5.0 for certain legal, litigation and other unusual items
resulting from the cancelled outsourcing of operations of the Ashland Works
and in connection with other Company workforce reductions.
On December 30, 1994, the Company sold its 50% equity interest in SOS and
49.15% equity interest in Nova to its former joint venture partner in the two
companies, Itochu Corporation, for $43.0. The sale resulted in a gain of $15.9
which is included in Special Charges and Unusual Items in the Statement of
Operations for the period ended December 31, 1994.
F-17
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
10. EXTRAORDINARY ITEM
In connection with the Recapitalization, during the second quarter of 1994
the Company repaid a total of $619.5 of long-term debt. This early repayment
resulted in an extraordinary loss of $14.9.
11. LEGAL, ENVIRONMENTAL MATTERS AND CONTINGENCIES
Domestic steel producers, including the Company, are subject to stringent
federal, state and local laws and regulations relating to the protection of
human health and the environment. The Company has expended, and can be
expected to expend in the future, substantial amounts for compliance with
these environmental laws and regulations.
The Company has expended the following for environmental related capital
investments and environmental compliance:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Environmental Related Capital Investments................. $16.4 $26.7 $19.1
Environmental Compliance Costs............................ $43.3 $46.4 $51.7
</TABLE>
The Clean Air Act Amendments of 1990 (the "Amendments") imposed new
standards designed to reduce air emissions. The Amendments have directly
affected many of the Company's operations, particularly its coke oven
batteries. As of December 31, 1995, the Company has incurred $63.2 in capital
investments to bring its cokemaking operations into compliance with the
Amendments' requirements. The Company shut down two of its Middletown Works'
coke oven batteries effective December 16, 1995. The Company does not expect
1996 environmental capital investments to be material.
In addition to the items discussed below, the Company is also involved in
routine litigation, environmental proceedings, and claims pending with respect
to matters arising out of the normal conduct of the business. In management's
opinion, the ultimate liability resulting from all claims, individually or in
the aggregate, will not materially affect the Company's consolidated financial
position, results of operations or cash flows.
As a result of a 1991 inspection of the Ashland Works' cokemaking operations
by the EPA and Kentucky EPA alleging mishandling of tar decanter sludge and
other materials, the Company has entered into non-binding arbitration with the
Kentucky Cabinet for Natural Resources.
Federal regulations promulgated pursuant to the Clean Water Act impose
categorical pretreatment limits on the concentrations of various constituents
in coke plant wastewaters prior to discharge into publicly owned treatment
works ("POTW"). Due to concentrations of ammonia and phenol in excess of these
limits at the Middletown Works, the Company, through the Middletown POTW,
petitioned the United States Environmental Protection Agency (the "EPA") for
"removal credits," a type of compliance exemption, based on the Middletown
POTW's satisfactory treatment of the Company's wastewater for ammonia and
phenol. The EPA declined to review the Company's application on the grounds
that it had not yet promulgated new sludge management rules. The Company
thereupon sought and obtained from the Federal District Court for the Southern
District of Ohio an injunction prohibiting the EPA from instituting
enforcement action against the Company for noncompliance with the pretreatment
limitations, pending the EPA's promulgation of the applicable sludge
management regulations. Although the Company is unable to predict the outcome
of this matter, if the EPA eventually refuses to grant the Company's request
for removal credits, the Company could incur additional costs to construct
pretreatment facilities at the Middletown Works.
On December 7, 1995, the Occupational Safety and Health Administration
announced that it had commenced an investigation and review of the Company's
safety procedures and practices at the Company's
F-18
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Middletown Works following an October 4, 1995 accident that resulted in the
fatality of a Company employee and a December 5, 1995 accident that injured
several employees of the Company.
On December 11, 1995, the Company executed a Consent Decree with the Ohio
Attorney General and Ohio Environmental Protection Agency regarding alleged
Middletown Works coke oven battery violations which occurred subsequent to
January 11, 1989, as well as the now idled Hamilton blast furnace permitting
issues dating from 1980. The Company agreed to pay a civil penalty of $0.4, of
which, $0.3 will be used for environmental control projects at the Middletown
Works.
On January 23, 1996, an action was filed in the Court of Common Pleas in
Butler County, Ohio on behalf of four named plaintiffs who purport to
represent a class of plaintiffs consisting of all hourly employees at the
Company's Middletown Works and all hourly employees of independent contractors
working at the facility since June 1992. The plaintiffs allege negligence and
intentional tort and seek compensatory and punitive damages in an unspecified
amount for alleged dangerous working conditions at the Middletown Works.
12. CONSOLIDATED QUARTERLY SALES AND EARNINGS (UNAUDITED)
Each quarter and the year are calculated individually and may not add to the
total for the year.
<TABLE>
<CAPTION>
1994
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Sales............................. $445.9 $514.8 $501.5 $554.4 $2,016.6
Gross Profit.......................... 70.1 93.3 94.7 103.3 361.4
Income Before Extraordinary Loss...... 10.3 34.5 41.3 186.4 272.5
Extraordinary Loss.................... -- 14.9 -- -- 14.9
Net Income............................ 10.3 19.6 41.3 186.4 257.6
Primary Earnings Per Share:
Income Before Extraordinary Items... $ .39 $ 1.32 $ 1.56 $ 6.92 $ 10.19
Extraordinary Items................. -- (.57) -- -- (.57)
Net Income.......................... .39 .75 1.56 6.92 9.62
Fully Diluted Earnings per Share:
Income Before Extraordinary Items... .31 1.06 1.25 5.68 8.30
Extraordinary Items................. -- (.45) -- -- (.45)
Net Income.......................... .31 .61 1.25 5.68 7.85
<CAPTION>
1995
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net Sales............................. $610.4 $595.9 $524.3 $526.7 $2,257.3
Gross Profit.......................... 125.0 135.7 120.4 108.1 489.2
Net Income............................ 68.3 78.4 67.2 54.7 268.6
Primary Earnings Per Share............ 2.44 2.81 2.37 1.94 9.56
Fully Diluted Earnings Per Share...... 2.08 2.39 2.02 1.68 8.14
</TABLE>
----------------
F-19
<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -----------------
1995 1996 1995 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net Sales............................. $ 524.3 $ 559.3 $1,730.6 $1,693.6
Cost of products sold................. 403.9 440.3 1,349.5 1,341.3
Selling and administrative expenses... 28.3 28.5 86.2 84.7
Depreciation.......................... 19.3 18.7 57.8 58.7
--------- --------- -------- --------
Total operating costs................. 451.5 487.5 1,493.5 1,484.7
Operating profit...................... 72.8 71.8 237.1 208.9
Interest expense...................... 8.3 9.5 26.6 28.4
Other income.......................... 6.0 2.8 14.0 8.4
--------- --------- -------- --------
Income before income taxes............ 70.5 65.1 224.5 188.9
Current income tax provision (benefit)
(Note 5)............................. (7.3) (1.6) 6.1 10.4
Deferred income tax provision (Note
5)................................... 10.6 27.0 4.5 63.3
--------- --------- -------- --------
Net income............................ 67.2 39.7 213.9 115.2
Preferred stock dividends............. 4.0 2.6 12.1 8.5
--------- --------- -------- --------
Net income applicable to common
shareholders......................... $ 63.2 $ 37.1 $ 201.8 $ 106.7
========= ========= ======== ========
Earnings per common share: (Note 2)
Primary............................. $ 2.37 $ 1.40 $ 7.62 $ 4.03
Fully diluted....................... $ 2.02 $ 1.28 $ 6.49 $ 3.71
Cash dividends per common share....... $ -- $ .15 $ -- $ .45
Common shares and common share
equivalents outstanding
(weighted average in millions):
For primary earnings per share...... 26.7 26.6 26.5 26.5
For fully diluted earnings per
share.............................. 33.1 30.9 33.0 31.1
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $ 137.0 $ 158.0
Short-term investments............................ 175.8 65.2
Accounts receivable--net (Note 4)................. 217.0 261.0
Inventories: (Note 3)
Finished and semi-finished...................... 183.5 213.4
Raw materials................................... 157.2 149.5
-------- --------
Total inventories--net........................ 340.7 362.9
Deferred taxes.................................... 14.8 --
Other current assets.............................. 1.9 8.0
-------- --------
Total Current Assets.......................... 887.2 855.1
-------- --------
Property, plant and equipment....................... 1,451.6 1,505.6
Less accumulated depreciation..................... (478.0) (535.4)
-------- --------
Property, plant and equipment--net................ 973.6 970.2
-------- --------
Prepaid Pension..................................... 138.8 156.1
Other............................................... 115.9 107.7
-------- --------
Total assets.................................. $2,115.5 $2,089.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................................. $ 255.9 $ 191.1
Other accruals.................................... 141.4 144.5
Current portion of long-term debt (Note 4)........ -- --
Current portion of pension obligation............. 0.1 0.1
Current portion of postretirement benefit
obligation....................................... -- --
-------- --------
Total Current Liabilities..................... 397.4 335.7
-------- --------
Noncurrent Liabilities:
Long-term debt (Note 4)........................... 325.0 325.0
Pension obligation................................ -- --
Postretirement benefit obligation................. 655.7 621.0
Other liabilities................................. 63.2 63.4
-------- --------
Total Noncurrent Liabilities.................. 1,043.9 1,009.4
-------- --------
Total liabilities............................. 1,441.3 1,345.1
-------- --------
Stockholders' Equity:
Preferred stock--Authorized 25,000,000 shares of
$.01 par value each; 7,479,674 shares issued;
outstanding 1995--5,915,974 shares, 1996--
4,845,774 shares................................. 0.1 0.1
Common stock--Authorized 75,000,000 shares of $.01
par value each; issued 1995--26,476,297 shares,
1996--26,958,834 shares; outstanding 1995--
25,838,862 shares, 1996--26,319,950 shares....... 0.3 0.3
Additional paid-in capital........................ 715.0 698.7
Treasury Stock--common shares at cost--1995--
637,435 shares, 1996--638,884.................... (21.5) (21.5)
Retained earnings................................. (19.7) 66.4
-------- --------
Total stockholders' equity.................... 674.2 744.0
-------- --------
Total liabilities and stockholders' equity.... $2,115.5 $2,089.1
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE>
AK STEEL HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1996
--------- --------
<S> <C> <C>
Net cash flows from operating activities................... $ 199.2 $ 13.8
--------- --------
Cash flows from investing activities:
Capital investments...................................... (103.6) (55.3)
Change in short-term investments......................... (181.2) 110.6
Other.................................................... 3.5 2.5
--------- --------
Net cash flows from investing activities............. (281.3) 57.8
--------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock................... 3.0 9.4
Principal payments on long-term debt..................... (5.0) --
Preferred stock dividends paid........................... (12.1) (9.1)
Common stock dividends paid.............................. -- (11.7)
Purchase of treasury stock............................... -- (0.1)
Purchase of preferred stock.............................. -- (39.1)
--------- --------
Net cash flows from financing activities............. (14.1) (50.6)
--------- --------
Net increase (decrease) in cash and cash equivalents....... (96.2) 21.0
Cash and cash equivalents, beginning of period............. 261.8 137.0
--------- --------
Cash and cash equivalents, end of period................... $ 165.6 $ 158.0
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)................... $ 16.2 $ 18.7
Income taxes........................................... 2.2 1.9
</TABLE>
See notes to condensed consolidated financial statements.
F-22
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
In the opinion of the management of AK Steel Holding Corporation ("AK
Holding") and AK Steel Corporation ("AK Steel"), collectively the ("Company"),
the accompanying condensed consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the financial position of the Company as of September 30, 1996, and the
results of its operations for the three-month and nine-month periods ended
September 30, 1995 and 1996, and cash flows for the nine-month periods ended
September 30, 1995 and 1996. The results of operations and financial position
of AK Steel approximate the results and financial position of AK Holding. The
results of operations for the nine-month period ended September 30, 1996 are
not necessarily indicative of the results to be expected for the year ending
December 31, 1996. These condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial statements for the
years ended December 31, 1994 and 1995.
2. EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1995 1996 1995 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Primary:
Net income............................. $ 67.2 $ 39.7 $ 213.9 $ 115.2
Less dividends on preferred stock...... 4.0 2.6 12.1 8.5
--------- --------- -------- --------
Income applicable to common
shareholders.......................... $ 63.2 $ 37.1 $ 201.8 $ 106.7
========= ========= ======== ========
Shares (weighted average):
Number of common shares outstanding.. 26.4 26.2 26.3 26.1
Number of common equivalent shares
outstanding......................... 0.3 0.4 0.2 0.4
--------- --------- -------- --------
Number of common shares outstanding
as adjusted......................... 26.7 26.6 26.5 26.5
========= ========= ======== ========
Primary earnings per common share.... $ 2.37 $ 1.40 $ 7.62 $ 4.03
========= ========= ======== ========
Assuming full dilution:
Net income............................. $ 67.2 $ 39.7 $ 213.9 $ 115.2
========= ========= ======== ========
Shares (weighted average):
Number of common shares outstanding.. 26.4 26.2 26.3 26.1
Number of common equivalent shares
outstanding......................... 0.3 0.4 0.3 0.4
Assuming conversion of preferred
stock............................... 6.4 4.3 6.4 4.6
--------- --------- -------- --------
Number of common shares outstanding
as adjusted......................... 33.1 30.9 33.0 31.1
========= ========= ======== ========
Earnings per share assuming full
dilution.............................. $ 2.02 $ 1.28 $ 6.49 $ 3.71
========= ========= ======== ========
</TABLE>
3. INVENTORIES
Inventories are valued at the lower of cost or market. The cost of the
majority of inventories is measured on the last in, first out (LIFO) method.
Other inventories are measured principally at average cost.
4. ACCOUNTS RECEIVABLE AND LONG-TERM DEBT
As of September 30, 1996, AK Steel Receivables, Inc. ("AKR") had not sold
accounts receivable to any participating banks under its Receivables Purchase
and Servicing Agreement although $5.8 letters of credit were outstanding. AKR
had a sufficient pool of eligible receivables that could be sold to utilize
the $119.2 remaining availability of the participating bank's financing
commitments.
At September 30, 1996, the Company had $325.0 of long-term debt outstanding.
5. INCOME TAXES
The book tax rate for 1996 will approximate 39% compared to nearly 5% in
1995. The significantly lower rate for 1995 resulted from the reduction of
valuation reserves previously set up against deferred tax assets.
F-23
<PAGE>
AK STEEL HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
6. LEGAL MATTERS
In addition to the items discussed below, the Company is also involved in
routine litigation, environmental proceedings, and claims pending with respect
to matters arising out of the normal conduct of the business. In management's
opinion, the ultimate liability resulting from all claims, individually or in
the aggregate, will not materially affect the Company's consolidated financial
position, results of operations or cash flows.
In January 1996, an action was filed in the Court of Common Pleas of Butler
County, Ohio on behalf of four named plaintiffs who purport to represent a
class of plaintiffs consisting of all hourly employees at the Company's
Middletown Works and all hourly employees of independent contractors working
at the facility since June 1992. The Complaint has twice been amended to add
three additional plaintiffs. The plaintiffs allege negligence and intentional
tort and seek compensatory and punitive damages in an unspecified amount for
alleged dangerous working conditions at the Company's Middletown Works. In
April 1996, plaintiffs moved to certify a class action. The Company has
vigorously opposed this motion and has filed motions to dismiss the suit in
whole and in part. In September 1996, all pending motions were argued to the
Court. No rulings have been rendered to date.
In April 1996, an action was filed in the United States District Court,
Southern District of Ohio by a number of former employees of the Company
seeking certain pension and post-retirement benefits which they allege were
wrongly denied them when the Company outsourced their positions.
In May 1996, an action was filed in the United States District Court,
Southern District of Ohio by several plaintiffs under the citizen action suit
provisions of federal environmental laws alleging violations of those laws as
well as state claims in connection with the accidental release of coke oven
gas from the Company's Middletown Works in January 1996. The Company has filed
a Motion to Dismiss all federal claims and the matter has been fully briefed
and presented to the Court where a decision is now pending.
The Company believes the allegations in each of the matters above are
without merit and will vigorously defend the Company's position in these
matters.
In April 1996, the Company and the Occupational Safety and Health
Administration ("OSHA") agreed to settle all outstanding issues involving a
series of OSHA inspections at the Company's Middletown Works for $1.9 million.
----------------
F-24
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CON-
NECTION WITH THE EXCHANGE OFFER DESCRIBED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. 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 OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE SUCH DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by
Reference............................................................... 2
Prospectus Summary....................................................... 3
Risk Factors............................................................. 11
Use of Proceeds.......................................................... 15
Capitalization........................................................... 16
Selected Historical Consolidated
Financial Data.......................................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 24
The New Facility......................................................... 29
Management............................................................... 32
Description of the Notes................................................. 41
Description of Certain Indebtedness...................................... 67
Certain Federal Income Tax Consequences.................................. 69
Plan of Distribution..................................................... 73
Notice to Canadian Residents............................................. 73
Legal Matters............................................................ 74
Independent Auditors..................................................... 74
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO]
AK Steel Corporation
$550,000,000
9 1/8% Senior Notes Due 2006
Guaranteed on a Senior Basis by
AK Steel Holding
Corporation
PROSPECTUS
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AK Steel Corporation (the "Registrant") is a Delaware corporation.
Subsection (b)(7) of Section 102 of the Delaware General Corporation Law (the
"DGCL"), enables a corporation in its original certificate of incorporation or
an amendment thereto to eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for
violations of the director's fiduciary duty, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from
which a director derived an improper personal benefit. Article Six of the
Registrant's Amended and Restated Certificate of Incorporation has eliminated
the personal liability of directors to the fullest extent permitted by law.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with such action, suit or proceeding
provided that such director or officer acted in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal action or proceeding, provided
further that such director or officer had no reasonable cause to believe his
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that such person acted in any of the
capacities set forth above, against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement
of such action or suit provided that such director or officer acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation, except that no indemnification may be made
in respect of any claim, issue or matter as to which such director or officer
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such director or officer is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall deem
proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or
proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification and advancement of expenses
provided for, by, or granted pursuant to, Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and empowers the corporation to purchase and maintain insurance on behalf of
any person who is or was a director or officer of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liabilities
under Section 145.
II-1
<PAGE>
Article Seven of the Registrant's Certificate of Incorporation states that
the corporation shall indemnify any person who was or is a party or is
threatened to be made a party to, or testifies in, any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative in nature, by reason of the fact that such person is or was a
director, officer or employee of the corporation, or is or was serving at the
request of the corporation as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
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 to the full extend permitted by law, and the
corporation may adopt by-laws or enter into agreements with any such person
for the purpose of providing such indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 --Indenture, dated as of December 17, 1996, relating to the Company's 9
1/8% Senior Notes Due 2006 (including form of Notes).*
4.2 --Indenture, dated as of April 1, 1994, relating to the Company's 10 3/4%
Senior Notes Due 2004 (the "1994 Indenture") (incorporated herein by
reference to Exhibit 4.3 to the Company's Registration Statement on Form
S-1, No. 33-83792 ("Registration No. 33-83792").
4.3 --Supplemental Indenture, dated as of September 21, 1994, to the 1994
Indenture (incorporated herein by reference to Exhibit 4.4 to
Registration No. 33-83792).
4.4 --Supplemental Indenture, dated as of December 11, 1996, to the 1994
Indenture.*
4.5 --Form of Note Purchase Agreement, dated as of December 17, 1996, with
respect to the Company's Senior Secured Notes Due 2004.*
5 --Opinion of Weil, Gotshal & Manges LLP.**
10.1 --Joint Venture Termination Agreement, dated April 6, 1994, among Armco,
Inc., Kawasaki, Kawasaki Steel Corporation, Kawasaki Steel Investments,
Inc., the Partnership, AJV Investments Corp., KSCA, Incorporated and the
Company (incorporated herein by reference to Exhibit 10.1 to Registration
No. 33-83792).
10.2 --Employment Contract, dated as of April 4, 1994, between the Company and
Thomas C. Graham (incorporated herein by reference to Exhibit 10.13 to
Registration No. 33-83792).
10.3 --Supplemental Agreement No. 1 to Employment Agreement with Thomas C.
Graham
(incorporated herein by reference to an Exhibit to the Company's 10-Q
Report for the period ended September 30, 1995).
10.4 --Form of Executive Officer Severance Agreement.*
10.5 --Annual Management Incentive Plan (incorporated herein by reference to
Exhibit 10.15 to Registration No. 33-83792).
10.6 --1994 Stock Incentive Plan, as amended May 15, 1996 and November 21,
1996.*
10.7 --Executive Minimum and Supplemental Retirement Plan (incorporated herein
by reference to Exhibit 10.17 to Registration No. 33-83792).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.8 --Registration Rights Agreement, dated as of April 7, 1994, among the
Company and certain subsidiaries of Kawasaki (incorporated herein by
reference to Exhibit 10.19 to Registration No. 33-83792).
10.9 --Registration Agreement, dated as of April 7, 1994, between the Company
and Thomas C. Graham (incorporated herein by reference to Exhibit 10.22
to Registration No. 33-38792).
10.10 --Receivables Purchase Agreement, dated as of December 1, 1994 by and
between AK Steel and AK Acquisition Receivables Ltd., as successor to AK
Steel Receivables, Inc. (incorporated herein by reference to Exhibit
10.23 to Registration No. 33-86678).
10.11 --Purchase and Servicing Agreement, dated as of December 1, 1994, among AK
Acquisition Receivables Ltd., as successor to AK Steel Receivables Inc.,
AK Steel, the institutions from time to time party thereto and PNC Bank,
Ohio, National Association (incorporated herein by reference to Exhibit
10.24 to Registration No. 33-86678).
10.11(a) --Amendment No. 1 to the Purchase and Servicing Agreement, dated as of
November 17, 1995, among AK Steel, AK Acquisition Receivables Ltd., as
successor to AK Steel Receivables, Inc., the purchasers party thereto and
PNC Bank, Ohio, National Association.*
10.11(b) --Consent, Amendment and Assumption Agreement to the Receivables Purchase
Agreement and the Purchase and Servicing Agreement, dated as of December
31, 1996, among the Company, AK Steel Receivables Inc., AK Acquisition
Receivables Ltd., AKSR Investments, Inc., the purchasers party thereto
and PNC Bank, Ohio, National Association.*
10.12 --Letter Agreement dated July 31, 1995, between the Company and Kawasaki
(incorporated herein by reference to Exhibit 10 to Post-Effective
Amendment No. 2 on Form S-3 to the Company's Registration Statement on
Form S-1, Registration No. 33-86678).
10.13 --Deferred Compensation Plan for Management (incorporated herein by
reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
10.14 --Deferred Compensation Plan for Directors (incorporated herein by
reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
10.15 --Long Term Performance Plan, as amended and restated effective November
21, 1996.**
10.16 --Exchange and Registration Rights Agreement, dated as of December 17,
1996, among the Company, CS First Boston Corporation and Goldman, Sachs &
Co.*
12 --Ratio of Earnings to Fixed Charges.*
23.1 --Consent of Deloitte & Touche LLP.*
23.2 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5).**
24 --Power of Attorney (included on signature pages).
25 --Statement of Eligibility on Form T-1 of The Bank of New York.**
99.1 --Form of Letter of Transmittal.**
</TABLE>
- --------
* Filed herewith
** To be filed by amendment.
II-3
<PAGE>
(B) SCHEDULES
All schedules are omitted as the required information is presented in the
Registrant's consolidated financial statements or related notes or such
schedules are not applicable.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 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.
(c) The undersigned Registrant hereby undertakes to supply by 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-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AK
STEEL HOLDING CORPORATION HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF MIDDLETOWN, STATE OF OHIO.
Date: January 13, 1997 AK STEEL HOLDING CORPORATION
/s/ Richard M. Wardrop, Jr.
By: _________________________________
RICHARD M. WARDROP, JR.
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES THOMAS C. GRAHAM, RICHARD M. WARDROP, JR., RICHARD E.
NEWSTED AND DONALD B. KORADE, AND EACH OF THEM, SUCH PERSON'S TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION, TO SIGN FOR
SUCH PERSON AND IN SUCH PERSON'S NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, ANY AND ALL AMENDMENTS, (INCLUDING POST-EFFECTIVE AMENDMENTS) TO
THIS REGISTRATION STATEMENT, AND TO FILE THE SAME WITH THE SECURITIES AND
EXCHANGE COMMISSION, GRANTING UNTO EACH OF SAID ATTORNEYS-IN-FACT AND AGENTS
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE TO BE DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS SUCH PERSON
MIGHT OR COULD DO PERSONALLY, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR THEIR RESPECTIVE SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT AND THE FOREGOING POWER OF ATTORNEY HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Thomas C. Graham Chairman of the January 13,
- ------------------------------------- Board 1997
THOMAS C. GRAHAM
/s/ Richard M. Wardrop, Jr. Director, President January 13,
- ------------------------------------- and Chief Executive 1997
RICHARD M. WARDROP, JR. Officer (Principal
Executive Officer)
/s/ Richard E. Newsted Senior Vice January 13,
- ------------------------------------- President, Chief 1997
RICHARD E. NEWSTED Financial Officer
(Principal
Financial Officer)
/s/ Donald B. Korade Controller January 13,
- ------------------------------------- (Principal 1997
DONALD B. KORADE Accounting Officer)
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Allen Born Director January 13,
- ------------------------------------- 1997
ALLEN BORN
/s/ John A. Georges Director January 13,
- ------------------------------------- 1997
JOHN A. GEORGES
/s/ Dr. Bonnie Guiton Hill Director January 13,
- ------------------------------------- 1997
DR. BONNIE GUITON HILL
/s/ Robert H. Jenkins Director January 13,
- ------------------------------------- 1997
ROBERT H. JENKINS
/s/ Lawrence A. Leser Director January 13,
- ------------------------------------- 1997
LAWRENCE A. LESER
/s/ Robert E. Northam Director January 13,
- ------------------------------------- 1997
ROBERT E. NORTHAM
Director
- -------------------------------------
CYRUS TANG
/s/ James A. Thomson, Ph.D. Director January 13,
- ------------------------------------- 1997
JAMES A. THOMSON, PH.D.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AK
STEEL CORPORATION HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
MIDDLETOWN, STATE OF OHIO.
Date: January 13, 1997
AK STEEL HOLDING CORPORATION
/s/ Richard M. Wardrop, Jr.
By: _________________________________
RICHARD M. WARDROP, JR.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES THOMAS C. GRAHAM, RICHARD M. WARDROP, JR., RICHARD E.
NEWSTED AND DONALD B. KORADE, AND EACH OF THEM, SUCH PERSON'S TRUE AND LAWFUL
ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF SUBSTITUTION, TO SIGN FOR
SUCH PERSON AND IN SUCH PERSON'S NAME, PLACE AND STEAD, IN ANY AND ALL
CAPACITIES, ANY AND ALL AMENDMENTS, (INCLUDING POST-EFFECTIVE AMENDMENTS) TO
THIS REGISTRATION STATEMENT, AND TO FILE THE SAME WITH THE SECURITIES AND
EXCHANGE COMMISSION, GRANTING UNTO EACH OF SAID ATTORNEYS-IN-FACT AND AGENTS
FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING
REQUISITE TO BE DONE, AS FULLY TO ALL INTENTS AND PURPOSES AS SUCH PERSON
MIGHT OR COULD DO PERSONALLY, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS, OR ANY OF THEM, OR THEIR RESPECTIVE SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT AND THE FOREGOING POWER OF ATTORNEY HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Thomas C. Graham Chairman of the January 13,
- ------------------------------------- Board 1997
THOMAS C. GRAHAM
/s/ Richard M. Wardrop, Jr. Director, President January 13,
- ------------------------------------- and Chief Executive 1997
RICHARD M. WARDROP, JR. Officer (Principal
Executive Officer)
/s/ Richard E. Newsted Senior Vice January 13,
- ------------------------------------- President, Chief 1997
RICHARD E. NEWSTED Financial Officer
(Principal
Financial Officer)
/s/ Donald B. Korade Controller January 13,
- ------------------------------------- (Principal 1997
DONALD B. KORADE Accounting Officer)
II-7
<PAGE>
SIGNATURE TITLE DATE
/s/ Allen Born Director January 13,
- ------------------------------------- 1997
ALLEN BORN
/s/ John A. Georges Director January 13,
- ------------------------------------- 1997
JOHN A. GEORGES
/s/ Dr. Bonnie Guiton Hill Director January 13,
- ------------------------------------- 1997
DR. BONNIE GUITON HILL
/s/ Robert H. Jenkins Director January 13,
- ------------------------------------- 1997
ROBERT H. JENKINS
/s/ Lawrence A. Leser Director January 13,
- ------------------------------------- 1997
LAWRENCE A. LESER
/s/ Robert E. Northam Director January 13,
- ------------------------------------- 1997
ROBERT E. NORTHAM
Director
- -------------------------------------
CYRUS TANG
/s/ James A. Thomson, Ph.D. Director January 13,
- ------------------------------------- 1997
JAMES A. THOMSON, PH.D.
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
4.1 --Indenture, dated as of December 17, 1996, relating to the Company's 9
1/8% Senior Notes Due 2006 (including form of Notes).*
4.2 --Indenture, dated as of April 1, 1994, relating to the Company's 10 3/4%
Senior Notes Due 2004 (the "1994 Indenture") (incorporated herein by
reference to Exhibit 4.3 to the Company's Registration Statement on Form
S-1, No. 33-83792 ("Registration No. 33-83792").
4.3 --Supplemental Indenture, dated as of September 21, 1994, to the 1994
Indenture (incorporated herein by reference to Exhibit 4.4 to
Registration No. 33-83792).
4.4 --Supplemental Indenture, dated as of December 11, 1996, to the 1994
Indenture.*
4.5 --Form of Note Purchase Agreement, dated as of December 17, 1996, with
respect to the Company's Senior Secured Notes Due 2004.*
5 --Opinion of Weil, Gotshal & Manges LLP.**
10.1 --Joint Venture Termination Agreement, dated April 6, 1994, among Armco,
Inc., Kawasaki, Kawasaki Steel Corporation, Kawasaki Steel Investments,
Inc., the Partnership, AJV Investments Corp., KSCA, Incorporated and the
Company (incorporated herein by reference to Exhibit 10.1 to Registration
No. 33-83792).
10.2 --Employment Contract, dated as of April 4, 1994, between the Company and
Thomas C. Graham (incorporated herein by reference to Exhibit 10.13 to
Registration No. 33-83792).
10.3 --Supplemental Agreement No. 1 to Employment Agreement with Thomas C.
Graham
(incorporated herein by reference to an Exhibit to the Company's 10-Q
Report for the period ended September 30, 1995).
10.4 --Form of Executive Officer Severance Agreement.*
10.5 --Annual Management Incentive Plan (incorporated herein by reference to
Exhibit 10.15 to Registration No. 33-83792).
10.6 --1994 Stock Incentive Plan, as amended May 15, 1996 and November 21,
1996.*
10.7 --Executive Minimum and Supplemental Retirement Plan (incorporated herein
by reference to Exhibit 10.17 to Registration No. 33-83792).
10.8 --Registration Rights Agreement, dated as of April 7, 1994, among the
Company and certain subsidiaries of Kawasaki (incorporated herein by
reference to Exhibit 10.19 to Registration No. 33-83792).
10.9 --Registration Agreement, dated as of April 7, 1994, between the Company
and Thomas C. Graham (incorporated herein by reference to Exhibit 10.22
to Registration No. 33-38792).
10.10 --Receivables Purchase Agreement, dated as of December 1, 1994 by and
between AK Steel and AK Acquisition Receivables Ltd., as successor to AK
Steel Receivables, Inc. (incorporated herein by reference to Exhibit
10.23 to Registration No. 33-86678).
10.11 --Purchase and Servicing Agreement, dated as of December 1, 1994, among AK
Acquisition Receivables Ltd., as successor to AK Steel Receivables Inc.,
AK Steel, the institutions from time to time party thereto and PNC Bank,
Ohio, National Association (incorporated herein by reference to Exhibit
10.24 to Registration No. 33-86678).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.11(a) --Amendment No. 1 to the Purchase and Servicing Agreement, dated as of
November 17, 1995, among AK Steel, AK Acquisition Receivables Ltd., as
successor to AK Steel Receivables, Inc., the purchasers party thereto and
PNC Bank, Ohio, National Association.*
10.11(b) --Consent, Amendment and Assumption Agreement to the Receivables Purchase
Agreement and the Purchase and Servicing Agreement, dated as of December
31, 1996, among the Company, AK Steel Receivables Inc., AK Acquisition
Receivables Ltd., AKSR Investments, Inc., the purchasers party thereto
and PNC Bank, Ohio, National Association.*
10.12 --Letter Agreement dated July 31, 1995, between the Company and Kawasaki
(incorporated herein by reference to Exhibit 10 to Post-Effective
Amendment No. 2 on Form S-3 to the Company's Registration Statement on
Form S-1, Registration No. 33-86678).
10.13 --Deferred Compensation Plan for Management (incorporated herein by
reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
10.14 --Deferred Compensation Plan for Directors (incorporated herein by
reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
10.15 --Long Term Performance Plan, as amended and restated effective November
21, 1996.**
10.16 --Exchange and Registration Rights Agreement, dated as of December 17,
1996, among the Company, CS First Boston Corporation and Goldman, Sachs &
Co.*
12 --Ratio of Earnings to Fixed Charges.*
23.1 --Consent of Deloitte & Touche LLP.*
23.2 --Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5).**
24 --Power of Attorney (included on signature pages).
25 --Statement of Eligibility on Form T-1 of The Bank of New York.**
99.1 --Form of Letter of Transmittal.**
</TABLE>
- --------
* Filed herewith
** To be filed by amendment.
<PAGE>
EXHIBIT 4.1
================================================================================
AK STEEL CORPORATION
9 1/8% Senior Notes Due 2006
INDENTURE
Dated as of December 17, 1996
The Bank of New York,
Trustee
================================================================================
<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.
(b) ................................... 7.8; 7.10
(c) ................................... N.A.
311 (a) ................................... 7.11
(b) ................................... 7.11
(c) ................................... N.A.
312 (a) ................................... 2.5
(b) ................................... 11.3
(c) ................................... 11.3
313 (a) ................................... 7.6
(b) (1) ................................... N.A.
(b) (2) ................................... 7.6
(c) ................................... 11.2
(d) ................................... 7.6
314 (a) ................................... 4.3; 4.18;
................................... 11.2
(b) ................................... N.A.
(c) (1) ................................... 11.4
(c) (2) ................................... 11.4
(c) (3) ................................... N.A.
(d) ................................... N.A.
(e) ................................... 11.5
(f) ................................... N.A.
315 (a) ................................... 7.1
(b) ................................... 7.5; 11.2
(c) ................................... 7.1
(d) ................................... 7.1
(e) ................................... 6.11
316 (a) (last sentence) ................................... 11.6
(a) (1) (A) ................................... 6.5
(a) (1) (B) ................................... 6.4
(a) (2) ................................... N.A.
(b) ................................... 6.7
317 (a) (1) ................................... 6.8
(a) (2) ................................... 6.9
(b) ................................... 2.4
318 (a) ................................... 11.1
N.A. means Not Applicable.
____________________
Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference............. 1
SECTION 1.1. Definitions.............................................. 1
SECTION 1.2. Other Definitions........................................ 15
SECTION 1.3. Incorporation by Reference of Trust Indenture Act........ 16
SECTION 1.4. Rules of Construction.................................... 16
ARTICLE 2
The Securities......................................... 17
SECTION 2.1. Form and Dating.......................................... 17
SECTION 2.2. Execution and Authentication............................. 17
SECTION 2.3. Registrar and Paying Agent............................... 18
SECTION 2.4. Paying Agent To Hold Money in Trust...................... 18
SECTION 2.5. Securityholder Lists..................................... 19
SECTION 2.6. Transfer and Exchange.................................... 19
SECTION 2.7. Replacement Securities................................... 19
SECTION 2.8. Outstanding Securities................................... 19
SECTION 2.9. Temporary Securities..................................... 20
SECTION 2.10. Cancellation............................................ 20
SECTION 2.11. Defaulted Interest...................................... 20
SECTION 2.12. CUSIP Numbers........................................... 20
ARTICLE 3
Redemption............................................. 21
SECTION 3.1. Notices to Trustee....................................... 21
SECTION 3.2. Selection of Securities to be Redeemed................... 21
SECTION 3.3. Notice of Redemption..................................... 21
SECTION 3.4. Effect of Notice of Redemption........................... 22
SECTION 3.5. Deposit of Redemption Price.............................. 22
SECTION 3.6. Securities Redeemed in Part.............................. 22
i
<PAGE>
ARTICLE 4
Covenants.............................................. 22
SECTION 4.1. Payment of Securities.................................... 22
SECTION 4.2. Maintenance of Office or Agency.......................... 23
SECTION 4.3. SEC Reports.............................................. 23
SECTION 4.4. Taxes.................................................... 24
SECTION 4.5. Limitation on Debt....................................... 24
SECTION 4.6. Limitation on Debt and Preferred Equity Interests of
Subsidiaries.......................................................... 25
SECTION 4.7. Limitation on Restricted Payments........................ 27
SECTION 4.8. Limitation on Issuance and Sale of Equity Interests of
Subsidiaries.......................................................... 29
SECTION 4.9. Limitation on Restrictions on Distributions from
Subsidiaries.......................................................... 29
SECTION 4.10. Limitation on Sales of Assets and Equity Interests of
Subsidiaries.......................................................... 30
SECTION 4.11. Limitation on Transactions with Affiliates.............. 33
SECTION 4.12. Limitation on Liens..................................... 33
SECTION 4.13. Limitation on Sale/Leaseback Transactions............... 35
SECTION 4.14. Corporate Existence..................................... 36
SECTION 4.15. Limitation on Lines of Business......................... 36
SECTION 4.16. Restrictive Covenant of Holding......................... 36
SECTION 4.17. Change in Control....................................... 37
SECTION 4.18. Compliance Certificate.................................. 38
SECTION 4.19. Further Instruments and Acts............................ 38
SECTION 4.20. Maintenance of Properties............................... 38
SECTION 4.21. Insurance............................................... 39
ARTICLE 5
Successor Company 39
SECTION 5.1. When AK Steel or any of its Subsidiaries May Merge or
Transfer Assets....................................................... 39
SECTION 5.2. Successor Corporation Substituted........................ 40
ARTICLE 6
Defaults and Remedies 40
SECTION 6.1. Events of Default........................................ 40
SECTION 6.2. Acceleration............................................. 42
SECTION 6.3. Other Remedies........................................... 42
SECTION 6.4. Waiver of Past Defaults.................................. 43
SECTION 6.5. Control by Majority...................................... 43
SECTION 6.6. Limitation on Suits...................................... 43
SECTION 6.7. Rights of Holders to Receive Payment..................... 43
SECTION 6.8. Collection Suit by Trustee............................... 44
ii
<PAGE>
SECTION 6.9. Trustee May File Proofs of Claim........................ 44
SECTION 6.10. Priorities.............................................. 44
SECTION 6.11. Undertaking for Costs................................... 44
SECTION 6.12. Waiver of Stay or Extension Laws........................ 44
ARTICLE 7
Trustee................................................ 45
SECTION 7.1. Duties of Trustee........................................ 45
SECTION 7.2. Rights of Trustee........................................ 46
SECTION 7.3. Individual Rights of Trustee............................. 47
SECTION 7.4. Trustee's Disclaimer..................................... 47
SECTION 7.5. Notice of Defaults....................................... 47
SECTION 7.6. Reports by Trustee to Holders............................ 47
SECTION 7.7. Compensation and Indemnity............................... 47
SECTION 7.8. Replacement of Trustee................................... 48
SECTION 7.9. Successor Trustee by Merger.............................. 49
SECTION 7.10. Eligibility; Disqualification........................... 49
SECTION 7.11. Preferential Collection of Claims Against Company....... 49
ARTICLE 8
Discharge of Indenture; Defeasance..................... 49
SECTION 8.1. Discharge of Liability on Securities; Defeasance......... 49
SECTION 8.2. Conditions to Defeasance................................. 50
SECTION 8.3. Application of Trust Money............................... 51
SECTION 8.4. Repayment to Company..................................... 51
SECTION 8.5. Indemnity for Government Obligations..................... 52
SECTION 8.6. Reinstatement............................................ 52
ARTICLE 9
Amendments............................................. 52
SECTION 9.1. Without Consent of Holders............................... 52
SECTION 9.2. With Consent of Holders.................................. 53
SECTION 9.3. Compliance with Trust Indenture Act...................... 54
SECTION 9.4. Revocation and Effect of Consents and Waivers............ 54
SECTION 9.5. Notation on or Exchange of Securities.................... 54
SECTION 9.6. Trustee to Sign Amendments............................... 54
SECTION 9.7. Payment for Consent...................................... 54
ARTICLE 10
Senior Note Guarantees................................ 55
SECTION 10.1. Unconditional Senior Note Guarantees.................... 55
SECTION 10.2. Limitation of Guarantor's Liability..................... 56
iii
<PAGE>
SECTION 10.3. Execution and Delivery of Senior Note Guarantees........ 56
SECTION 10.4. Addition of Guarantor................................... 57
SECTION 10.5. Release of the Senior Note Guarantee.................... 57
ARTICLE 11
Miscellaneous......................................... 58
SECTION 11.1. Trust Indenture Act Controls............................ 58
SECTION 11.2. Notices................................................. 58
SECTION 11.3. Communication by Holders with Other Holders............. 59
SECTION 11.4. Certificate and Opinion as to Conditions Precedent...... 59
SECTION 11.5. Statements Required in Certificate or Opinion........... 59
SECTION 11.6. When Securities Disregarded............................. 59
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar............ 60
SECTION 11.8. Legal Holidays.......................................... 60
SECTION 11.9. Governing Law........................................... 60
SECTION 11.10. No Recourse Against Others............................. 60
SECTION 11.11. Successors............................................. 60
SECTION 11.12. Multiple Originals..................................... 60
SECTION 11.13. Table of Contents; Headings............................ 60
SECTION 11.14. Separability Clause.................................... 60
SECTION 11.15. Benefits of Indenture.................................. 61
APPENDIX A Provisions Relating to Initial Securities, Private
Exchange Securities and Exchange Securities
EXHIBIT 1 TO
APPENDIX A Form of Initial Security
EXHIBIT A Form of Exchange Security or Private Exchange Security
EXHIBIT B Form of Notation on Security Relating to Senior Note
Guarantees................................................. 2
iv
<PAGE>
THIS INDENTURE is dated as of December 17, 1996, among AK STEEL
CORPORATION, a Delaware corporation ("AK Steel"), AK STEEL HOLDING CORPORATION,
--------
a Delaware corporation ("Holding"), as Guarantor, and The Bank of New York, a
-------
New York banking corporation (the "Trustee").
-------
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of AK Steel's 9 1/8% Senior
Notes Due 2006 (the "Initial Securities") and, if and when issued pursuant to a
------------------
registered exchange for Initial Securities, AK Steel's 9 1/8% Senior Notes due
2006 (the "Exchange Securities"), and if and when issued pursuant to a private
-------------------
exchange for Initial Securities, AK Steel's 9 1/8% Senior Notes due 2006 (the
"Private Exchange Securities" and, together with the Initial Securities and the
- ----------------------------
Exchange Securities, the "Securities"):
----------
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.1. Definitions.
-----------
"Accounts Receivable" of any Person means any and all accounts,
-------------------
contract rights, chattel paper, instruments, documents, general intangibles and
other obligations of any kind relating to the sale or lease of goods and the
rendering of services by such Person, all rights relating thereto, all deposit
accounts containing the proceeds thereof, all books and records relating thereto
and the proceeds thereof.
"Affiliate" of any specified Person means (a) any other Person that,
---------
directly or indirectly, is in control of, is controlled by or is under common
control with such specified Person or (b) any other Person who is a director or
officer (i) of such specified Person, (ii) of any Subsidiary of such specified
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer or other
-----------------
disposition (or series of related sales, leases, transfers or dispositions) of
Equity Interests of a Subsidiary (other than directors' qualifying shares),
property or other assets (each referred to for the purposes of this definition
as a "disposition") by AK Steel or any of its Subsidiaries, including any
-----------
disposition by means of a merger, consolidation or similar transaction, other
than (a) a disposition by AK Steel or a Subsidiary to AK Steel or a Wholly Owned
Guarantor Subsidiary, (b) a disposition of property or assets at Fair Market
Value (as determined in good faith by the Board of Directors of Holding) in the
ordinary course of business, (c) a disposition of obsolete assets in the
ordinary course of business, (d) a disposition that constitutes a Restricted
Payment or a
<PAGE>
Sale/Leaseback Transaction, (e) a sale of Accounts Receivable under a Permitted
Credit Facility and (f) a transfer of Accounts Receivable that constitutes a
Permitted Investment under clauses (e) or (f) of the definition of "Permitted
Investments".
"Attributable Debt", in respect of a Sale/Leaseback Transaction,
-----------------
means, as of the date of determination, the present value (discounted at the
lower of the interest rate of such Sale/Leaseback Transaction and the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to
------------
any Debt, the quotient obtained by dividing (a) the sum of the products of the
numbers of years from the date of determination to the dates of each successive
scheduled principal payment of such Debt multiplied by the amount of such
principal payment by (b) the sum of all such principal payments.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal or
--------------
state law for the relief of debtors.
"Board of Directors" of a Person means the Board of Directors of that
------------------
Person or any committee thereof duly authorized to act on behalf of such Board
of Directors.
"Business Day" means any day that is not a Saturday, a Sunday or a day
------------
on which banking institutions are required to close in the State of New York.
"Capital Lease Obligations" of a Person means any obligation which is
-------------------------
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Cash Equivalents" means:
----------------
(a) Investments in U.S. Government Obligations maturing within
365 days of the date of acquisition thereof;
(b) Investments in certificates of deposit or Eurodollar deposits
maturing within 365 days of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United
States or any state thereof and which has a combined capital and surplus of
at least $1.0 billion and rated at least A3 by Moody's Investors Service,
Inc.;
(c) Investments in repurchase agreements, involving Investments
in U.S. Government Obligations or other Cash Equivalents, entered into with
any bank, trust
-2-
<PAGE>
company or investment bank rated at least A- and A-1 by Standard & Poor's
and at least A3 and P-1 by Moody's Investors Service, Inc.;
(d) Investments in commercial paper maturing not more than 90
days from the date of acquisition thereof and rated at least A-1 by
Standard & Poor's and at least P-1 by Moody's Investors Service, Inc.
issued by a corporation (except AK Steel or an Affiliate of AK Steel) that
is organized under the laws of any state of the United States or the
District of Columbia; and
(e) Investments in money market accounts or funds whose assets
consist solely of cash or Cash Equivalents.
"Change in Control" means the occurrence of any of the following
-----------------
events:
(a) any "Person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall
be deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 40%
of the total voting power of the Voting Equity Interests of Holding;
provided, however, that a Person shall not be deemed the "beneficial owner"
of shares tendered pursuant to a tender or exchange offer made by that
Person or any Affiliate of that Person until the tendered shares are
accepted for purchase or exchange;
(b) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of
Holding (together with any new directors whose election by such Board of
Directors of Holding, or whose nomination for election by the shareholders
of Holding, as the case may be, was approved by a vote of 66-2/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board of
Directors of Holding then in office; or
(c) Holding fails to own 100% of the Equity Interests of AK
Steel; provided, however, that it shall not be deemed a Change in Control
if Holding merges into AK Steel except that, in such case, AK Steel shall
be substituted for Holding for purposes of this definition of "Change in
Control" and this clause (c) shall no longer be applicable.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
----------------------------------
means the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (b) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (i) if AK Steel or any Subsidiary has
issued any Debt since the beginning of such period that remains outstanding or
if the transaction giving rise to the need to calculate the Consolidated EBITDA
Coverage Ratio is an issuance of Debt, or both, EBITDA and Consolidated Interest
Expense for
-3-
<PAGE>
such period shall be calculated after giving effect on a pro forma basis to such
Debt as if such Debt had been issued on the first day of such period and the
discharge of any other Debt repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Debt as if such discharge had occurred
on the first day of such period, (ii) if since the beginning of such period AK
Steel or any Subsidiary shall have made any Asset Disposition, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the assets that are the subject of such Asset
Disposition for such period, or increased by an amount equal to the EBITDA (if
negative), directly attributable thereto for such period, and Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Debt of AK Steel or
any Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to AK Steel and its continuing Subsidiaries in connection with such
Asset Dispositions for such period (or, if the Equity Interests of any
Subsidiary are sold, the Consolidated Interest Expense for such period directly
attributable to the Debt of such Subsidiary to the extent AK Steel and its
continuing Subsidiaries are no longer liable for such Debt after such sale),
(iii) if since the beginning of such period AK Steel or any Subsidiary (by
merger or otherwise) shall have made an Investment in any Subsidiary (or any
Person that becomes a Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, that constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the issuance of any Debt) as if such Investment or acquisition occurred on the
first day of such period, and (iv) if since the beginning of such period any
Person (that subsequently became a Subsidiary or was merged with or into AK
Steel or any Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment that would have required an adjustment
pursuant to clause (ii) or (iii) above if made by AK Steel or a Subsidiary
during such period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if such Asset
Disposition or Investment occurred on the first day of such period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto, and
the amount of Consolidated Interest Expense associated with any Debt issued in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of AK Steel. If any Debt
bears a floating rate of interest and is being given pro forma effect, the
interest on such Debt shall be calculated as if the rate in effect on the date
of determination had been the applicable rate for the entire period (taking into
account any Interest Rate Protection Agreement applicable to such Debt if such
Interest Rate Protection Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
-----------------------------
interest expense of Holding and its consolidated Subsidiaries (other than Non-
Recourse Subsidiaries), including (a) interest expense attributable to capital
leases, (b) amortization of debt discount and debt issuance cost, (c)
capitalized interest, (d) non-cash interest payments, (e) commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (f) net costs under Interest Rate Protection Agreements
(including amortization of fees), (g) Preferred Equity Interests dividends or
distributions in respect of all Preferred Equity Interests held by Persons other
than AK Steel or a Wholly Owned Subsidiary, (h) interest allocated in connection
with investments in discontinued operations and (i) interest actually paid
-4-
<PAGE>
by Holding or any of its consolidated Subsidiaries (other than Non-Recourse
Subsidiaries) under any guarantee of Debt or other obligation of any other
Person.
"Consolidated Net Income" means, for any period, the net income (or
-----------------------
loss) of Holding and its consolidated Subsidiaries; provided, however, that
there shall not be included in such Consolidated Net Income:
(a) any net income (or loss) of any Person if such Person is not
a Subsidiary of AK Steel, except that AK Steel's equity in the net income
of any such Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually distributed by such
Person during such period to AK Steel or a Subsidiary (other than a Non-
Recourse Subsidiary) as a dividend or other distribution (subject, in the
case of a dividend or other distribution to a Subsidiary, to the
limitations contained in clause (c) below);
(b) any net income (or loss) of any Person acquired by AK Steel
or a Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(c) any net income of any Subsidiary if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to AK Steel, except that (i) AK Steel's equity in the net
income of any such Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during such period to AK Steel or another
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to another Subsidiary, to the limitation
contained in this clause) and (ii) AK Steel's equity in a net loss of any
such Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(d) any gain or loss realized upon the sale or other disposition
of any property, plant or equipment of AK Steel or its consolidated
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) that is
not sold or otherwise disposed of in the ordinary course of business and
any gain or loss realized upon the sale or other disposition of any Equity
Interests of any Person;
(e) any net income (or loss) of any Non-Recourse Subsidiary,
except that AK Steel's equity in the net income of any such Non-Recourse
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Non-
Recourse Subsidiary during such period to AK Steel as a dividend or other
distribution; and
(f) the cumulative effect of a change in accounting principles.
"Consolidated Net Tangible Assets" of any Person means the total
--------------------------------
assets of such Person and its consolidated Subsidiaries after deducting
therefrom all intangible assets, current liabilities (excluding any thereof
which are by their terms extendible or renewable at the option
-5-
<PAGE>
of the obligor thereon to a time more than 12 months after the time as of which
the amount thereof is being computed) and minority interests, if any, in any
assets of such Person's Subsidiaries.
"Consolidated Net Worth" of any Person means the total of the amounts
----------------------
shown on the balance sheet of such Person and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, as of the end of the most recent fiscal quarter of such
Person ending at least 45 days prior to the taking of any action for the purpose
of which the determination is being made, as (a) the par or stated value of all
outstanding Equity Interests of such Person plus (b) paid-in capital or capital
surplus relating to such Equity Interests plus (c) any retained earnings or
earned surplus less (i) any accumulated deficit, (ii) any amounts attributable
to Redeemable Equity Interests and (iii) any amounts attributable to
Exchangeable Equity Interests.
"Corporate Trust Office" of the Trustee means the address of the
----------------------
Trustee specified in Section 11.2 hereof or such other address as to which the
Trustee may give notice to AK Steel and the Guarantors.
"Debt" of any Person means, without duplication,
----
(a) the principal of and premium (if any) in respect of (i)
indebtedness of such Person for money borrowed and (ii) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable;
(b) all Capital Lease Obligations of such Person;
(c) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(d) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (a)
through (c) above) entered into in the ordinary course of business of such
Person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
third Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit);
(e) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Redeemable Equity
Interests (but excluding any accrued dividends);
-6-
<PAGE>
(f) all obligations of such Person under interest rate swap or
similar agreements, or foreign currency or commodity hedge, exchange or
similar agreements of such Person;
(g) all obligations of the type referred to in clauses (a)
through (f) of other Persons and all dividends of other Persons for the
payment of which, in either case, such Person is responsible or liable,
directly or indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee; and
(h) all obligations of the type referred to in clauses (a)
through (g) of other Persons secured by any Lien on any property or asset
of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Default" means any event which is, or after notice or passage of time
-------
or both would be, an Event of Default.
"EBITDA" for any period means the Consolidated Net Income of Holding
------
for such period (but without giving effect to adjustments, accruals, deductions
or entries resulting from purchase accounting, extraordinary losses or gains and
any gains or losses from any Asset Dispositions), plus (a) the following to the
extent deducted in calculating such Consolidated Net Income: (i) income tax
expense, (ii) Consolidated Interest Expense, (iii) depreciation expense, (iv)
amortization expense, (v) the non-cash portion of post retirement benefits other
than pensions, (vi) special charges taken after December 31, 1996 in respect of
which Holding has delivered to the Trustee (1) an Officers' Certificate setting
forth estimates, made in good faith by a responsible financial or accounting
Officer of Holding, of the cash costs estimated, at the time such special
charges are recorded, to be paid during any period for such special charges and
containing an undertaking of Holding to deliver to the Trustee, as soon as
practicable after Holding determines that such estimates are not appropriate, a
supplemental Officers' Certificate setting forth appropriate adjustments to such
estimates and (2) together with any Officers' Certificate or supplemental
Officers' Certificate referred to in clause (1), a report prepared by Holding's
independent auditors setting forth the procedures performed by such auditors in
connection with such special charges and the related cash costs estimated to be
paid during any period for such charges minus (b) to the extent not deducted in
calculating such Consolidated Net Income, cash costs estimated to be paid during
such period for special charges taken during any period as set forth in the
Officers' Certificate most recently delivered to the Trustee in respect of such
special charges pursuant to clause (a)(vi) of this definition.
"Equity Interests" means any and all shares, interests, rights to
----------------
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock or other equity participations,
including partnership interests, whether general or limited, including any
Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
-7-
<PAGE>
"Exchangeable Equity Interests" of any Person means any Equity
-----------------------------
Interest which is exchangeable for or convertible into another security (other
than any Equity Interest of such Person which is neither an Exchangeable Equity
Interest nor a Redeemable Equity Interest).
"Fair Market Value" means, with respect to any asset or property,
------------------
the sale value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer.
"Guarantee" means any obligation, contingent or otherwise, of any
---------
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or other obligation of such other Person (whether such
obligation to purchase or pay such Debt or other obligation of such other Person
arises by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (b) entered into for purposes of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantors" means Holding and each Guarantor Subsidiary.
----------
"Guarantor Subsidiary" means any Subsidiary (other than a Non-Recourse
--------------------
Subsidiary) that executes a supplement to this Indenture pursuant to which such
Subsidiary jointly and severally unconditionally guarantees the due and punctual
payment and performance of the Obligations and assumes the other obligations of
a Guarantor Subsidiary pursuant to this Indenture, in the manner provided by
this Indenture.
"Holder" or "Securityholder" means the Person in whose name a Security
------ --------------
is registered on the Registrar's books.
"Indenture" means this Indenture as amended or supplemented from time
---------
to time.
"Interest Rate Protection Agreement" means any interest rate swap
----------------------------------
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect AK Steel or any Subsidiary against fluctuations
in interest rates.
"Inventory" of any Person means any and all inventory of any kind of
---------
such Person, including without limitation, any or all of the following:
inventory, merchandise, goods and other tangible personal property that are held
for sale or lease by such Person; all materials used or consumed in the business
of such Person, but excluding from the foregoing equipment of such Person; all
trademarks, servicemarks, trade names and similar intangible property owned or
used by such Person in its business, together with the goodwill of the business
symbolized thereby and all rights relating thereto ("Intangible Property"); and
-------------------
all books and records relating to the foregoing and the proceeds thereof.
-8-
<PAGE>
"Investment" in any Person means any loan or advance to, any
----------
acquisition of Equity Interests, equity interest, obligation or other security
of, or capital contribution or other investment in, such Person.
"issue" means issue, assume, guarantee, incur or otherwise become
-----
liable for; provided, however, that any Debt or Equity Interests of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
"JV Subsidiary" means a Guarantor Subsidiary which (a) was created or
-------------
became a Subsidiary after the date on which the Securities were originally
issued and (b) has not acquired any assets directly or indirectly from AK Steel
or any Subsidiary, other than (i) cash constituting a Restricted Payment or (ii)
assets, in an Asset Disposition, which were acquired by AK Steel and its
Subsidiaries within one year prior to such Asset Disposition.
"Lien" means any mortgage, pledge, security interest, conditional sale
----
or other title retention agreement or other similar lien or encumbrance of any
kind.
"Net Available Cash" from an Asset Disposition means cash payments
------------------
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets or received in any other noncash form) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under generally accepted
accounting principles, as a consequence of such Asset Disposition, and in each
case net of all payments made on any Debt that is secured by any assets subject
to such Asset Disposition, in accordance with the terms of any lien upon or
other security agreement of any kind with respect to such assets, or that must
by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law be repaid out of the proceeds from such Asset
Disposition, and net of all distributions and other payments required to be made
to minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Equity
-----------------
Interests means the cash proceeds of such issuance or sale net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Convertible Equity Interests" means, with respect to any Person,
--------------------------------
any non-convertible Equity Interests of such Person and any Equity Interests of
such Person convertible solely into non-convertible Equity Interests of such
Person; provided, however, that Non-Convertible Equity Interests shall not
include any Redeemable Equity Interests or Exchangeable Equity Interests.
-9-
<PAGE>
"Non-Recourse Debt" means Debt or that portion of Debt (a) issued to a
-----------------
Person other than Holding, AK Steel or any Subsidiary (other than a Non-Recourse
Subsidiary) and (b) no default with respect to which (including any rights which
the holders thereof may have to take enforcement action against a Non-Recourse
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Debt of Holding, AK Steel or any Subsidiary (other than a Non-Recourse
Subsidiary) to declare a default on such other Debt or cause the payment thereof
to be accelerated or payable prior to its Stated Maturity.
"Non-Recourse Subsidiary" means a Subsidiary of AK Steel in respect of
-----------------------
any obligation of which neither Holding, AK Steel nor any Subsidiary (other than
another Non-Recourse Subsidiary) has issued a Guarantee, and which (a) has not
acquired any assets directly or indirectly from Holding, AK Steel or any
Subsidiary (other than (i) cash constituting a Restricted Payment and (ii)
Accounts Receivable that have been sold or otherwise transferred to such
Subsidiary in an Accounts Receivable financing for AK Steel or such other
Subsidiary), (b) only owns properties acquired after the date on which the
Securities were originally issued and (c) has no Debt other than (i) Non-
Recourse Debt and (ii) Debt issued to AK Steel or a Significant Subsidiary which
constitutes a Permitted Investment under clause (e) of the definition of
"Permitted Investments".
"Normal Replacement Assets" means any assets other than Special
-------------------------
Assets.
"Obligations" means the principal of, premium, if any, and interest on
-----------
the Securities and all other amounts due and payable under this Indenture and
the Securities and all other obligations and liabilities of AK Steel whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter issued, which may arise under, out of or in connection with this
Indenture and the Securities or any other documents made, delivered or given in
connection therewith, whether on account of principal, premium, if any,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including without limitation all fees and disbursements of counsel to the
Trustee or the Holders for which AK Steel has become obligated pursuant to the
terms of this Indenture) or otherwise whether or not an allowable claim against
AK Steel under the Bankruptcy Law or otherwise enforceable against AK Steel, and
including, in any event, interest and other liabilities accruing or arising
after the filing by or against AK Steel of a petition under the Bankruptcy Law
or that would have so accrued or arisen but for the filing of such a petition.
"Officer" means the Chairman of the Board, the President, any Vice
-------
President, the Treasurer or the Secretary of AK Steel or any Guarantor.
"Officers' Certificate" means a certificate signed by two Officers.
---------------------
"Opinion of Counsel" means a written opinion from legal counsel who is
------------------
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to AK Steel, Holding or the Trustee.
"Permitted Credit Facility" or "Facilities" means any agreement or
------------------------- ----------
agreements providing for (a) the making of a loan or the advancing of credit,
(b) the sale of Accounts Receivable of AK Steel or any Significant Subsidiary
under any asset securitization facility or
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<PAGE>
other financing facility for the financing of Accounts Receivable of AK Steel or
any Significant Subsidiary or (c) the issuance of letters of credit and/or the
creation of bankers' acceptances, under which the aggregate amount that may be
issued or otherwise obtained, in the case of clauses (a), (b) and (c), is based
upon eligible Accounts Receivable and eligible Inventory and the aggregate
principal amount of Debt, or (in the case of clause (b)) aggregate Investments
outstanding, excluding Permitted Investments under clause (e) or (f) of the
definition of "Permitted Investments" in respect of any such asset
securitization facility, shall not at any time exceed the greater of (i) $75.0
million and (ii) an amount equal to (1) 100% of the book value of the
consolidated Accounts Receivable of AK Steel and its Significant Subsidiaries
that are Guarantor Subsidiaries or Non-Recourse Subsidiaries plus (2) 100% of
the book value (excluding last-in-first-out reserves) of the consolidated
Inventory of AK Steel and its Subsidiaries that are Guarantor Subsidiaries,
minus (3) the aggregate principal amount of outstanding Debt secured by any
Accounts Receivable or Inventory of AK Steel or any of its Subsidiaries, other
than Debt outstanding under any Permitted Credit Facility, minus (4) other
outstanding Investments (other than Debt under a Permitted Credit Facility or
Debt described in (3) above or Permitted Investments under clauses (e) and (f)
of the definition of "Permitted Investments") under any asset securitization or
similar facility in respect of Accounts Receivable or Inventory of AK Steel or
any of its Subsidiaries.
"Permitted Investments" means:
---------------------
(a) Cash Equivalents;
(b) Investments in AK Steel or a Wholly Owned Guarantor
Subsidiary (or any Person which will become a Wholly Owned Guarantor
Subsidiary as a result of such Investment);
(c) Loans and reasonable advances to employees of AK Steel or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(d) Investments in obligations the interest on which is excluded
from income for Federal income tax purposes and which obligations have a
remaining life to maturity of less than one year from the acquisition
thereof and were issued or guaranteed by any state of the United States of
America or the District of Columbia or the Commonwealth of Puerto Rico or
any political subdivision, agency, authority or instrumentality thereof,
which issuer or guarantor has a short-term Debt rating which is (on the
date of the acquisition thereof) at least A-1 by Standard & Poor's and at
least P-1 by Moody's Investors Service, Inc.
(e) Investments resulting from the transfer of Accounts
Receivable of AK Steel or its Significant Subsidiaries that are Guarantor
Subsidiaries to a Non-Recourse Subsidiary, the only business of which is
the acquisition and financing of such Accounts Receivable under a Permitted
Credit Facility; and
(f) Investments resulting from the transfer of Accounts
Receivable of AK Steel or its Significant Subsidiaries that are Guarantor
Subsidiaries (or Non-Recourse
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<PAGE>
Subsidiaries) to a trust, the only purpose of which is the acquisition and
financing of such Accounts Receivable, provided that the aggregate amount
of outstanding Debt issued by such trust to, and outstanding Investments in
such trust made by, Persons other than AK Steel and its Significant
Subsidiaries that are Guarantor Subsidiaries or Non-Recourse Subsidiaries
shall not at any time exceed the greater of (i) $75.0 million and (ii) an
amount equal to (1) 85% of the book value of the consolidated Accounts
Receivable of AK Steel and its Significant Subsidiaries that are Guarantor
Subsidiaries or Non-Recourse Subsidiaries plus (2) 100% of the book value
(excluding last-in-first-out reserves) of the consolidated Inventory of AK
Steel and its Subsidiaries that are Guarantor Subsidiaries, minus (3) the
aggregate principal amount of outstanding Debt secured by any Accounts
Receivable or Inventory of AK Steel or any of its Subsidiaries, other than
to the extent included in clause (4) below, minus (4) other outstanding
Investments (other than Investments in such trust) under any asset
securitization or similar facility in respect of Accounts Receivable or
Inventory of AK Steel or any of its Subsidiaries.
(g) Until December 31, 1999, Investments not to exceed $200.0 million
at any time, in publicly traded debt obligations issued or guaranteed by a
corporation (other than AK Steel) organized under the laws of any state of
the United States of America and subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, provided that (i) such debt
obligations are acquired by AK Steel in the open market and not directly
from the issuer thereof or an affiliate of such issuer or from an
underwriter thereof, (ii) such debt obligations, at the date of acquisition
thereof by AK Steel, shall have a remaining life to maturity of not more
than five years, shall provide for payments of principal and interest
solely in cash and shall be rated at least BB by Standard & Poor's and Ba2
by Moody's Investors Service, Inc. and (iii) not more than $15.0 million of
such Investments at any time shall consist of debt obligations issued or
guaranteed by the same corporation and not more than 20% of such
Investments at any time shall consist of debt obligations issued or
guaranteed by corporations within the same industry (as determined by
Primary Standard Industrial Classification Code).
"Permitted Liens" means, with respect to any Person, (a) pledges or
---------------
deposits by such Person under workers' compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits or cash or United States government bonds 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, in each case
incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings; or other Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review or time for appeal has not yet expired; (c) Liens for property taxes not
yet subject to penalties for non-payment or which are being contested in good
faith by appropriate proceedings; (d) Liens in favor of issuers of surety bonds
or letters of credit issued pursuant to the request of and for the account of
such Person in the ordinary course of its business; provided, however, that such
letters of credit do not constitute Debt; (e) survey exceptions, encumbrances,
easements
-12-
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or reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or liens
incidental to the conduct of the business of such Person or to the ownership of
its properties which were not incurred in connection with Debt and which do not
in the aggregate materially adversely affect the value of said properties or
materially impair their use in the operation of the business of such Person; (f)
Liens securing an Interest Rate Protection Agreement so long as the related Debt
is, and is permitted to be under this Indenture, secured by a Lien on the same
property securing the Interest Rate Protection Agreement; and (g) leases and
subleases of real property which do not interfere with the ordinary conduct of
the business of AK Steel or any of its Subsidiaries, and which are made on
customary and usual terms applicable to similar properties.
"Person" means any individual, corporation, limited liability company,
------
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Equity Interests" as applied to the Equity Interests of any
--------------------------
Person means Equity Interests of any class or classes (however designated) that
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Equity Interests of any other class of such
Person.
"principal" of a security means the principal of the security plus the
---------
premium (if any) payable on the security which is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering
----------------------
of common stock of Holding pursuant to an effective registration statement under
the Securities Act.
"Redeemable Equity Interests" means any Equity Interest that by its
---------------------------
terms or otherwise is required to be redeemed on or prior to the first
anniversary of the Stated Maturity of the Securities or is redeemable at the
option of the holder thereof at any time on or prior to the first anniversary of
the Stated Maturity of the Securities.
"Sale/Leaseback Transaction" means an arrangement relating to property
--------------------------
now owned or hereafter acquired whereby AK Steel or a Subsidiary transfers such
property to a Person and AK Steel or a Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange Commission.
---
"Significant Subsidiary" means (a) any domestic Subsidiary of AK Steel
----------------------
(other than a Non-Recourse Subsidiary) that at the time of determination either
(i) had assets that, as of the date of Holding's most recent quarterly
consolidated balance sheet, constituted at least 5% of Holding's total assets on
a consolidated basis as of such date, or (ii) had revenues for the 12-month
period ending on the date of Holding's most recent quarterly consolidated
statement of income which constituted at least 5% of Holding's total revenues on
a consolidated basis for such period, (b) any foreign Subsidiary (other than a
Non-Recourse Subsidiary) of AK Steel that at the time of determination either
(i) had assets which, as of the date of Holding's most recent
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<PAGE>
quarterly consolidated balance sheet, constituted at least 5% of Holding's total
assets on a consolidated basis as of such date, in each case determined in
accordance with generally accepted accounting principles or (ii) had revenues
for the 12-month period ending on the date of Holding's most recent quarterly
consolidated statement of income which constituted at least 5% of Holding's
total revenues on a consolidated basis for such period, or (c) any Subsidiary
(other than a Non-Recourse Subsidiary) of AK Steel that, if merged with all
Defaulting Subsidiaries of AK Steel, would at the time of determination either
(i) have had assets which, as of the date of Holding's most recent quarterly
consolidated balance sheet, would have constituted at least 10% of Holding's
total assets on a consolidated basis as of such date or (ii) have had revenues
for the 12-month period ending on the date of Holding's most recent quarterly
consolidated statement of income which would have constituted at least 10% of
Holding's total revenues on a consolidated basis for such period (each such
determination being made in accordance with generally accepted accounting
principles). "Defaulting Subsidiary" means any Subsidiary of AK Steel (other
---------------------
than a Non-Recourse Subsidiary) with respect to which a Default has occurred.
"Special Assets" means a capital asset, or series of related capital
--------------
assets, with an aggregate purchase price in excess of $20.0 million that
enhances the competitiveness or productivity of the business of AK Steel and its
Subsidiaries or is required so that AK Steel and its Subsidiaries will be able
to remain in compliance with all material requirements of applicable law.
"Stated Maturity" means, with respect to any security, the date
---------------
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Debt of AK Steel (whether
-----------------------
outstanding on the date on which the Securities were originally issued or
thereafter issued) which is subordinate or junior in right of payment to the
Securities.
"Subsidiary" of any Person means any corporation, association,
----------
partnership or other business entity of which more than 50% of the total voting
power of Equity Interests or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, through one or more intermediaries, or both,
by such Person. Unless otherwise qualified, all references to a "Subsidiary" or
to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of AK Steel.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
---
77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.3 hereof.
"Trustee" means the party named as such in the caption of this
-------
Indenture until a successor replaces it and, thereafter, means the successor.
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"Trust Officer" means any Vice President, trust officer or authorized
-------------
signatory of the Trustee assigned by the Trustee to administer its corporate
trust matters.
"Uniform Commercial Code" or "UCC" means the New York Uniform
----------------------- ---
Commercial Code as in effect from time to time.
"U.S. Government Obligations" means direct obligations (or
---------------------------
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Equity Interests" of a corporation or other entity means all
-----------------------
classes of Equity Interests of a corporation or other entity then outstanding
and normally entitled to vote in the election of directors or other governing
body of such corporation or other entity.
"Wholly Owned Guarantor Subsidiary" means any Wholly Owned Subsidiary
---------------------------------
that is a Guarantor Subsidiary.
"Wholly Owned Non-Recourse Subsidiary" of a Person means a Non-
------------------------------------
Recourse Subsidiary of such Person all the Equity Interests (other than non-
voting, money market preferred shares) of which (other than directors'
qualifying shares) are owned by such Person or another Wholly Owned Non-Recourse
Subsidiary of such Person. Unless otherwise qualified, all references to a
"Wholly Owned Non-Recourse Subsidiary" or to "Wholly Owned Non-Recourse
Subsidiaries" shall refer to a Wholly Owned Non-Recourse Subsidiary or Wholly
Owned Non-Recourse Subsidiaries of AK Steel.
"Wholly Owned Subsidiary" of a Person means a Subsidiary of such
-----------------------
Person (other than a Non-Recourse Subsidiary) all the Equity Interests (other
than non-voting, money market preferred shares) of which (other than directors'
qualifying shares) are owned by such Person or another Wholly Owned Subsidiary
of such Person. Unless otherwise qualified, all references to a "Wholly Owned
Subsidiary" or to "Wholly Owned Subsidiaries" shall refer to a Wholly Owned
Subsidiary or Wholly Owned Subsidiaries of AK Steel.
SECTION 1.2. Other Definitions.
-----------------
Defined in
Term Section
---- -----------
"Change in Control Offer" 4.17
"Change in Control Payment Date" 4.17
"Change in Control Payment Price" 4.17
"covenant defeasance option" 8.1
"Custodian" 6.1
"defeasance trust" 8.2
"Event of Default" 6.1
"Intangible Property" 1.1; definition
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of "Inventory"
"legal defeasance option" 8.1
"Legal Holiday" 11.8
"Offer" 4.10(a)
"Offer Amount" 4.10(d)
"Offer Period" 4.10(d)
"Paying Agent" 2.3
"Purchase Date" 4.10(d)
"Registrar" 2.3
"Restricted Payment" 4.7
"Senior Note Guarantee" 10.1
SECTION 1.3. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of 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 Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means AK Steel and any other
obligor on the indenture 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 have the
meanings assigned to them by such definitions.
SECTION 1.4. 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 generally accepted accounting principles as in
effect on the date of this Indenture;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
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<PAGE>
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured debt shall not be deemed to be subordinate or junior to
secured debt merely by virtue of its nature as unsecured debt;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with generally accepted accounting principles and accretion of
principal on such security shall be deemed to be the issuance of Debt; and
(8) the principal amount of any Preferred Equity Interest shall be (i)
the maximum liquidation value of such Preferred Equity Interest or (ii) the
maximum mandatory redemption or mandatory repurchase price with respect to
such Preferred Equity Interest, whichever is greater.
ARTICLE 2
The Securities
--------------
SECTION 2.1. Form and Dating. Provisions relating to the Initial
---------------
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in Appendix A, which is hereby incorporated in and expressly made part of
this Indenture. The Initial Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit 1 to Appendix A
hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Securities, the Private Exchange Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which AK Steel or any Guarantor is
subject, if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Trustee and AK Steel). Each Security
shall be dated the date of its authentication. The terms of the Securities set
forth in Exhibit 1 to Appendix A and Exhibit A hereto are part of the terms of
this Indenture.
SECTION 2.2. Execution and Authentication. Two Officers shall sign
----------------------------
the Securities for AK Steel by manual or facsimile signature. AK Steel's seal
shall be impressed, affixed, imprinted or reproduced on the Securities and may
be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
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.
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<PAGE>
The Trustee shall authenticate and make available for delivery
Securities for original issue in an aggregate principal amount of $550,000,000,
upon a written order of AK Steel signed by two Officers or by an Officer and
either an Assistant Treasurer or an Assistant Secretary of AK Steel. Such order
shall specify the amount of the Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed that
amount except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent reasonably acceptable
to AK Steel to authenticate the Securities. Unless limited by the terms of such
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 any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.3. Registrar and Paying Agent. AK Steel shall maintain an
--------------------------
office or agency where Securities may be presented for registration of transfer
or for exchange (the "Registrar") and an office or agency where Securities may
---------
be presented for payment (the "Paying Agent"). The Registrar shall keep a
------------
register of the Securities and of their transfer and exchange. AK Steel may
have one or more co-registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
------------
AK Steel shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. AK Steel shall notify
the Trustee of the name and address of any such agent. If AK Steel fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7 hereof.
AK Steel or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
AK Steel initially appoints the Trustee as Registrar and Paying Agent
in connection with the Securities.
SECTION 2.4. Paying Agent To Hold Money in Trust. Prior to, or not
-----------------------------------
later than 10:00 a.m., New York City time, on, each due date of the principal of
and interest on any Security, AK Steel shall deposit with the Paying Agent a sum
sufficient to pay such principal and interest when so becoming due. AK Steel
shall require each Paying Agent (other than the Trustee) to agree in writing
that the Paying Agent shall hold in trust for the benefit of Securityholders or
the Trustee all money held by the Paying Agent for the payment of principal of
or interest on the Securities and shall notify the Trustee of any default by AK
Steel in making any such payment. If AK Steel or a domestically incorporated
Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held
by it as Paying Agent and hold it as a separate trust fund. AK Steel at any time
may require a Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed by the Paying Agent. Upon complying with this
Section 2.4, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
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<PAGE>
SECTION 2.5. 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 Securityholders. If the Trustee is not the
Registrar, AK Steel shall furnish to the Trustee, in writing at least 15 days
before each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
SECTION 2.6. Transfer and Exchange. The Securities shall be issued
---------------------
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section 8-401(1)
of the Uniform Commercial Code are met. When Securities are presented to the
Registrar or a co-registrar with a request to exchange them for an equal
principal amount of Securities of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, AK Steel shall execute and the Trustee
shall authenticate Securities at the Registrar's or co-registrar's request. AK
Steel may require payment of a sum sufficient to pay all taxes, assessments or
other governmental charges in connection with any transfer or exchange pursuant
to this Section 2.6. AK Steel shall not be required to make and the Registrar
need not register transfers or exchanges of (a) Securities (or portions thereof)
selected for redemption or (b) any Securities for a period of 15 days before (i)
a selection of Securities to be redeemed or (ii) an interest payment date.
Prior to the due presentation for registration of transfer of any
Security, AK Steel, the Trustee, the Paying Agent, the Registrar or any co-
registrar may deem and treat the Person in whose name a Security is registered
as the absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of AK Steel, the
Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected
by notice to the contrary.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.7. Replacement Securities. If a mutilated Security is
----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, AK Steel shall issue and
the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies
any other reasonable requirements of the Trustee. Such Holder shall furnish an
indemnity bond sufficient in the judgment of AK Steel and the Trustee to protect
AK Steel, the Trustee, the Paying Agent, the Registrar and any co-registrar from
any loss that any of them may suffer if a Security is replaced. AK Steel and
the Trustee may charge the Holder for their expenses in replacing a Security.
Every replacement Security is an additional obligation of AK Steel.
SECTION 2.8. Outstanding Securities. Securities outstanding at any
----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it
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<PAGE>
for cancellation and those described in this Section 2.8 as not outstanding. A
Security does not cease to be outstanding because AK Steel or an Affiliate of AK
Steel holds the Security.
If a Security is replaced pursuant to Section 2.7 hereof, it ceases to
be outstanding unless the Trustee and AK Steel receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.9. Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, AK Steel may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that AK Steel considers
appropriate for temporary Securities. Without unreasonable delay, AK Steel
shall prepare and the Trustee shall authenticate definitive Securities and make
them available for delivery in exchange for temporary Securities. Until such
exchange, temporary Securities shall be entitled to the same rights, benefits
and privileges as definitive securities.
SECTION 2.10. Cancellation. AK Steel 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 registration
of transfer, exchange or payment. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment or cancellation and
deliver such canceled Securities to AK Steel. AK Steel may not issue new
Securities to replace Securities it has redeemed, paid or delivered to the
Trustee for cancellation.
SECTION 2.11. Defaulted Interest. If AK Steel defaults in a payment
------------------
of interest on the Securities, AK Steel shall pay such defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
AK Steel may pay the defaulted interest to the Persons who are Securityholders
on a subsequent special record date, which date shall be at least five Business
Days prior to the payment date. AK Steel shall fix or cause to be fixed any
such special record date and payment date, and, at least 15 days before any such
special record date, AK Steel shall mail to each Securityholder a notice that
states the special record date, the payment date and the amount of defaulted
interest (and interest payable on such defaulted interest) to be paid.
SECTION 2.12. CUSIP Numbers. AK Steel in issuing the Securities may
-------------
use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to
Securityholders; provided that any such notice may state that no representation
is made as to the correctness of such numbers either as printed on the
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Securities,
and any such redemption shall not
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be affected by any defect in or omission of such numbers. AK Steel shall
promptly notify the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3
Redemption
----------
SECTION 3.1. Notices to Trustee. If AK Steel elects to redeem
------------------
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the principal amount of Securities
to be redeemed.
AK Steel shall give each notice to the Trustee provided for in this
Section 3.1 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from AK Steel to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by AK Steel and given to the Trustee, which record date shall be not
less than 15 days after the date of notice to the Trustee.
SECTION 3.2. Selection of Securities to be Redeemed. If fewer than
--------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate and in accordance with methods generally used at
the time of selection by fiduciaries in similar circumstances. The Trustee
shall make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations larger than $1,000. Securities and portions
of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify AK Steel promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.3. Notice of Redemption. At least 30 days but not more
--------------------
than 60 days before a date for redemption of Securities, AK Steel shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
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(e) if fewer than all the outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed;
(f) that, unless AK Steel defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest on Securities (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
(g) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed; and
(h) the CUSIP number, if any, of the Securities and that no
representation is made as to the correctness or accuracy of the CUSIP
number, if any, listed in such notice or printed on the Securities.
At AK Steel's request, the Trustee shall give the notice of redemption
in AK Steel's name and at AK Steel's expense. In such event, AK Steel shall
provide the Trustee with the information required by this Section 3.3.
SECTION 3.4. Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest to the redemption date.
Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.5. Deposit of Redemption Price. Prior to the redemption
---------------------------
date, AK Steel shall deposit with the Paying Agent (or, if AK Steel or a
domestically incorporated Wholly Owned Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which have been
delivered by AK Steel to the Trustee for cancellation.
SECTION 3.6. Securities Redeemed in Part. Upon surrender of a
---------------------------
Security that is redeemed in part, AK Steel shall execute and the Trustee shall
authenticate for the Holder (at AK Steel's expense) a new Security equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
---------
SECTION 4.1. Payment of Securities. AK Steel shall promptly pay the
---------------------
principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the date due if on such date the Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay
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all principal and interest then due and the Trustee or the Paying Agent, as the
case may be, is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture.
AK Steel shall pay interest on overdue principal at the rate specified
therefor in the Securities, and it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency. AK Steel will maintain
-------------------------------
in the Borough of Manhattan, The City of New York, an office or agency (which
may be an office of the Trustee, Registrar or co-registrar) where Securities may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon AK Steel or any Guarantor in respect of the Securities, any
Guarantee enclosed thereon and this Indenture may be served. AK Steel and the
Guarantors will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time AK Steel
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 Corporate Trust Office of the
Trustee, and AK Steel and each Guarantor hereby appoint the Trustee as their
Agent to receive all such presentations, surrenders, notices and demands.
AK Steel 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 AK Steel of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. AK Steel 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. AK Steel
hereby designates the agency of the Trustee, care of Corporate Trust Trustee
Administration, as one such office or agency of AK Steel in accordance with
Section 2.3 hereof.
SECTION 4.3. SEC Reports. Holding shall file with the Trustee and
-----------
provide Securityholders, within 15 days after it files them with the SEC, copies
of its annual report and of 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) which Holding is required to file with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act. Notwithstanding that Holding may
not be required to remain subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, Holding shall continue to file with the SEC and
provide the Trustee and Securityholders with such annual reports and such
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which are
specified in Sections 13 and 15(d) of the Exchange Act. Holding also shall
comply with the other provisions of TIA (S) 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including AK Steel's or Holding's compliance with any of its covenants
hereunder (as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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SECTION 4.4. Taxes. Holding and AK Steel shall, and shall cause each
-----
of the Subsidiaries to, pay prior to delinquency all material taxes, assessments
and governmental levies except as contested in good faith and by appropriate
proceedings.
SECTION 4.5. Limitation on Debt. AK Steel shall not issue, directly
------------------
or indirectly, any Debt unless, immediately after giving effect to the issuance
of such Debt and the receipt and application of the proceeds thereof, the pro
forma Consolidated EBITDA Coverage Ratio would be greater than 2.5 to 1.0.
Notwithstanding the foregoing limitation, AK Steel may issue the
following Debt:
(a) The Securities, AK Steel's Senior Secured Notes Due 2004, Debt
issued by AK Steel pursuant to the Permitted Credit Facilities and
Guarantees by AK Steel of obligations in respect of bonds or notes (in an
aggregate principal amount not exceeding $60.0 million) payable solely from
the proceeds of (a) taxes payable by AK Steel on real or depreciable
personal property relating to AK Steel's Rockport Works facility or (b)
charges payable by AK Steel for sewer and water services relating to such
facility and, to the extent that such taxes or charges are insufficient to
make such payments, payments under such Guarantees (provided that the
payments under such bonds or notes or such Guarantees are not required to
be prefunded by more than an aggregate amount equal to one year of debt
service on such bonds or notes and are not subject to acceleration by the
express terms thereof or otherwise);
(b) Debt issued by AK Steel owed to and held by a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of
any Equity Interests that results in such Wholly Owned Subsidiary ceasing
to be a Wholly Owned Subsidiary or any transfer of such Debt (other than to
another Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Debt by AK Steel;
(c) the Securities issued by AK Steel and Debt issued in exchange
for, or the proceeds of which are used to refund or refinance, any Debt
permitted by this subsection (d); provided, however, that (i) the principal
amount of the Debt so issued shall not exceed the principal amount of the
Debt so exchanged, refunded or refinanced, and (ii) the Debt so issued (1)
shall not mature prior to the Stated Maturity of the Debt so exchanged,
refunded or refinanced and (2) shall have an Average Life equal to or
greater than the remaining Average Life of the Debt so exchanged, refunded
or refinanced;
(d) Debt issued by AK Steel, whether or not secured by a Lien,
constituting all or a part of the purchase price of assets or property
acquired or constructed in the ordinary course of business after the date
on which the Securities were originally issued; provided, however, that
Debt issued under this subsection (d) in any calendar year shall not exceed
in aggregate principal amount the sum of (i) $50.0 million for each of
1997, 1998 and 1999, and $35.0 million for each calendar year from and
including 2000 to and including 2005 plus (ii) the excess of the aggregate
principal amount otherwise permitted to be issued under this subsection (d)
in all previous calendar years to and including the
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calendar year in which the Securities were originally issued over the
aggregate principal amount actually issued by AK Steel during such period
under this subsection (d), and Debt issued by AK Steel in exchange for, or
the proceeds of which are used to refund or refinance, any then outstanding
Debt permitted by this subsection (d); provided, however, that (1) the
principal amount of the Debt so issued shall not exceed the principal
amount of the Debt so exchanged, refunded or refinanced, and (2) the Debt
so issued (A) shall not mature prior to the Stated Maturity of the Debt so
exchanged, refunded or refinanced and (B) shall have an Average Life equal
to or greater than the remaining Average Life of the Debt so exchanged,
refunded or refinanced;
(e) Debt (other than Debt described in subsection (a), (b), (c), or
(d) of this Section 4.5) outstanding on the date on which the Securities
were originally issued, and Debt issued by AK Steel in exchange for, or the
proceeds of which are used to refund or refinance, any Debt permitted by
this subsection (e) or permitted as described in the first paragraph of
this Section 4.5; provided, however, that (i) the principal amount of the
Debt so issued shall not exceed the principal amount of the Debt so
exchanged, refunded or refinanced and (ii) the Debt so issued (1) shall not
mature prior to the Stated Maturity of the Debt so exchanged, refunded or
refinanced and (2) shall have an Average Life equal to or greater than the
remaining Average Life of the Debt so exchanged, refunded or refinanced;
(f) Obligations of AK Steel pursuant to (i) interest rate swap or
similar agreements designed to protect AK Steel against fluctuations in
interest rates in respect of Debt of AK Steel to the extent the notional
principal amount of such obligation does not exceed the aggregate principal
amount of the Debt to which such interest rate contracts relate, and (ii)
foreign exchange or commodity hedge, exchange or similar agreements
designed to protect AK Steel against fluctuations in foreign currency
exchange rates or commodity prices in respect of foreign exchange or
commodity exposures incurred by AK Steel in the ordinary course of its
business; or
(g) Debt (not otherwise permitted to be issued pursuant to
subsections (a) through (f) of this Section 4.5) in an aggregate principal
amount which, together with (i) any other outstanding Debt issued by AK
Steel pursuant to this subsection (g) and (ii) Debt issued and Preferred
Equity Interests then outstanding and issued by Subsidiaries pursuant to
subsection (h) of Section 4.6 hereof does not exceed $100.0 million.
Notwithstanding the foregoing, AK Steel shall not issue any Debt if
the proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Debt shall be subordinated to the Securities to at least the same extent as such
Subordinated Obligations.
SECTION 4.6. Limitation on Debt and Preferred Equity Interests of
----------------------------------------------------
Subsidiaries. AK Steel shall not permit any Subsidiary to issue, directly or
- ------------
indirectly, any Debt or Preferred Equity Interests except:
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(a) Debt or Preferred Equity Interests issued to and held by AK Steel
or a Wholly Owned Subsidiary; provided, however, that (i) any subsequent
issuance or transfer of any Equity Interests that results in any such
Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or (ii) any
subsequent transfer of such Debt or Preferred Equity Interests (other than
to AK Steel or a Wholly Owned Subsidiary) shall be deemed, in each case, to
constitute the issuance of such Debt or Preferred Equity Interests by the
issuer thereof;
(b) Debt or Preferred Equity Interests, other than any described in
subsection (a) of this Section 4.6, outstanding on the date on which the
Securities were originally issued;
(c) Debt or Preferred Equity Interests of a Subsidiary issued and
outstanding on or prior to the date on which such Subsidiary became a
Subsidiary (other than Debt or Preferred Equity Interests issued as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary);
(d) Debt or Preferred Equity Interests issued in exchange for, or the
proceeds of which are used to refund or refinance, Debt or Preferred Equity
Interests referred to in subsection (b) or (c) of this Section 4.6;
provided, however, (i) the principal amount or liquidation value of such
Debt or Preferred Equity Interests so issued shall not exceed the principal
amount or the liquidation value of the Debt or Preferred Equity Interests
so refunded or refinanced and (ii) the Debt or Preferred Equity Interests
so issued (1) shall have a Stated Maturity later than the Stated Maturity
of the Debt or Preferred Equity Interests being exchanged or refinanced and
(2) shall have an Average Life equal to or greater than the remaining
Average Life of the Debt or Preferred Equity Interests being exchanged or
refinanced;
(e) Non-Recourse Debt or Preferred Equity Interests of a Non-Recourse
Subsidiary issued after the date on which the Securities were originally
issued; provided, however, that if any such Debt or Preferred Equity
Interests thereafter ceases to be Non-Recourse Debt or Preferred Equity
Interests of a Non-Recourse Subsidiary, then such event will be deemed to
constitute the issuance of such Debt or Preferred Equity Interests by the
issuer thereof;
(f) Guarantees of the Securities or any other Debt as permitted in
subsection (c) of Section 4.5 hereof;
(g) Guarantees issued by any Guarantor Subsidiary of any Debt issued
by AK Steel as permitted under Section 4.5 hereof; or
(h) Debt or Preferred Equity Interests not otherwise permitted to be
issued pursuant to subsections (a) through (g) of this Section 4.6, which,
together with (i) any other outstanding Debt or Preferred Equity Interests
issued pursuant to this subsection
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(h) and (ii) Debt issued by AK Steel pursuant to subsection (g) of Section
4.5 hereof does not exceed $60.0 million.
SECTION 4.7. Limitation on Restricted Payments. (a) Holding shall
---------------------------------
not, and shall not permit any Subsidiary of Holding to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on or in respect of, or
make any distribution to the holders of, Equity Interests of Holding (except
dividends or distributions payable solely in its Non-Convertible Equity
Interests or in options, warrants or other rights to acquire its Non-Convertible
Equity Interests and except dividends or distributions payable to a Wholly Owned
Guarantor Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of Holding, (iii) declare or pay any dividend or make
any distribution on or in respect of, or make any distribution to holders of,
Equity Interests of any Subsidiary of Holding (other than with respect to any
such Equity Interests held by Holding, AK Steel, any Wholly Owned Guarantor
Subsidiary or any Wholly Owned Non-Recourse Subsidiary) or purchase, redeem or
otherwise acquire or retire for value any Equity Interests of any Subsidiary of
Holding (other than such Equity Interests held by Holding, AK Steel, any Wholly
Owned Guarantor Subsidiary or any Wholly Owned Non-Recourse Subsidiary), (iv)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), or (v) make any
Investment other than Permitted Investments (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted Payment") if:
------------------
(1) a Default shall have occurred and be continuing (or would
result therefrom);
(2) upon giving effect to such Restricted Payment, on a pro
forma basis, AK Steel is not able to issue an additional $1.00 of Debt
pursuant to the Consolidated EBITDA Coverage Ratio as set forth in the
first paragraph of Section 4.5 hereof; or
(3) upon giving effect to such Restricted Payment, the aggregate
amount of such Restricted Payment and all other Restricted Payments
since the date on which the Securities were originally issued would
exceed the sum of (A) 50% of the Consolidated Net Income of Holding
accrued during the period (treated as one accounting period) from the
first day of the first month of the fiscal quarter in which the
Securities were originally issued through the last full fiscal quarter
for which quarterly or annual financial statements are available prior
to the date of such Restricted Payment (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit), plus (B)
the aggregate Net Cash Proceeds received by AK Steel from the issue or
sale of its Equity Interests (other than Redeemable Equity Interests
or Exchangeable Equity Interests) subsequent to the date on which the
Securities were originally issued (other than to a Subsidiary of AK
Steel or an employee stock ownership plan or similar trust), plus (C)
the
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aggregate Net Cash Proceeds received by AK Steel from the issue or
sale of its Equity Interests (other than Redeemable Equity Interests
or Exchangeable Equity Interests) to an employee stock ownership plan
subsequent to the date on which the Securities were originally issued,
provided, that, if such employee stock ownership plan issues any Debt
only to the extent that any such proceeds are equal to any increase in
the Consolidated Net Worth of Holding resulting from principal
repayments made by such employee stock ownership plan with respect to
Debt issued by it to finance the purchase of such Equity Interests,
plus (D) the amount by which consolidated Debt of AK Steel is reduced
on Holding's balance sheet upon the conversion or exchange (other than
by a Subsidiary), subsequent to the date on which the Securities were
originally issued, of any Debt of AK Steel or any of its Subsidiaries
convertible or exchangeable for Equity Interests (other than
Redeemable Equity Interests or Exchangeable Equity Interests) of AK
Steel (less the amount of any cash, or other property, distributed by
AK Steel or any of its Subsidiaries upon such conversion or exchange).
(b) So long as no Default shall have occurred and be continuing (or
would result therefrom), the provisions of this Section 4.7 shall not prohibit
the following:
(i) any purchase or redemption of Equity Interests of Holding or
Subordinated Obligations made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Equity Interests of Holding (other
than Redeemable Equity Interests or Exchangeable Equity Interests and other
than Equity Interests issued or sold to a Subsidiary or an employee stock
ownership plan); provided, however, that (1) such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments
and (2) the Net Cash Proceeds from such sale shall be excluded from
subsections (a)(v)(3)(B) and (a)(v)(3)(C) of this Section 4.7;
(ii) any purchase or redemption of Subordinated Obligations
(other than Redeemable Equity Interests) made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Debt of AK Steel
other than to a Subsidiary; provided, however, that such Debt (1) shall be
subordinated to the Securities to at least the same extent as the
Subordinated Obligations so exchanged, purchased or redeemed, (2) shall
have a Stated Maturity later than the Stated Maturity of the Securities and
(3) shall have an Average Life greater than the remaining Average Life of
the Securities; provided further, however, that such purchase or redemption
shall be excluded in the calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations
from Net Available Cash to the extent permitted under Section 4.10 hereof;
provided, however, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
if at such date of declaration such dividend would have complied with this
Section 4.7; provided, however, that at the time of payment of such
dividend, no Default shall have occurred
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and be continuing (or would result therefrom); provided further, however,
that such dividend shall be included in the calculation of the amount of
Restricted Payments;
(v) any repurchase by Holding of employee stock granted under an
employee stock option plan; provided, however, that the aggregate amount of
such repurchase in any calendar year shall not exceed $1.0 million per
employee and the aggregate amount of all repurchases in any calendar year
shall not exceed $5.0 million (it being understood that the excess of any
such amounts permitted to be expended under this subsection (v) during any
calendar year over the amount actually expended during such period shall
not be carried forward); provided further, however, that such repurchase
shall be included in the calculation of the amount of Restricted Payments;
or
(vi) any purchase, repurchase, redemption, defeasance or other
acquisition by any Non-Recourse Subsidiary of Non-Recourse Debt of such
Non-Recourse Subsidiary; provided, however, that the amount of such
purchase, repurchase, redemption, defeasance or other acquisition shall be
excluded in the calculation of the amount of Restricted Payments.
(c) So long as none of the conditions described in clause (1) or (2)
of subsection (a) hereof exists, the foregoing limitations on Restricted
Payments shall not prohibit the declaration and payment of one or more dividends
on or before December 31, 1998 in an aggregate amount not to exceed $50.0
million; provided, however, that all such dividends shall be excluded in the
-------- -------
calculation of the amount of Restricted Payments.
SECTION 4.8. Limitation on Issuance and Sale of Equity Interests of
------------------------------------------------------
Subsidiaries. AK Steel shall not permit any Subsidiary to issue or sell any
- ------------
Equity Interests to any Person, or permit any Person, in either case, other than
AK Steel and its Subsidiaries, to own or hold an interest, other than any
interest owned or held on the date on which the Securities were originally
issued by a Person other than AK Steel and its Subsidiaries, in any Equity
Interests, of any Subsidiary (other than a Non-Recourse Subsidiary or a JV
Subsidiary); provided, however, that the foregoing limitation shall not apply to
(a) the sale of all but not less than all of the Equity Interests of any
Subsidiary made in accordance with Section 4.10 hereof, (b) issuances of
Preferred Equity Interests permitted pursuant to subsections (c), (e) and (g) of
Section 4.6 hereof, and (c) the ownership or holding of an interest by any
Person, other than AK Steel and its Subsidiaries, in any Equity Interests of any
Subsidiary issued pursuant to subsection (b) of this Section 4.8.
SECTION 4.9. Limitation on Restrictions on Distributions from
------------------------------------------------
Subsidiaries. (a) AK Steel shall not, and shall not permit any Subsidiary to,
- ------------
create or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary to (i) pay dividends or make any
other distributions on its Equity Interests or pay any Debt or other obligation
owed to AK Steel or any Subsidiary, (ii) make any Investment in AK Steel or any
Subsidiary or (iii) transfer any of its property or assets to AK Steel or any
Subsidiary.
(b) Notwithstanding the foregoing, AK Steel may, and may permit any
Subsidiary of AK Steel to, suffer to exist any such encumbrance or restriction:
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(i) pursuant to an agreement in effect at or entered into on the
date on which the Securities were originally issued;
(ii) with respect to a Subsidiary pursuant to an agreement
relating to any Debt issued by such Subsidiary on or prior to the date on
which such Subsidiary became a Subsidiary (other than Debt issued as
consideration in, or to provide all or any portion of the funds utilized to
consummate, the transaction or series of related transactions pursuant to
which such Subsidiary became a Subsidiary) and outstanding on such date;
(iii) pursuant to an agreement effecting a refinancing of Debt
issued pursuant to an agreement referred to in subsection (i) or (ii) of
this Section 4.9(b) or contained in any amendment to an agreement referred
to in subsection (i) or (ii) of this Section 4.9(b); provided, however,
that the encumbrances and restrictions contained in any such refinancing
agreement or amendment are no less favorable to the Holders of Securities
than encumbrances and restrictions contained in such agreements;
(iv) consisting of customary nonassignment provisions in leases
governing leasehold interests to the extent such provisions restrict the
transfer of the lease;
(v) in the case of subsection (a)(iii) of this Section 4.9,
restrictions contained in security agreements securing Debt of a Subsidiary
otherwise permitted under this Indenture, to the extent such restrictions
restrict the transfer of the property subject to such security agreements;
or
(vi) relating to a Non-Recourse Subsidiary.
SECTION 4.10. Limitation on Sales of Assets and Equity Interests of
-----------------------------------------------------
Subsidiaries. (a) AK Steel shall not, and shall not permit any Subsidiary
- ------------
(other than Non-Recourse Subsidiaries) to, make any Asset Disposition unless:
(i) AK Steel or such Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the Fair Market Value, as
determined in good faith by the Board of Directors of Holding (including as
to the value of all non-cash consideration), of the shares and assets
subject to such Asset Disposition and at least 75% of such consideration is
in the form of cash or Cash Equivalents; and
(ii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by AK Steel or such Subsidiary, as the case
may be, (1) first, to the extent AK Steel elects (or is required by the
terms of any Debt), to prepay, repay or purchase Debt (other than any
Redeemable Equity Interests or Non-Recourse Debt) of AK Steel, such
Subsidiary or a Wholly Owned Guarantor Subsidiary (in each case other than
Debt owed to AK Steel or an Affiliate of AK Steel) within 60 days from the
later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (2) second, to the extent of the balance of such Net
Available Cash after application in accordance with subsection (a)(ii)(1)
of this Section 4.10, at AK Steel's election, to the investment by AK Steel
or such Subsidiary or any Wholly Owned Guarantor Subsidiary
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<PAGE>
in assets to replace the assets that were the subject of such Asset
Disposition or an asset that (as determined by the Board of Directors of
Holding) will be used in the business of AK Steel and the Wholly Owned
Guarantor Subsidiaries existing on the date on which the Securities were
originally issued or in businesses reasonably related thereto, in each case
within the later of one year from the date of such Asset Disposition or the
receipt of such Net Available Cash; and (3) third, to the extent of the
balance of such Net Available Cash after application in accordance with
subsections (a)(ii)(1) and (2) of this Section 4.10, to make an offer (the
"Offer") to purchase Securities at par in accordance with the procedures
-----
set forth in subsection (d) of this Section 4.10; provided, however, that
in connection with any prepayment, repayment or purchase of Debt pursuant
to subsection (a)(ii)(1) of this Section 4.10, AK Steel shall cause the
related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
(b) Notwithstanding the requirement in subsection (a)(i) of this
Section 4.10 that at least 75% of consideration consist of cash or Cash
Equivalents, AK Steel and its Subsidiaries may make one or more Asset
Dispositions for which the consideration, in addition to the non-cash
consideration permitted by such subsection, consists of or includes (i) non-cash
consideration, the aggregate Fair Market Value (as determined in good faith by
the Board of Directors of Holding) of which, for all Asset Dispositions made
after the date on which the Securities were originally issued, does not exceed
$10.0 million, and (ii) non-cash consideration, the aggregate Fair Market Value
(as determined in good faith by the Board of Directors of Holding) of which, for
all Asset Dispositions made after the date on which the Securities were
originally issued, does not exceed $50.0 million, consisting of the cancellation
of Debt of AK Steel or any Subsidiary existing on the date on which the
Securities were originally issued; provided, however, that in connection with
any such cancellation of Debt, AK Steel or such Subsidiary shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal so canceled.
(c) Notwithstanding the provisions of subsection (a)(ii) of this
Section 4.10, in the event that the Net Available Cash resulting from any Asset
Disposition is less than $25.0 million, the application of an amount equal to
such Net Available Cash in accordance with this Section 4.10 may be deferred
until such time as such Net Available Cash from any prior or subsequent Asset
Dispositions not otherwise applied in accordance with this Section 4.10, is at
least equal to $25.0 million. In the event that the Net Available Cash
resulting from any Asset Disposition, after giving effect to subsections
(a)(ii)(1) and (2) of this Section 4.10, is less than $10.0 million, the
application of such amount equal to such Net Available Cash to make the Offer to
purchase Securities in accordance with subsection (a)(ii)(3) of this Section
4.10 may be deferred until such time as such Net Available Cash, together with
Net Available Cash from any prior or subsequent Asset Dispositions not otherwise
applied in accordance with this Section 4.10, is at least equal to $10.0
million. Pending application of Net Available Cash pursuant to this Section
4.10, such Net Available Cash shall be invested in Cash Equivalents. To the
extent any portion of the amount of Net Available Cash remains after compliance
with this Section 4.10, and provided that all Holders of Securities have been
given the opportunity to tender their Securities for repurchase as provided in
subsection (a)(ii)(3) of this Section 4.10, AK Steel may use such remaining
amount for general corporate purposes.
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(d)(i) Promptly, and in any event within 90 days after the occurrence
of an Asset Disposition requiring AK Steel to offer to purchase Securities
pursuant to the Offer, AK Steel shall be obligated to deliver to the Trustee and
send, by first-class mail to each Holder, a written notice stating that the
Holder may elect to have his Securities purchased by AK Steel either in whole or
in part (subject to prorationing as hereinafter described in the event the Offer
is oversubscribed) in integral multiples of $1,000 of principal amount, at the
applicable purchase price. The notice shall specify a purchase date not less
than 30 days nor more than 60 days after the date of such notice (the "Purchase
--------
Date") and shall contain information concerning the business of AK Steel which
- ----
AK Steel in good faith believes will enable such Holders to make an informed
decision (which at a minimum will include (1) the most recently filed Annual
Report on Form 10-K (including audited consolidated financial statements) of
Holding, the most recent subsequently filed Quarterly Report on Form 10-Q and
any Current Report on Form 8-K of Holding filed subsequent to such Quarterly
Report, other than Current Reports describing Asset Dispositions otherwise
described in the offering materials (or corresponding successor reports), (2) a
description of material developments in the AK Steel's business subsequent to
the date of the latest of such Reports, and (3) if material, appropriate pro
forma financial information and all instructions and materials necessary to
tender Securities pursuant to the Offer, together with the information contained
in subsection (d)(iii) of this Section 4.10.
(ii) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided in subsection (d)(i) of this Section 4.10,
AK Steel shall deliver to the Trustee an Officers' Certificate as to (1) the
amount of the Offer (the "Offer Amount"), (2) the allocation of the Net
------------
Available Cash from the Asset Dispositions pursuant to which such Offer is being
made and (3) the compliance of such allocation with the provisions of subsection
(a) of this Section 4.10. On such date, AK Steel shall irrevocably deposit with
the Trustee or with the Paying Agent (or, if AK Steel or a domestically
incorporated Wholly Owned Subsidiary is acting as the Paying Agent, segregate
and hold in trust) funds in an amount equal to the Offer Amount to be held for
payment in accordance with the provisions of this Section 4.10. The amount so
deposited, at the option of, and pursuant to the specific written direction of,
AK Steel, may be invested in Cash Equivalents the maturity date of which is not
later than the Purchase Date. AK Steel shall be entitled to any interest or
dividends accrued, earned or paid on such Cash Equivalents. Upon the expiration
of the period for which the Offer remains open (the "Offer Period") AK Steel
------------
shall deliver to the Trustee the Securities or portions thereof which have been
properly tendered to and are to be accepted by AK Steel. The Trustee shall, on
the Purchase Date, mail or deliver payment to each tendering Holder in the
amount of the purchase price. In the event that the aggregate purchase price of
the Securities delivered by AK Steel to the Trustee is less than the Offer
Amount, the Trustee shall deliver the excess to AK Steel promptly after the
expiration of the Offer Period.
(iii) Holders electing to have a Security purchased will be required
to surrender the Security, with an appropriate form on the back of the Security
entitled "Option of Holder to Elect Purchase" duly completed, to AK Steel at the
address specified in the notice at least 10 Business Days prior to the Purchase
Date. Holders will be entitled to withdraw their election if AK Steel receives
not later than three Business Days prior to the Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Security which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Security
purchased. If at the expiration of the Offer Period the
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purchase price of Securities surrendered by Holders exceeds the Offer Amount, AK
Steel shall select the Securities to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by AK Steel so that only Securities in
denominations of $1,000, or integral multiples thereof, shall be purchased).
Holders whose Securities are purchased only in part will be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered. AK Steel shall promptly execute, and the Guarantors
shall promptly execute their Guarantees to be endorsed thereon and thereafter
the Trustee shall promptly authenticate and mail or make available for delivery
to such Holders a new Security equal in principal amount to any unpurchased
portion of the Security surrendered. Any Security not accepted for payment
shall be promptly mailed or delivered by AK Steel to the Holder thereof. AK
Steel shall publicly announce the results of the Offer on or as soon as
practicable after the Purchase Date.
(iv) At the time AK Steel delivers Securities to the Trustee which
are to be accepted for purchase, AK Steel will also deliver an Officers'
Certificate stating that such Securities are to be accepted by AK Steel pursuant
to and in accordance with the terms of this Section 4.10. A Security shall be
deemed to have been accepted for purchase at the time the Trustee, directly or
through an agent, mails or makes available for delivery payment therefor to the
surrendering Holder.
(e) AK Steel 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 this
Section 4.10.
SECTION 4.11. Limitation on Transactions with Affiliates. AK Steel
------------------------------------------
shall not, and shall not permit any Subsidiary to, conduct any business or enter
into any transaction or series of similar transactions (including the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of AK Steel or any legal or beneficial owner of 5% or more of any
class of Equity Interests of Holding or with an Affiliate of any such owner
(other than a Wholly Owned Subsidiary or any employee stock ownership plan for
the benefit of AK Steel or a Subsidiary's employees) unless the terms of such
business, transaction or series of transactions are (a) set forth in writing,
(b) not less favorable to AK Steel or such Subsidiary, as the case may be, than
terms that would be obtainable at the time for a comparable transaction or
series of similar transactions in arm's-length dealings with an unrelated third
Person, (c) if such business or transaction or series of transactions involves
in excess of (i) $5.0 million, the Board of Directors of Holding has, by
resolution, determined in good faith that such business or transaction or series
of transactions meets the criteria set forth in subsection (b) of this Section
4.11, and (ii) $25.0 million and as to which there are no disinterested
directors, AK Steel has obtained an opinion of a nationally recognized expert
with experience in appraising the terms and conditions of the type of business
or transaction or series of transactions stating that such business or
transaction or series of transactions is fair (from a financial point of view)
to AK Steel or such Subsidiary, as the case may be; provided, however, that the
provisions of this Section 4.11 do not apply to performance of contractual
obligations with respect to Eveleth Mines existing as of the date of this
Indenture.
SECTION 4.12. Limitation on Liens. AK Steel shall not, and shall not
-------------------
permit any Subsidiary to, create or permit to exist any Lien upon any of its
property or assets, now owned or hereafter acquired, securing any obligation
unless concurrently with the creation of
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such Lien effective provision is made to secure the Securities equally and
ratably with such obligation for so long as such obligation is so secured;
provided, that if such obligation is a Subordinated Obligation, the Lien
securing such obligation shall be subordinated and junior to the Lien securing
the Securities with the same or lesser relative priority as such Subordinated
Obligation shall have with respect to the Securities. The preceding restriction
shall not require AK Steel or any Subsidiary to equally and ratably secure the
Securities if the Lien consists of the following:
(a) Liens created by this Indenture, Liens existing as of the date on
which the Securities were originally issued and Liens to secure Debt in
respect of AK Steel's Senior Secured Notes Due 2004 on the Pledged Assets,
the Pledged Assets Site and the other Mortgaged Property (each as defined
in the Note Purchase Agreement dated as of December 17, 1996 among AK
Steel, Holding and the Purchasers listed in Schedule A thereto, as in
effect on the date the Securities were originally issued);
(b) Permitted Liens;
(c) Liens to secure Debt issued by AK Steel for the purpose of
financing all or a part of the purchase price of assets or property
acquired or constructed in the ordinary course of business after the date
on which the Securities were originally issued; provided, however, that (i)
the aggregate principal amount (or accreted value in the case of Debt
issued at a discount) of Debt so issued shall not exceed the lesser of cost
or Fair Market Value, as determined in good faith by the Board of Directors
of Holding, of the assets or property so acquired or constructed, (ii)
either (1) the Debt secured by such Liens shall have been permitted to be
issued under subsection (d) of Section 4.5 hereof or (2) additional Debt
secured by such Liens, at the time of determination on a pro forma basis,
would not exceed, in the case of Normal Replacement Assets, 50%, or in the
case of Special Assets, 100%, of the aggregate principal amount of Debt
which AK Steel would have been permitted to issue at such time under the
Consolidated EBITDA Coverage Ratio as set forth in the first paragraph of
Section 4.5 hereof at an interest rate equal to the rate of interest on the
additional Debt to be secured by such Liens and (iii) such Liens shall not
encumber any other assets or property of AK Steel or any of its
Subsidiaries other than such assets or property or any improvement on such
assets or property and shall attach to such assets or property within 90
days of the construction or acquisition of such assets or property;
(d) Liens on the assets or property of a Subsidiary existing at the
time such Subsidiary became a Subsidiary and not issued as a result of (or
in connection with or in anticipation of) such Subsidiary becoming a
Subsidiary; provided, however, that such Liens do not extend to or cover
any other property or assets of AK Steel or any of its other Subsidiaries;
(e) Liens on the Inventory or Accounts Receivable of AK Steel or any
Significant Subsidiary that is a Guarantor Subsidiary securing Debt under
any Permitted Credit Facility; provided, that any Lien on Intangible
Property shall limit the rights of the
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<PAGE>
holder of such Lien to the use of such Intangible Property to manufacture,
process and sell the Inventory with respect to which such holder has a
Lien;
(f) Liens securing industrial revenue or pollution control bonds
issued by AK Steel; provided, however, that (i) the aggregate principal
amount of Debt secured by such Liens shall not exceed the lesser of cost or
Fair Market Value, as determined in good faith by the Board of Directors of
Holding, of the assets or property so financed, and (ii) such Liens do not
encumber any other property or assets of AK Steel or any of its
Subsidiaries;
(g) Liens securing Debt issued to refinance Debt which has been
secured by a Lien permitted under this Indenture and is permitted to be
refinanced under this Indenture; provided, however, that such Liens do not
extend to or cover any property or assets of AK Steel or any of its
Subsidiaries not securing the Debt so refinanced, and the principal amount
(or accreted value) of the Debt so secured is not increased except as
otherwise permitted pursuant to this Indenture;
(h) Liens on the Equity Interests, assets or property of a Non-
Recourse Subsidiary securing Non-Recourse Debt; or
(i) Liens securing Debt which, together with all other Debt secured
by Liens (excluding Debt secured by Liens permitted by subsections (a)
through (h) of this Section 4.12) at the time of determination do not
exceed $100.0 million; provided, however, that the Attributable Debt in
connection with Sale/Leaseback Transactions permitted under subsection (c)
of Section 4.13 hereof will be included in the determination and treated as
Debt secured by a Lien not otherwise permitted by subsections (a) through
(h) of this Section 4.12.
For the avoidance of ambiguity, it is understood that Liens referred
to in clauses (a) through (i) of this Section 4.12 may secure, in addition to
principal of and premium, if any, on Debt referred to in such clauses, interest
and all other obligations on and in respect of such Debt.
SECTION 4.13. Limitation on Sale/Leaseback Transactions. AK Steel
-----------------------------------------
shall not, and shall not permit any Subsidiary to, enter into, Guarantee or
otherwise become liable with respect to any Sale/Leaseback Transaction unless at
least one of the following conditions is satisfied:
(a) the lease is between AK Steel and a Wholly Owned Guarantor
Subsidiary, or between Wholly Owned Guarantor Subsidiaries; provided,
however, that upon either (i) the transfer or other disposition by such
Wholly Owned Guarantor Subsidiary of any such lease to a Person other than
AK Steel or another Wholly Owned Guarantor Subsidiary or (ii) the issuance,
sale, lease, transfer or other disposition of Equity Interests (including
by consolidation or merger) of such Wholly Owned Guarantor Subsidiary to a
Person other than AK Steel or another such Wholly Owned Guarantor
Subsidiary, the provisions of this subsection (a) shall no longer be
applicable to such lease and such lease shall be
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<PAGE>
deemed for purposes of this subsection (a) to constitute the entering into
of such Sale/Leaseback Transaction by the parties thereto;
(b) AK Steel or such Subsidiary under subsections (b) through (h) of
Section 4.12 hereof could create a Lien on the property to secure Debt in
an amount at least equal to the Attributable Debt in respect of such
Sale/Leaseback Transaction and AK Steel or such Subsidiary, as the case may
be, receives consideration at least equal to the Fair Market Value, as
determined in good faith by the Board of Directors of Holding, of the
property transferred;
(c) AK Steel or such Subsidiary could create a Lien under subsection
(i) of Section 4.12 hereof on the property to secure Debt at least equal to
the Attributable Debt in respect of such Sale/Leaseback Transaction and AK
Steel or such Subsidiary, as the case may be, receives consideration at
least equal to the Fair Market Value, as determined in good faith by the
Board of Directors of Holding, of the property transferred; or
(d) the Sale/Leaseback Transaction is treated as an Asset Disposition
and all the conditions of Section 4.10 hereof are satisfied with respect to
such Sale/Leaseback Transaction (without giving effect to the exceptions
for Net Available Cash in amounts less than $25.0 million or $10.0 million,
as set forth in subsection (c) of Section 4.10 hereof).
SECTION 4.14. Corporate Existence. Subject to Article 5 hereof,
-------------------
Holding and AK Steel will do or cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence, rights
(charter and statutory), licenses and franchises of Holding, AK Steel and each
Guarantor Subsidiary; provided, however, that this Section 4.14 shall not be
applicable to Holding if Holding merges into AK Steel and that, in such case,
all mention of Holding shall be deleted from this Section 4.14..
SECTION 4.15. Limitation on Lines of Business. AK Steel shall not,
-------------------------------
and shall not permit any of its Subsidiaries to, enter into any business, either
directly or through any Subsidiary, except for those businesses in which AK
Steel and its Subsidiaries were engaged on the date on which the Securities were
originally issued or businesses reasonably related thereto.
SECTION 4.16. Restrictive Covenant of Holding. Holding (a) shall not
-------------------------------
engage in any activities or hold any assets other than (i) holding 100% of the
Equity Interests of AK Steel and debt securities of AK Steel that were held by
Holding at the date of the Indenture and (ii) those activities incidental to
maintaining its status as a public company, and (b) it will not incur any
liabilities other than liabilities relating to its Guarantees of the Securities,
any Permitted Credit Facility, any other Debt of AK Steel or any Debt of any
Significant Subsidiary that is Guaranteed by AK Steel and any other obligations
or liabilities incidental to holding 100% of the Equity Interests of AK Steel
and those liabilities incidental to its status as a public company; provided,
however, that, for purposes of this Section 4.16, the term "liabilities" shall
not include any liability for the declaration and payment of dividends on any
Equity Interests of
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Holding; and provided further, however, that if Holding merges into AK Steel,
this Section 4.16 shall no longer be applicable.
SECTION 4.17. Change in Control. (a) Upon the occurrence of a
-----------------
Change in Control, each Holder of Securities shall have the right to require AK
Steel to repurchase such Holder's Securities in whole or in part in integral
multiples of $1,000 at a purchase price (the "Change in Control Payment Price")
-------------------------------
in cash in an amount equal to 101% of the principal amount of such Securities
plus accrued and unpaid interest thereon, if any, to and including the Change in
Control Payment Date (as defined below), in accordance with the procedures set
forth in this Section 4.17 (a "Change in Control Offer").
-----------------------
(b) Within 30 days following any Change in Control, AK Steel shall
send by first-class mail, postage prepaid, to the Trustee and to each Holder of
the Securities, at his address appearing in the Security register, a notice
stating:
(i) that a Change in Control has occurred and that such Holder
has the right to require AK Steel to repurchase such Holder's Securities in
whole or in part in integral multiples of $1,000 at the Change in Control
Purchase Price;
(ii) the circumstances and relevant facts regarding such Change
in Control (including but not limited to information with respect to pro
---
forma historical income, cash flow and capitalization after giving effect
-----
to such Change in Control);
(iii) a payment date (the "Change in Control Payment Date")
------------------------------
which shall be a date no earlier than 45 days nor later than 60 days from
the date such notice is mailed or such later date as may be necessary for
AK Steel to comply with the requirements under the Exchange Act;
(iv) that any Security not tendered will continue to accrue
interest; and
(v) the instructions a Holder must follow in order to have its
Securities repurchased in accordance with subsection (d) of this Section
4.17.
(c) Holders electing to have Securities purchased will be required to
surrender such Securities with an appropriate form on the back of the Security
entitled "Option of Holder to Elect Purchase" duly completed to AK Steel at the
address specified in the notice at least three Business Days prior to the Change
in Control Payment Date. Any Holder will be entitled to withdraw his or her
election if AK Steel receives, not later than three Business Days prior to the
Change in Control Payment Date, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities delivered for
purchase by the Holder as to which his or her election is to be withdrawn and a
statement that such Holder is withdrawing his or her election to have such
Securities purchased. Holders whose Securities are purchased only in part will
be issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered.
(d) On the Change in Control Payment Date, AK Steel shall (i) accept
for payment Securities or portions thereof tendered pursuant to the Change in
Control Offer, (ii)
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deposit with the Paying Agent money 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 stating the
Securities or portions thereof tendered to AK Steel. The Paying Agent shall
promptly mail to the Holder of Securities so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail to
such Holders a new Security equal in principal amount to any unpurchased portion
of the Security surrendered.
(e) AK Steel will comply with the applicable tender offer rules,
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws or regulations in connection with a Change in Control Offer.
SECTION 4.18. Compliance Certificate. (a) AK Steel and the
----------------------
Guarantors shall deliver to the Trustee, within 90 days after the end of each
fiscal year, an Officers' Certificate, one of the signers of which shall be the
principal executive officer, principal financial officer or principal accounting
officer, stating whether or not to the best knowledge of the signers thereof AK
Steel or the Guarantors, as the case may be, has fulfilled all its obligations
hereunder, is not in default in the performance and observance of any of the
terms, and if AK Steel or the Guarantors, as the case may be, shall be in
default, specifying all such defaults and the nature and status thereof of which
they may have knowledge. For purposes of this Section 4.18, such compliance or
default shall be determined without regard to any period of grace or requirement
of notice provided under this Indenture.
(b) AK Steel, Holding and each Guarantor Subsidiary shall deliver to
the Trustee, as soon as possible and in any event within 10 days after AK Steel,
Holding or any Guarantor Subsidiary becomes aware or should reasonably become
aware of the occurrence of an Event of Default or an event which, with notice or
the lapse of time or both, would constitute an Event of Default, an Officers'
Certificate setting forth the details of such Event of Default or default, and
the action which AK Steel, Holding or any Guarantor Subsidiary proposes to take
with respect thereto.
SECTION 4.19. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, AK Steel, Holding and each Guarantor Subsidiary will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.
SECTION 4.20. Maintenance of Properties. AK Steel will cause all
-------------------------
properties owned by AK Steel or any Subsidiary or used or held for use in the
conduct of the business of AK Steel or any Subsidiary to be maintained and kept
in good condition, repair and working order (other than where failure to do so
would be immaterial or in the case of ordinary wear and tear) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of AK Steel may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent AK Steel from
discontinuing the maintenance of any of such properties if such discontinuance
is, in the judgment of AK Steel, desirable in the conduct of the business of AK
Steel or any Subsidiary and not disadvantageous in any material respect to the
Holders.
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SECTION 4.21. Insurance. AK Steel will at all times keep all of the
---------
properties of AK Steel and the Subsidiaries which are of an insurable nature
insured with insurers, believed by AK Steel to be responsible, or insured
through a program of self-insurance, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
ARTICLE 5
Successor Company
-----------------
SECTION 5.1. When AK Steel or any of its Subsidiaries May Merge or
-----------------------------------------------------
Transfer Assets. AK Steel shall not (a) consolidate with or merge with or into
- ---------------
any other Person, (b) permit any other Person to consolidate with or merge into
(i) AK Steel or (ii) any of its Subsidiaries in a transaction in which such
Subsidiary (or successor Person) remains (or becomes) a Subsidiary, (c) directly
or indirectly, transfer, convey, sell, lease or otherwise dispose of all or
substantially all of its properties and assets, (d) directly or indirectly, (i)
acquire Equity Interests or other ownership interests of any other Person, other
than as a Permitted Investment as defined in clause (e) of the definition of
"Permitted Investments", such that such Person becomes a Subsidiary or (ii)
purchase, lease or otherwise acquire all or substantially all of the property
and assets of any Person or any existing business (whether existing as a
separate entity, subsidiary, division, unit or otherwise) of any Person, or (e)
permit any of its Subsidiaries to enter into any such transaction unless:
(1) AK Steel or such Subsidiary shall be the continuing entity or the
resulting, surviving or transferee Person (if not AK Steel or such
Subsidiary) shall be a Person organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
such Person shall expressly assume, by an indenture supplemental to this
Indenture, executed and delivered to the Trustee, all the obligations of AK
Steel or such Subsidiary, as the case may be, under the Securities and this
Indenture;
(2) immediately after giving effect to such transaction (and treating
any Debt that becomes an obligation of the resulting, surviving or
transferee Person or any Subsidiary as a result of such transaction as
having been issued by such Person or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction, on a pro
forma basis, AK Steel (or the resulting, surviving or transferee Person (if
not AK Steel)) would be able to issue at least $1.00 of Debt pursuant to
the Consolidated EBITDA Coverage Ratio set forth in the first paragraph of
Section 4.5 hereof;
(4) immediately after giving effect to such transaction, Holding
shall have Consolidated Net Worth which is not less than the Consolidated
Net Worth of Holding immediately prior to such transaction;
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<PAGE>
(5) each Guarantor, unless it is the other party to the transactions
described above, shall expressly confirm, by an indenture supplemental to
this Indenture, executed and delivered to the Trustee, that its Guarantee
shall apply to such Person's obligations under the Securities; and
(6) AK Steel shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indentures (if any)
comply with this Indenture;
provided, however, that subsections (3) and (4) of this Section 5.1 shall not
apply to (A) the consolidation or merger of any Wholly Owned Subsidiary with or
into any other Wholly Owned Subsidiary or AK Steel, (B) the transfer,
conveyance, sale, lease or other disposal (including any disposition by means of
a merger, consolidation or similar transaction) of all or substantially all of
the properties or assets of a Non-Recourse Subsidiary or a Subsidiary which is
not a Significant Subsidiary or (C) the merger of Holding into AK Steel.
If after the date on which the Securities were originally issued any
Person shall become a Subsidiary (other than a Non-Recourse Subsidiary), such
Person shall (a) unconditionally guarantee, by an indenture supplemental to this
Indenture, executed and delivered to the Trustee, all of AK Steel's obligations
under the Securities on the terms set forth in this Indenture and (b) deliver to
the Trustee an Opinion of Counsel stating that such supplemental indenture has
been duly authorized and constitutes the enforceable obligation of such Person.
SECTION 5.2. Successor Corporation Substituted. Upon any
---------------------------------
consolidation or merger, or any transfer, conveyance, sale, lease or other
disposition of all or substantially all of the assets of AK Steel or any
Subsidiary, in accordance with Section 5.1 hereof, the successor corporation
formed by such consolidation or into or with which AK Steel or any Subsidiary is
merged or to which such transfer, conveyance, sale, lease or other disposition
is made shall succeed to, and be substituted for, and may exercise every right
and power of, AK Steel or such Subsidiary, as the case may be, under this
Indenture and the Securities with the same effect as if such successor Person
has been named as AK Steel or such Subsidiary herein, and thereafter, except in
the case of a transfer, conveyance, sale, lease or other disposition, the
predecessor Person shall be released from all obligations and covenants under
this Indenture.
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.1. Events of Default. "Event of Default", wherever used
----------------- ----------------
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
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(a) default in any payment of interest on any Security when the same
becomes due and payable, and such default continues for a period of 30
days;
(b) default in the payment of the principal of any Security when the
same becomes due and payable at its Stated Maturity, upon redemption, upon
declaration or otherwise;
(c) failure to redeem or purchase Securities when required pursuant
to this Indenture and the Securities;
(d) failure to (i) comply with the provisions of Section 5.1 hereof,
(ii) make or consummate an Offer in accordance with the provisions of
Section 4.10 hereof or (iii) make or consummate a Change in Control Offer
in accordance with the provisions of Section 4.17 hereof;
(e) failure to observe or comply with any of the agreements in the
Securities or this Indenture (other than those referred to in subsection
(a), (b), (c) or (d) of this Section 6.1), which continues for 60 days
after there has been given to AK Steel by the Trustee or to AK Steel and
the Trustee by the Holders of at least 25% in principal amount of
Securities then outstanding a written notice specifying such failure;
(f) Debt of AK Steel or any Significant Subsidiary is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default, and the total amount of such Debt
unpaid or accelerated exceeds $10.0 million or its foreign currency
equivalent;
(g) any Senior Note Guarantee issued by Holding or any Significant
Subsidiary ceases to be in full force and effect other than in accordance
with its terms, or Holding or any Significant Subsidiary or any Person
acting on behalf of Holding or such Significant Subsidiary shall deny or
disaffirm its obligations under its Senior Note Guarantee;
(h) AK Steel or any Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) admits in writing its inability to pay debts as the same
become due;
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(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against AK Steel, Holding or any
Significant Subsidiary in an involuntary case,
(ii) appoints a Custodian of AK Steel, Holding or any
Significant Subsidiary or for all or any substantial part of its
property, or
(iii) orders the liquidation of AK Steel, Holding or any
Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days; or
(j) any judgment or decree for the payment of money in excess of
$10.0 million is rendered against Holding, AK Steel or any Significant
Subsidiary and is not discharged and either (i) an enforcement proceeding
has been commenced by any creditor upon such judgment or decree or (ii)
there is a period of 60 days following such judgment during which such
judgment or decree is not discharged, waived or the execution thereof
stayed.
The term "Custodian" means any receiver, trustee, assignee, liquidator
---------
or similar official under any Bankruptcy Law.
SECTION 6.2. Acceleration. If an Event of Default shall occur and be
------------
continuing, either the Trustee or the Holders of at least 25% in principal
amount of the Securities then outstanding may accelerate the maturity of all
Securities and thereupon the principal of, premium, if any, and any accrued and
unpaid interest on the Securities shall become due and payable immediately;
provided, that if any Event of Default specified in subsection (h) or (i) of
Section 6.1 hereof occurs, such amount shall become immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the then outstanding
Securities by notice to the Trustee may rescind such acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all Events of Default, other than the nonpayment of accelerated principal
of, premium, if any, and interest on Securities, have been cured or waived as
provided in this Indenture. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.3. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy 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.
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 Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
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SECTION 6.4. Waiver of Past Defaults. Holders of at least a majority
-----------------------
in principal amount of the then outstanding Securities by notice to the Trustee
may waive an existing Default or Event of Default and its consequences except
(a) a Default or Event of Default in the payment of the principal of or interest
on any Security or (b) a Default or Event of Default in respect of a provision
that under Section 9.2 hereof cannot be amended without the consent of each
Holder affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.
SECTION 6.5. Control by Majority. The Holders of a majority in
-------------------
principal amount of the then 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 the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture,
that the Trustee determines is unduly prejudicial to the rights of other
Securityholders or would involve the Trustee in personal liability; provided,
however, that the Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.
SECTION 6.6. Limitation on Suits. No Holder of any Security will
-------------------
have any right to pursue any remedy with respect to this Indenture or the
Securities unless:
(a) such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the Securities
shall have made written request to the Trustee to pursue the remedy;
(c) such Holder shall have offered the Trustee reasonable indemnity
against any liability;
(d) the Trustee shall have failed to comply with the request within 60
days after the receipt of such request and the offer of indemnity; and
(e) no written direction inconsistent with such request shall have
been given to the Trustee during such 60-day period by the Holders of at
least a majority in principal amount of the Securities.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder of a Security to
receive payment of principal and interest on the Securities held by such Holder,
on or after the respective due dates expressed in the Securities, 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.
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SECTION 6.8. Collection Suit by Trustee. If an Event of Default
--------------------------
specified in subsection (a) or (b) of Section 6.1 hereof occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against AK Steel for the whole amount of principal and interest
remaining unpaid (together with interest on such unpaid interest to the extent
lawful) on the Securities and the amounts provided for in Section 7.7 hereof.
SECTION 6.9. 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 and the Securityholders
allowed in any judicial proceedings relative to AK Steel, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7 hereof.
SECTION 6.10. Priorities. If the Trustee collects any money pursuant
----------
to this Article 6, it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.7 hereof;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
THIRD: to AK Steel.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, AK Steel shall mail to each Securityholder and the Trustee a notice
that states the record date, the payment and amount to be paid.
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 a 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 and expenses, 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 6.7 hereof, or
a suit by Holders of more than 10% in principal amount of the then outstanding
Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. AK Steel (to the
--------------------------------
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever
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claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and AK Steel (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE 7
Trustee
-------
SECTION 7.1. Duties of Trustee. (a) If an Event of Default has
-----------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on 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,
in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or other
facts stated therein).
(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:
(i) this subsection (c) does not limit the effect of subsection
(b) of this Section 7.1;
(ii) 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; and
(iii) 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 Section 6.5 hereof.
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(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections (a), (b) and (c) of this Section 7.1.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with AK Steel.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur 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 to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.1 and to the provisions of the TIA.
SECTION 7.2. Rights of Trustee. (a) The Trustee may rely on 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.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through 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 it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel with respect to legal matters relating to this
Indenture and the Securities shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered by
it hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(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 or direction of
any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
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(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness 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 to examine the
books, records and premises of AK Steel, personally or by agent or attorney.
SECTION 7.3. 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 AK Steel, Holding or their Affiliates with the same
rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-
registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11 hereof.
SECTION 7.4. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for AK Steel's use
of the proceeds from the Securities, and it shall not be responsible for any
statement of AK Steel in this Indenture or in any document issued in connection
with the sale of the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.5. Notice of Defaults. If a Default occurs and is
------------------
continuing and if it is known to the Trustee, the Trustee shall mail to each
Securityholder notice of the Default within 90 days after it occurs. Except in
the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security), the Trustee may withhold the notice if and so long as a committee of
its Trust Officers in good faith determines that withholding the notice is in
the interests of Securityholders.
SECTION 7.6. Reports by Trustee to Holders. If required by TIA (S)
-----------------------------
313(a), as promptly as practicable after each March 15 beginning with the March
15 following the date on which the Securities were originally issued, and in any
event prior to May 15 in each year, the Trustee shall mail to each
Securityholder a brief report dated as of March 15 that complies with such TIA
(S) 313(a). The Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. AK Steel agrees to notify promptly the Trustee whenever
the Securities become listed on any stock exchange and of any delisting thereof.
SECTION 7.7. Compensation and Indemnity. AK Steel shall pay to the
--------------------------
Trustee from time to time such compensation as AK Steel and the Trustee shall
from time to time agree in writing for its services. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. AK Steel shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the
Trustee's agents, counsel,
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accountants and experts. AK Steel shall indemnify each of the Trustee or any
predecessor Trustee against any and all loss, liability, damage, claim or
reasonable expense (including attorneys' fees and expenses) incurred by it in
connection with the acceptance and administration of this trust and the
performance of its duties hereunder. The Trustee shall notify AK Steel promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify AK Steel shall not relieve AK Steel of its obligations hereunder. AK
Steel shall defend the claim and the Trustee may have separate counsel and AK
Steel shall pay the fees and expenses of such counsel. AK Steel need not
reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own willful misconduct, negligence
or bad faith.
To secure AK Steel's payment obligations in this Section 7.7, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
AK Steel's payment obligations pursuant to this Section 7.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a Default specified in subsection (h) or (i) of Section 6.1
hereof with respect to AK Steel, Holding or a Significant Subsidiary, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.8. Replacement of Trustee. The Trustee may resign at any
----------------------
time by so notifying AK Steel. The Holders of at least a majority in principal
amount of the Securities may remove the Trustee by so notifying the Trustee and
may appoint a successor Trustee. AK Steel shall remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee otherwise 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 Trustee in such event being referred to
herein as the retiring Trustee), AK Steel shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to AK Steel. Thereupon 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. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.7 hereof.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, AK Steel or the
Holders of at least a majority in principal amount of the 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 hereof, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.8, AK Steel's obligations under Section 7.7 hereof shall continue for
the benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture and any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
-----------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee 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. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of AK Steel are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
-------------------------------------------------
Trustee shall comply with TIA (S)311(a), excluding any creditor relationship
listed in TIA (S)311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.1. Discharge of Liability on Securities; Defeasance. (a)
------------------------------------------------
When (i) AK Steel delivers to the Trustee all outstanding Securities (other than
Securities replaced pursuant to Section 2.7 hereof) for cancellation or (ii) all
outstanding Securities have become due and payable and AK Steel irrevocably
deposits with the Trustee funds sufficient to pay at
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maturity all outstanding Securities, including interest thereon (other than
Securities replaced pursuant to Section 2.7 hereof), and if in either case AK
Steel pays all other sums payable hereunder by AK Steel, then this Indenture
shall, subject to subsection (c) of Section 8.1 hereof and Section 8.6 hereof,
cease to be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of AK Steel accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of AK Steel.
(b) Subject to subsection (c) of this Section 8.1 and Sections 8.2 and
8.6 hereof, AK Steel at any time may terminate (i) all its obligations under the
Securities and this Indenture ("legal defeasance option") or (ii) its
-----------------------
obligations under Sections 4.3, 4.5 through 4.14, 4.17 hereof and the operation
of subsections (e) (with respect to Sections 4.3 and 4.5 through 4.13 only) and
(d) of Section 6.1 hereof ("covenant defeasance option"). AK Steel may exercise
--------------------------
its legal defeasance option notwithstanding its prior exercise of its covenant
defeasance option.
If AK Steel exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If AK Steel
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default by AK Steel specified in subsection
(e) (insofar as it relates to compliance with Sections 4.3 and 4.5 through 4.13
only) or (d) of Section 6.1 hereof.
Upon satisfaction of the conditions set forth herein and upon request
of AK Steel, the Trustee shall acknowledge in writing the discharge of those
obligations that AK Steel terminates.
(c) Notwithstanding subsections (a) and (b) of this Section 8.1, AK
Steel's obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and
8.6 hereof shall survive until the Securities have been paid in full.
Thereafter, AK Steel's obligations only in Sections 7.7, 8.4 and 8.5 hereof
shall survive.
SECTION 8.2. Conditions to Defeasance. AK Steel may exercise its
------------------------
legal defeasance option or its covenant defeasance option only if:
(a) AK Steel irrevocably deposits in trust (the "defeasance trust")
----------------
with the Trustee money or U.S. Government Obligations for the payment of
principal of, premium, if any, and interest on the Securities to maturity
or redemption, as the case may be;
(b) AK Steel delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that
the payments of principal, premium, if any, and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in
such amounts (but, in the case of the legal defeasance option only, not
more than such amounts) as will be sufficient to pay principal, premium, if
any, and interest when due on all the Securities to maturity or redemption,
as the case may be;
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(c) 123 days pass after the deposit is made and during the 123-day
period no Default specified in subsection (h) or (i) of Section 6.1 hereof
with respect to AK Steel occurs which is continuing at the end of the
period;
(d) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(e) the deposit does not constitute a default under any other
agreement binding on AK Steel;
(f) AK Steel delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940, as amended;
(g) in the case of the legal defeasance option, AK Steel delivers to
the Trustee an Opinion of Counsel stating that (i) AK Steel has received
from, or there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date on which the Securities were originally
issued there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel
shall confirm that, the Securityholders will not recognize income, gain or
loss for Federal income tax purposes as a result of such 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 defeasance
had not occurred;
(h) in the case of the covenant defeasance option, AK Steel delivers
to the Trustee an Opinion of Counsel to the effect that the Securityholders
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; and
(i) AK Steel delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, AK Steel may make arrangements satisfactory
to the Trustee for the redemption of Securities at a future date in accordance
with Article 3 hereof.
SECTION 8.3. Application of Trust Money. The Trustee shall hold in
--------------------------
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of, premium, if any, and interest on the
Securities.
SECTION 8.4. Repayment to Company. The Trustee and the Paying Agent
--------------------
shall promptly turn over to AK Steel upon written request any excess money or
securities held by them at any time.
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Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to AK Steel upon request any money held by them for the
payment of principal, premium, if any, or interest that remains unclaimed for
two years, and, thereafter, Securityholders entitled to the money must look to
AK Steel for payment as general creditors.
SECTION 8.5. Indemnity for Government Obligations. AK Steel shall
------------------------------------
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited U.S. Government Obligations or the principal,
premium, if any, and interest received on such U.S. Government Obligations.
SECTION 8.6. Reinstatement. If the Trustee or Paying Agent is unable
-------------
to apply any money or U.S. Government Obligations in accordance with this
Article 8 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, AK Steel's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; provided, however, that, if AK
Steel has made any payment of interest on, premium, if any, or principal of any
Securities because of the reinstatement of its obligations, AK Steel 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 9
Amendments
----------
SECTION 9.1. Without Consent of Holders. AK Steel, the Guarantors
--------------------------
and the Trustee may amend this Indenture or the Securities without notice to or
consent of any Securityholder:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to comply with Article 5 hereof;
(c) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Internal Revenue Code of 1986, as amended, or in a
manner such that the uncertificated Securities are described in Section
163(f) (2) (B) of the Internal Revenue Code of 1986, as amended;
(d) to add guarantees with respect to the Securities;
(e) to add to the covenants of AK Steel or the Guarantors for the
benefit of the Holders or to surrender any right or power herein conferred
upon AK Steel or the Guarantors;
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<PAGE>
(f) to reflect the release of any Guarantor Subsidiary from its Senior
Note Guarantee, or the addition of any Subsidiary of AK Steel as a
Guarantor Subsidiary, in the manner provided by this Indenture;
(g) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA; or
(h) to make any change that does not adversely affect the rights of
any Securityholder.
After an amendment under this Section 9.1 becomes effective, AK Steel
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.1.
SECTION 9.2. With Consent of Holders. AK Steel, the Guarantors and
-----------------------
the Trustee may amend this Indenture or the Securities without notice to any
Securityholder but with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Securities. However,
without the consent of each Securityholder affected, an amendment may not:
(a) reduce the amount of Securities whose Holders must consent to an
amendment;
(b) reduce the rate of or extend the time for payment of interest on
any Security;
(c) reduce the principal amount of or extend the Stated Maturity of
any Security;
(d) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(e) change the currency of payment of any Security;
(f) make any change in the provisions concerning waiver of Defaults by
Holders of the Securities or the rights of Holders to receive payments of
principal or interest in Section 6.4 or 6.7 hereof;
(g) make any change in Section 4.17 hereof or the definition "Change
in Control"; or
(h) make any change in this Section 9.2.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
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<PAGE>
After an amendment under this Section 9.2 becomes effective, AK Steel
shall mail to Securityholders a notice briefly describing such amendment. The
failure to give such notice to all Securityholders, or any defect therein, shall
not impair or affect the validity of an amendment under this Section 9.2.
SECTION 9.3. Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents and Waivers. A
---------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
AK Steel may, but shall not be obligated to, fix a record date for the
purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.5. Notation on or Exchange of Securities. If an amendment
-------------------------------------
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 regarding the changed terms and return it to the
Holder. Alternatively, if AK Steel or the Trustee so determines, AK Steel 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 to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6. Trustee to Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and, subject to Section 7.1 hereof, shall be, fully protected in
relying upon, an Officers' Certificate and an Opinion of Counsel stating that
such amendment is authorized or permitted by this Indenture.
SECTION 9.7. Payment for Consent. Neither Holding, AK Steel, any
-------------------
Affiliate of Holding nor any Subsidiary shall, directly or indirectly, pay or
cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Securities
unless such consideration is offered to be paid or agreed to be paid
-54-
<PAGE>
to all Holders which so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver or agreement.
ARTICLE 10
Senior Note Guarantees
----------------------
SECTION 10.1. Unconditional Senior Note Guarantees. (a) Each
------------------------------------
Guarantor, which includes Holding and each Guarantor Subsidiary, hereby jointly
and severally unconditionally guarantees to each Holder of a Security
authenticated and delivered by the Trustee, and to the Trustee on behalf of such
Holder, the due and punctual payment and performance of the Obligations (the
"Senior Note Guarantees") and further agree to pay any and all expenses
- -----------------------
(including, without limitation, all fees and disbursements of counsel) which may
be paid or incurred by the Trustee or the Holders in enforcing their rights
under the Senior Note Guarantees. In case of the failure of AK Steel punctually
to perform or make any such payment, each Guarantor hereby jointly and severally
agrees to cause such payment and performance to be made punctually.
(b) Each Guarantor hereby jointly and severally agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of such Security or this Indenture, the absence of
any action to enforce the same, any exchange, or any release or amendment or
waiver of any term of any other Guarantee of, or any consent to departure from
any requirement of any other Guarantee of all or of any of the Securities, the
election by the Trustee or any of the Holders in any proceeding under Chapter 11
of the Bankruptcy Law of the application of Section 1111(b)(2) of the Bankruptcy
Law, any borrowing or grant of a security interest by AK Steel, as debtor-in-
possession, under Section 364 of the Bankruptcy Law, the disallowance, under
Section 502 of the Bankruptcy Law, of all or any portion of the claims of the
Trustee or any of the Holders for payment of any of the Securities, any waiver
or consent by the Holder of such Security or by the Trustee or either of them
with respect to any provisions thereof or of this Indenture, the obtaining of
any judgment against AK Steel or any action to enforce the same or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Guarantor hereby waives the benefits of diligence,
presentment, demand of payment, or exhausts any right or take any action against
AK Steel or any other Person, filing of claims with a court in the event of
insolvency or bankruptcy of AK Steel, any right to require a proceeding first
against AK Steel, protest or notice with respect to such Security or the Debt
evidenced thereby and all demands whatsoever, and covenants that this Senior
Note Guarantee will not be discharged except by complete performance of the
obligations contained in such Security and in this Senior Note Guarantee. Each
Guarantor hereby agrees that, in the event of a default in payment of principal
(or premium, if any) or interest on such Security, whether at their first
scheduled maturity, by acceleration, call for redemption, purchase or otherwise,
legal proceedings may be instituted by the Trustee on behalf of, or by, the
Holder of such Security, subject to the terms and conditions set forth in this
Indenture, directly against each Guarantor to enforce this Senior Note Guarantee
without first proceeding against AK Steel. Each Guarantor agrees that if, after
the occurrence and during the continuance of an Event of Default, the Trustee or
any of the Holders are prevented by applicable law from exercising their
respective rights to accelerate the maturity of
-55-
<PAGE>
the Securities, to collect interest on the Securities, or to enforce or exercise
any other right or remedy with respect to the Securities, such Guarantor agrees
to pay to the Trustee for the account of the Holders, upon demand therefor, the
amount that would otherwise have been due and payable had such rights and
remedies been permitted to be exercised by the Trustee or any of the Holders.
(c) Each Guarantor shall be subrogated to all rights of the Holders
of the Securities upon which its Guarantee is endorsed against AK Steel in
respect of any amounts paid by such Guarantor on account of such Security
pursuant to the provisions of its Senior Note Guarantee or this Indenture;
provided, however, that no Guarantor shall be entitled to enforce or to receive
any payments arising out of, or based upon, such right of subrogation until the
principal of (and premium, if any) and interest on all Securities issued
hereunder shall have been paid in full.
(d) Each Senior Note Guarantee shall remain in full force and effect
and continue to be effective should any petition be filed by or against AK Steel
for liquidation or reorganization, should AK Steel become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of AK Steel's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Securities,
is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee on the Securities, whether as a
"voidable preference," "fraudulent transfer," or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Securities shall,
to the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.
(e) Each Guarantor shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under its Senior Note Guarantee.
SECTION 10.2. Limitation of Guarantor's Liability. Each Guarantor
-----------------------------------
and, by its acceptance hereof, each Holder confirms that it is the intention of
all such parties that the guarantee by such Guarantor pursuant to its Guarantee
not constitute a fraudulent transfer or conveyance for purposes of any Federal,
state or foreign law. To effectuate the foregoing intention, the Holders and
each Guarantor hereby irrevocably agree that the obligations of each Guarantor
under its Guarantee shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee pursuant to subsection (e) of Section 10.1 hereof, result in the
obligations of such Guarantor under its Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under Federal, state or foreign law.
SECTION 10.3. Execution and Delivery of Senior Note Guarantees. To
------------------------------------------------
further evidence the Senior Note Guarantees set forth in Section 10.1 hereof,
each Guarantor and AK Steel hereby agree that a notation relating to such Senior
Note Guarantees substantially in the
-56-
<PAGE>
form of Exhibit B shall be endorsed on each Security authenticated and delivered
by the Trustee and executed by either manual or facsimile signature of an
Officer of each Guarantor.
A Senior Note Guarantee bearing the manual or facsimile signature of
individuals who were at any time the Officers of a Guarantor shall bind such
Guarantor, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of the Security on
which such Senior Note Guarantee is endorsed or did not hold such offices at the
date of such Senior Note Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Senior Note Guarantee
endorsed thereon on behalf of the Guarantor. Each Guarantor hereby jointly and
severally agrees that its Senior Note Guarantee set forth in Section 10.1 hereof
shall remain in full force and effect notwithstanding any failure to endorse a
Senior Note Guarantee on any Security.
SECTION 10.4. Addition of Guarantor. (a) For as long as any Senior
---------------------
Note Guarantees are required to remain in effect pursuant to the terms of this
Indenture, promptly but in no event later than 15 days following the date any
Person shall become a Subsidiary (other than a Non-Recourse Subsidiary) after
the date on which the Securities were originally issued, AK Steel shall cause
such Subsidiary to become a Guarantor Subsidiary with respect to the Securities
by executing and delivering to the Trustee (i) a supplemental indenture, in form
and substance satisfactory to the Trustee, which subjects such Person to the
provisions (including the representations and warranties) of this Indenture as a
Guarantor Subsidiary and (ii) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable obligation of such Person
(subject to such customary exceptions concerning creditors' rights and equitable
principles as may be acceptable to the Trustee in its discretion).
(b) AK Steel will cause any Subsidiary of AK Steel that is or becomes
a borrower under or guarantor of any Permitted Revolving Credit Facility to
become a Guarantor Subsidiary with respect to the Securities in accordance with
subsection (a) of this Section 10.4.
SECTION 10.5. Release of the Senior Note Guarantee. (a)
------------------------------------
Notwithstanding anything to the contrary contained in this Article 10, in the
event that (i) any Guarantor Subsidiary shall no longer be obligated to
guarantee any Debt under the Permitted Revolving Credit Facility, and (ii) no
Default or Event of Default shall have occurred and be continuing, then,
following compliance with the next following sentence, such Guarantor Subsidiary
shall be released from its obligations under this Indenture and the Senior Note
Guarantee of such Guarantor Subsidiary shall be of no further force or effect.
Upon delivery by AK Steel to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that the terms of this subsection (a) have been
satisfied with respect to any Guarantor Subsidiary, the Trustee shall execute
any documents reasonably required and reasonably acceptable in form and
substance to the Trustee to evidence the release of such Guarantor Subsidiary
from the obligations of its Senior Note Guarantee hereunder.
(b) Concurrently with any sale or other disposition (other than to
Holding or any Subsidiary of Holding) by way of merger, consolidation or
otherwise of all or substantially
-57-
<PAGE>
all the assets of a Guarantor Subsidiary or all the capital stock of a Guarantor
Subsidiary permitted by and in accordance with the terms of this Indenture, and
upon delivery by AK Steel to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made by
AK Steel in accordance with the provisions of this Indenture, the Trustee shall
execute any documents reasonably required and reasonably acceptable in form and
substance to the Trustee to evidence the release of such Guarantor Subsidiary
from the obligations under its Senior Note Guarantee. Any Guarantor Subsidiary
not released from its obligations under its Senior Note Guarantee endorsed on
the Securities and under this Article 10 shall remain liable for the Obligations
under its Senior Note Guarantee endorsed on the Securities and under this
Article 10.
(c) Concurrently with the legal defeasance of the Securities or the
covenant defeasance of the Securities under Article 8 hereof, the Guarantor
Subsidiaries shall be released from all of their obligations under their Senior
Note Guarantees endorsed on the Securities and under this Article 10, without
any action on the part of the Trustee or any Holder of Securities.
ARTICLE 11
Miscellaneous
-------------
SECTION 11.1. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by any provision of the TIA, such
required provision shall control.
SECTION 11.2. Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first class mail addressed as
follows:
if to AK Steel or any Guarantor:
AK Steel Corporation
703 Curtis Street
Middletown, Ohio 45043
Attention: John G. Hritz, Esq.
Vice President,
General Counsel and Secretary
if to the Trustee:
The Bank of New York
101 Barclay Street, 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
AK Steel, the Guarantors or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
-58-
<PAGE>
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given 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 communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.3. Communication by Holders with Other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. AK Steel, the Guarantors, the Trustee, the Registrar and anyone
else shall have the protection of TIA (S) 312(c).
SECTION 11.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by AK Steel or any Guarantor to the Trustee to
take or refrain from taking any action under this Indenture, AK Steel or any
Guarantor shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
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
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.5. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(a) a statement that each person signing such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether or not, in the opinion of each such
person, such covenant or condition has been complied with.
SECTION 11.6. When Securities Disregarded. In determining whether
---------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver
-59-
<PAGE>
or consent, Securities owned by Holding, AK Steel or by any Affiliate of Holding
shall be disregarded and deemed not to be outstanding, except that, for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Securities which the Trustee actually
knows are so owned shall be so disregarded. Also, subject to the foregoing,
only Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.7. Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.8. Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York or the State in which the principal Corporate Trust Office of
the Trustee is located. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.9. Governing Law. The rights and duties of AK Steel,
-------------
Holding and the Trustee under this Indenture, the Securities and the Senior Note
Guarantees shall, pursuant to New York General Obligations Law Section 5-1401,
be governed by the law of the State of New York.
SECTION 11.10. No Recourse Against Others. A director, officer,
--------------------------
employee or stockholder, as such, of AK Steel or any Guarantor shall not have
any liability for any obligations of AK Steel or such Guarantor under the
Securities or this Indenture or the Senior Note Guarantees or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Security, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of the Securities.
SECTION 11.11. Successors. All agreements of AK Steel and the
----------
Guarantor in this Indenture and the Securities shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 11.12. Multiple Originals. The parties may sign any number
------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13. Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 11.14. Separability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
-60-
<PAGE>
SECTION 11.15. Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
-61-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
AK Steel Corporation
By /s/ Richard E. Newsted
------------------------------
Name: Richard E. Newsted
Title: Senior Vice President,
Chief Financial Officer
Attest:
/s/ John G. Hritz
- ---------------------
John G. Hritz
Secretary
AK Steel Holding Corporation,
as Guarantor
By /s/ Richard E. Newsted
------------------------------
Name: Richard E. Newsted
Title: Senior Vice President,
Chief Financial Officer
Attest:
/s/ John G. Hritz
- ---------------------
John G. Hritz
Secretary
The Bank of New York,
as Trustee
By /s/ Mary Jane Morrissey
------------------------------
Name: Mary Jane Morrissey
Title: Vice President
Attest:
/s/ Paul J. Schmalzel
- ---------------------
Paul J. Schmalzel
Assistant Treasurer
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 16th day of December, 1996, before me personally came Richard
E. Newsted, to me known, who, being by me duly sworn, did depose and say that he
is Senior Vice President, CFO of AK Steel Corporation, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of the said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
/s/ Christine Shrestha
----------------------
Christine Shrestha
Notary Public, State of New York
No. 01SH5056934
Qualified in New York County
Commission Expires March 11, 1998
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 16th day of December, 1996, before me personally came Richard
E. Newsted, to me known, who, being by me duly sworn, did depose and say that he
is Senior Vice President, CFO of AK Steel Holding Corporation, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of the said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/ Christine Shrestha
----------------------
Christine Shrestha
Notary Public, State of New York
No. 01SH5056934
Qualified in New York County
Commission Expires March 11, 1998
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 16th day of December, 1996, before me personally came Mary Jane
Morrissey, to me known, who, being by me duly sworn, did depose and say that
[he --she] is a Vice President of The Bank of New York, one of the corporations
described in and which executed the foregoing instrument; that [he -- she] knows
the seal of the said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that [he -- she] signed [his -- her] name
thereto by like authority.
/s/ Timothy J. Shea
----------------------
Timothy J. Shea
Notary Public, State of New York
No. 01SH5027547
Qualified in New York County
Commission Expires March 8, 1998
<PAGE>
APPENDIX A
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A,
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
------------------------------------------
PRIVATE EXCHANGE SECURITIES
---------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions.
-----------
1.1 Definitions.
-----------
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Definitive Security" means a certificated Initial Security bearing
the restricted securities legend set forth in Section 2.3(d) and which is held
by an IAI in accordance with Section 2.1(c) .
"Depository" means The Depository Trust Company, New York, New York,
its nominees and their respective successors.
"Exchange Securities" means the 9 1/8% Senior Notes Due 2006 to be
issued pursuant to this Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a) (1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means CS First Boston Corporation and Goldman,
Sachs & Co.
"Initial Securities" means the 9 1/8% Senior Notes Due 2006 issued
under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver to
each Initial Purchaser, in exchange for the Initial Securities held by such
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
"Private Exchange Securities" means the 9 1/8% Senior Notes Due 2006
to be issued pursuant to this Indenture in connection with a Private Exchange
pursuant to the Registration Rights Agreement.
<PAGE>
"Purchase Agreement" means the Purchase Agreement dated December 12,
1996, among AK Steel, Holding and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company, pursuant
to the Registration Rights Agreement, to certain Holders of Initial Securities,
to issue and deliver
to such Holders, in exchange for the Initial Securities, a like aggregate
principal amount of Exchange Securities registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement dated December 12, 1996, among AK Steel, Holding and the Initial
Purchasers.
"Securities" means the Initial Securities, the Exchange Securities and
the Private Exchange Securities, treated as a single class.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depository), or any successor person thereto and
shall initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued
by the Company in connection with the offer and sale of Initial Securities or
Private Exchange Securities pursuant to the Registration Rights Agreement.
"Transfer Restricted Securities"'means Definitive Securities and
Securities that bear or are required to bear the legend set forth in Section
2.3(d).
1.2 Other Definitions.
-----------------
Defined in
----------
Term Section:
---- -------
"Agent Members" 2.1(b)
"Global Security" 2.1(a)
"Regulation S" 2.1(a)
"Rule 144A" 2.1(a)
2. The Securities.
--------------
2.1 Form and Dating.
---------------
The Initial Securities are being offered and sold by AK Steel pursuant
to the Purchase Agreement.
(a) Global Securities. Initial Securities offered and sold to a QIB
-----------------
in reliance on Rule 144A under the Securities Act ("Rule 144A") or in reliance
---------
on Regulation S under the
-2-
<PAGE>
Securities Act ("Regulation S"), in each case as provided in the Purchase
------------
Agreement, shall be issued initially in the form of one or more permanent global
Securities in definitive, fully registered form without interest coupons with
the global securities legend and restricted securities legend set forth in
Exhibit 1 hereto (each, a "Global Security"), which shall be deposited on behalf
---------------
of the purchasers of the Initial Securities represented thereby with the
Trustee, at its New York office, as custodian for the Depository (or with such
other custodian as the Depository may direct), and registered in the name of the
Depository or a nominee of the Depository, duly executed by AK Steel and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Securities may from time to time be increased or decreased
by adjustments made on the records of the Trustee and the Depository or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
---------------------
Global Security deposited with or on behalf of the Depository.
AK Steel shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially one or more Global Securities
that (a) shall be registered in the name of the Depository or the nominee of
such Depository and (b) shall be delivered by the Trustee to such Depository or
pursuant to such Depository's instructions or held by the Trustee as custodian
for the Depository.
Members of, or participants in, the Depository ("Agent Members") shall
-------------
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
AK Steel, the Trustee and any agent of AK Steel or the Trustee as the absolute
owner of such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent AK Steel, the Trustee or any agent of AK
Steel 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 of such
Depository governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Certificated Securities. Except as provided in this Section 2.1
-----------------------
or Section 2.3 or 2.4, owners of beneficial interests in Global Securities will
not be entitled to receive physical delivery of certificated Securities.
Purchasers of Initial Securities who are IAIs and are not QIBs and did not
purchase Initial Securities sold in reliance on Regulation S will receive
Definitive Securities; provided, however, that upon transfer of such Definitive
-------- -------
Securities to a QIB, such Definitive Securities will, unless the Global Security
has previously been exchanged, be exchanged for an interest in a Global Security
pursuant to the provisions of Section 2.3.
2.2 Authentication. The Trustee shall authenticate and deliver: (1)
--------------
Initial Securities for original issue in an aggregate principal amount of
$550,000,000 and (2) Exchange Securities or Private Exchange Securities for
issue only in a Registered Exchange Offer or a Private Exchange, respectively,
pursuant to the Registration Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order of AK Steel signed by two
Officers or by an Officer and either an Assistant Treasurer or an Assistant
Secretary of AK Steel. Such order shall specify the amount of the Securities to
be authenticated and the date on
-3-
<PAGE>
which the original issue of Securities is to be authenticated and whether the
Securities are to be Initial Securities, Exchange Securities or Private Exchange
Securities. The aggregate principal amount of Securities outstanding at any
time may not exceed $550,000,000 except as provided in Section 2.07 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
--------------------- -----------------------------------
Securities. When Definitive Securities are presented to the Registrar or a co-
- ----------
registrar with a request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Securities surrendered for transfer or
- -------- -------
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to Section 2.3(b)
or pursuant to clause (A), (B) or (C) below, and are accompanied by the
following additional information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse of the Security); or
(B) if such Definitive Securities are being transferred to AK
Steel, a certification to that effect (in the form set forth on the
reverse of the Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144; or (x)
in reliance on another exemption from the registration requirements of
the Securities Act: (i) a certification to that effect (in the form
set forth on the reverse of the Security) and (ii) if AK Steel or the
Registrar so requests, an opinion of counsel or other evidence
reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a Beneficial
------------------------------------------------------------------
Interest in a Global Security. A Definitive Security may not be exchanged for a
- -----------------------------
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by
-4-
<PAGE>
the Trustee of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) certification, in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred (A) to a QIB
in accordance with Rule 144A, or (B) outside the United States in an
offshore transaction within the meaning of Regulation S and in compliance
with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depository
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding, the Company shall issue and the Trustee
shall authenticate, upon written order of AK Steel in the form of an Officers'
Certificate, a new Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities and Beneficial
---------------------------------------------------------
Interests Therein. (i) The transfer and exchange of Global Securities or
- -----------------
beneficial interests therein shall be effected through the Depository in
accordance with this Indenture (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Depository therefor. A
transferor of a beneficial interest in a Global Security shall deliver to the
Registrar a written order given in accordance with the Depository's procedures
containing information regarding the participant account of the Depository to be
credited with a beneficial interest in the Global Security. The Registrar
shall, in accordance with such instructions instruct the Depository to credit to
the account of the Person specified in such instructions a beneficial interest
in the Global Security and to debit the account of the Person making the
transfer the beneficial interest in the Global Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix A (other
than the provisions set forth in Section 2.4 hereof), a Global Security may
not be transferred as a whole except 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 or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(iii) In the event that a Global Security is exchanged for Securities
in definitive registered form pursuant to Section 2.4 hereof or Section 2.9
of this Indenture, prior to the consummation of a Registered Exchange Offer
or the effectiveness of a Shelf
-5-
<PAGE>
Registration Statement with respect to such Securities, such Securities may
be exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial
Securities intended to ensure that such transfers comply with Rule 144A or
Regulation S, as the case may be) and such other procedures as may from
time to time be adopted by AK Steel.
(d) Legend.
------
(i) Except as permitted by the following paragraphs (ii), (iii) and
(iv), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF AK STEEL THAT
(A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (I) TO A PERSON WHOM 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, (II) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904
UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
(IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
Each Definitive Security will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES
-6-
<PAGE>
AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO
CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global
Security) pursuant to Rule 144 under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a certificated Security
that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted Security that is
represented by a Global Security, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
certificated Security that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer
Restricted Security, if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on
Rule 144 (such certification to be in the form set forth on the
reverse of the Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to legends on
such Initial Security or such Private Exchange Security will cease to
apply, the requirements requiring any such Initial Security or such Private
Exchange Security issued to certain Holders be issued in global form will
cease to apply, and a certificated Initial Security or Private Exchange
Security without legends will be available to the transferee of the Holder
of such Initial Securities or Private Exchange Securities upon exchange of
such transferring Holder's certificated Initial Security or Private
Exchange Security or directions to transfer such Holder's interest in the
Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in global form will
cease to apply and certificated Initial Securities with the restricted
securities legend set forth in Exhibit 1 hereto will be available to
Holders of such Initial Securities that do not exchange their Initial
Securities, and Exchange Securities in certificated or global form will be
available to Holders that exchange such Initial Securities in such
Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining
-7-
<PAGE>
to such Initial Securities that Initial Securities issued to certain
Holders be issued in global form will still apply, and Private Exchange
Securities in global form with the Restricted Securities Legend set forth
in Exhibit 1 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(e) Cancellation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
certificated or Definitive Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depository for cancellation or retained
and canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and Exchanges of Securities.
-----------------------------------------------------------------
(i) To permit registrations of transfers and exchanges, AK Steel shall
execute and the Trustee shall authenticate certificated Securities,
Definitive Securities and Global Securities at the Registrar's or co-
registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but AK Steel may require payment of a sum sufficient to cover
any transfer tax, assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 3.7, 4.17 and 9.5 of this Indenture).
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of (a) any certificated or Definitive Security
selected for redemption in whole or in part pursuant to Article III of this
Indenture, except the unredeemed portion of any certificated or Definitive
Security being redeemed in part, or (b) any Security for a period beginning
15 Business Days before the mailing of a notice of an offer to repurchase
or redeem Securities or 15 Business Days before an interest payment date.
(iv) Prior to the due presentation for registration of transfer of any
Security, AK Steel, the Trustee, the Paying Agent, the Registrar or any co-
registrar may deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is overdue, and
none of AK Steel, the Trustee, the Paying Agent, the Registrar or any co-
registrar shall be affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
-8-
<PAGE>
(g) No Obligation of the Trustee.
----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depository or other Person with respect to the accuracy of the records of
the Depository or its nominee or of any participant or member thereof, with
respect to any ownership interest in the Securities or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to or upon the order of the registered Holders (which shall be
the Depository or its nominee in the case of a Global Security) . The
rights of beneficial owners in any Global Security shall be exercised only
through the Depository subject to the applicable rules and procedures of
the Depository. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to its
members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
-----------------------
(a) A Global Security deposited with the Depository or with the Trustee as
custodian for the Depository pursuant to Section 2.1 shall be transferred to the
beneficial owners thereof in the form of certificated Securities in an aggregate
principal amount equal to the principal amount of such Global Security, in
exchange for such Global Security, only if such transfer complies with Section
2.3 and (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 such
Depository ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within 90 days of
such notice, (ii) an Event of Default has occurred and is continuing or (iii) AK
Steel, in its sole discretion, notifies the Trustee in writing that it elects to
cause the issuance of certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depository to
the Trustee located in the Borough of Manhattan, The City of New York, to be so
transferred, in whole or from time to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such transfer of each portion of
such Global Security, an equal aggregate principal amount of certificated
Initial Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section 2.4 shall be executed,
authenticated and delivered only in denominations of
-9-
<PAGE>
$1,000 and any integral multiple thereof and registered in such names as the
Depository shall direct. Any certificated Initial Security delivered in
exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(d), bear the restricted securities legend set forth in
Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered Holder of a
Global Security may grant proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests through Agent Members, to take
any action that a Holder is entitled to take under this Indenture or the
Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a), AK Steel will promptly make available to the Trustee a
reasonable supply of certificated Securities in definitive, fully registered
form without interest coupons.
-10-
<PAGE>
EXHIBIT 1
to
APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
AK STEEL OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT
THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF AK STEEL THAT (A)
THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I)
TO A PERSON WHOM 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, (II) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
<PAGE>
THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE IN THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS.]/1/
AK STEEL CORPORATION
9 1/8% Senior Note Due 2006
GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY
AK STEEL HOLDING CORPORATION
CUSIP No. ___________
AK Steel Corporation, a Delaware corporation, promises to pay to
_____________________ or registered assigns, the principal sum of
_____________________ Dollars ($__________) on December 15, 2006.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
- --------------
/1/ Include if a Definitive Security to be held by an institutional "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act).
-2-
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
AK Steel Corporation,
by
[Seal]
______________________________
Name:
Title:
______________________________
Name:
Title:
Dated: __________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
The Bank of New York,
as Trustee, certifies
that this is one of the
Securities referred to
in the Indenture.
by
____________________________
Authorized Signatory
-3-
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
AK STEEL CORPORATION
9 1/8% Senior Note Due 2006
1. Interest
--------
AK Steel Corporation, a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called "AK Steel"), promises to pay interest on the principal amount of
this Security at the rate per annum shown above; provided, however, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
interest will accrue on this Security at a rate of 9 1/8% per annum from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. AK Steel
will pay interest semiannually on June 15 and December 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 17, 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. AK Steel shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
AK Steel will pay interest on the Securities (except defaulted
interest which AK Steel may pay on a special payment date) to the Persons who
are registered Holders of Securities at the close of business on the June 1 or
December 1 next preceding the interest payment date even if the Securities are
canceled after the record date and on or before the interest payment date.
Holders must surrender the Securities to a Paying Agent to collect principal
payments. AK Steel will 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. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. AK Steel will make all payments in respect of a
certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of a
certificated Security of at least $1,000,000 aggregate principal amount of
Securities, by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee (as defined herein) or the Paying Agent
to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion).
-4-
<PAGE>
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York (the "Trustee"), will act as Paying
Agent and Registrar. AK Steel may appoint and change any Paying Agent,
Registrar or co-registrar without notice. AK Steel or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-
registrar.
4. Indenture
---------
AK Steel issued the Securities under an Indenture dated as of December
17, 1996 (the "Indenture"), among AK Steel, AK Steel Holding Corporation
("Holding"), as Guarantor, and the Trustee. 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.C. (S)(S) 77aaa-77bbbb) as in effect
on the date of the Indenture (the "Act"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.
The Securities are senior unsecured obligations of AK Steel limited to
$550,000,000 aggregate principal amount (subject to Section 2.7 of the
Indenture). The Indenture imposes certain limitations on, among other things,
the issuance of Debt by AK Steel, the issuance of Debt and Preferred Equity
Interests by the Subsidiaries of AK Steel, the payment of dividends and other
distributions and acquisitions or retirements of AK Steel's capital stock and
subordinated obligations, issuance and sale of Equity Interests by the
Subsidiaries of AK Steel, restrictions on distributions by the Subsidiaries of
AK Steel, sales of assets, transactions with Affiliates, sale/leaseback
transactions, lines of business and the activities of Holding. In addition, the
Indenture requires AK Steel, under certain circumstances, to offer to purchase
Securities in the event of a Change in Control as described below and to offer
to repurchase Securities at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase, with the net cash proceeds of certain sales or other dispositions of
assets..
5. Optional Redemption
-------------------
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 15, 2001. On and after that date, AK Steel may
redeem the Securities, as a whole or from time to time in part, at the following
redemption prices (expressed as percentages of principal amount) if redeemed
during the 12-month period beginning December 15 of the years indicated:
-5-
<PAGE>
Redemption
Year Price
---- ----------
2001 .................................................. 104.56%
2002 .................................................. 103.04%
2003 .................................................. 101.52%
2004 and thereafter ................................... 100.00%
together in the case of any such optional redemption with accrued interest (if
any) to the redemption date.
In addition, at any time prior to December 15, 1999, AK Steel may
redeem up to $175,000,000 of the aggregate principal amount of Securities with
the proceeds of a Public Equity Offering, at any time or from time to time, at a
redemption price (expressed as a percentage of principal amount) of 109.125%
plus accrued interest to the redemption date; provided, however, that at least
$375,000,000 aggregate principal amount of the Securities remain outstanding
after each such redemption.
6. 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 his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
--------------
Upon a Change in Control, any Holder of Securities will have the
right, subject to certain conditions, to cause AK Steel to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase as provided in, and subject to the terms of, the
Indenture.
8. Senior Note Guarantees
----------------------
As provided in the Indenture and subject to certain limitations
therein set forth, the Obligations of AK Steel under the Indenture and this
Security are Guaranteed on a senior basis pursuant to Senior Note Guarantees
endorsed hereon by the Guarantors, which includes Holding and each Guarantor
Subsidiary. The Indenture provides that a Guarantor Subsidiary shall be
released from its Senior Note Guarantee and that the Holder shall have no
further claim against such Guarantor Subsidiary upon compliance with certain
conditions.
-6-
<PAGE>
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 (or in the case of Definitive Securities sold to institutional
accredited investors as described in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, minimum denominations of $200,000) and whole multiples of
$1,000. A Holder may transfer or exchange securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Securities (or portions thereof except the
portion of the Security not be redeemed) selected for redemption or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to AK Steel
at its request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to AK Steel
and not to the Trustee for payment.
12. Defeasance
----------
Subject to certain conditions, AK Steel at any time may terminate some
or all of its obligations under the Securities and the Indenture if AK Steel
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal of, premium, if any, and interest on the Securities to redemption
or maturity, as the case may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (b) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, AK Steel and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to add guarantees with respect to the Securities, or to comply
with Article 5 of the Indenture, or to provide for uncertificated securities in
addition to or in place of certificated Securities, or to comply with the Act,
or to add to the covenants for the benefit of the Holders or surrender any right
or power conferred upon AK Steel or the Guarantors, or to reflect the release of
any Guarantor Subsidiary from its Senior Note Guarantee to the extent permitted
by the Indenture, or to make any change that does not adversely affect the
rights of any Securityholder.
-7-
<PAGE>
14. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (a) default in any
payment of interest on any Security when the same becomes due and payable, and
such default continues for a period of 30 days, (b) default in the payment of
the principal of any Security when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration or otherwise, (c) failure to
redeem or purchase Securities when required pursuant to the Indenture and the
Securities, (d) failure to (i) comply with the covenant described under Section
5.1 of the Indenture (ii) make or consummate an Offer in accordance with the
provisions of Section 4.10 of the Indenture or (iii) make or consummate a Change
in Control Offer in accordance with the provisions of Section 4.17 of the
Indenture, (e) failure to comply with any of the agreements in the Securities or
the Indenture (other than those referred to in subsection (a), (b), (c) or (d)
above), which continues for 60 days after there has been given to AK Steel by
the Trustee or to AK Steel and the Trustee by the Holders of at least 25% in
principal amount of Securities then outstanding a written notice specifying such
failure, (f) Debt of AK Steel or any Significant Subsidiary is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default, the total amount of such Debt unpaid or
accelerated exceeds $10.0 million or its foreign currency equivalent, (g) any
Senior Note Guarantee issued by Holding or any Significant Subsidiary ceases to
be in full force and effect other than in accordance with its terms, or Holding
or any Significant Subsidiary or any Person acting on behalf of Holding or such
Significant Subsidiary shall deny or disaffirm its obligations under its Senior
Note Guarantee, (h) certain events in bankruptcy, insolvency or reorganization
with respect to Holding, AK Steel or any Significant Subsidiary, and (i) any
judgment or decree for the payment of money in excess of $10.0 million is
rendered against Holding, AK Steel or any Significant Subsidiary and is not
discharged and either (i) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (ii) there is a period of 60 days
following such judgment during which such judgment or decree is not discharged,
waived or the execution thereof stayed.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency with respect to AK Steel, Holding or any Significant Subsidiary
are Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest on any Security) if it
determines that withholding notice is in their interest.
15. Trustee Dealings with AK Steel, Holding and their Affiliates
------------------------------------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may
-8-
<PAGE>
otherwise deal with and collect obligations owed to it by AK Steel, Holding or
their Affiliates and may otherwise deal with AK Steel, Holding or their
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of AK Steel,
Holding or any Guarantor Subsidiary shall not have any liability for any
obligations of AK Steel, Holding or the Guarantor Subsidiary under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TENANT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
-------------
The rights and duties of AK Steel, Holding and the Trustee hereto
under the Indenture, this Security and the Senior Note Guarantees shall,
pursuant to New York General Obligations Law Section 5-1401, be governed by the
law of the State of New York.
20. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, AK Steel has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
-9-
<PAGE>
AK Steel will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made to:
AK STEEL CORPORATION
703 Curtis Street
Middletown, Ohio 45043
Attention: General Counsel
-10-
<PAGE>
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or tax I.D. No.)
And irrevocably appoint _____________________________
agent to transfer this Security on the books of AK Steel. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: _________________ Your Signature: ________________________
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act of 1933 after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) [_] to the Company; or
(2) [_] pursuant to an effective registration statement under the Securities
Act of 1933; or
<PAGE>
(3) [_] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that purchases
for its own account or for the account of a qualified institutional
buyer to whom notice is given that such transfer is being made in
reliance on Rule 144A, in each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(4) [_] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance with
Rule 904 under the Securities Act of 1933; or
(5) [_] pursuant to another available exemption from registration provided by
Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; provided, however, that if box (4) or (5) is
-------- -------
checked, the Trustee may require, prior to registering any such transfer of the
Securities, such legal opinions, certifications and other information as the
Company has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933, such as the exemption
provided by Rule 144 under such Act.
-------------------------------------------------
Signature
- ---------------------------------
Signature Guarantee:
(Signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
-2-
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: _________________________ ______________________________________________
NOTICE: To be executed by an executive officer
-3-
<PAGE>
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<CAPTION>
Principal amount of Signature of
Amount of decrease in Amount of increase in this Global Security authorized officer of
Date of Principal Amount of Principal Amount of following such Trustee or Securities
Exchange this Global Security this Global Security decrease or increase Custodian
<S> <C> <C> <C> <C>
</TABLE>
-4-
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by AK Steel
pursuant to Section 4.10 or 4.17 of the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased by
AK Steel pursuant to Section 4.10 or 4.17 of the Indenture, state the amount:
Date: _______________ Your Signature: __________________________
(Sign exactly as your name appears on the other side of
the Security)
Signature Guarantee: ____________________________________________
(Signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar,
which requirements include membership or participation
in the Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to,
or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
[/2/]
[/3/]
AK STEEL CORPORATION
9 1/8% Senior Note Due 2006
GUARANTEED AS TO PAYMENT OF PRINCIPAL,
PREMIUM, IF ANY, AND INTEREST BY
AK STEEL HOLDING CORPORATION
CUSIP No. ___________
AK Steel Corporation, a Delaware corporation, promises to pay to
_____________________ or registered assigns, the principal sum of
_____________________ Dollars ($__________) on December 15, 2006.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Security are set forth on the other side
of this Security.
- -------------------
/2/ If the Security is to be issued in global form add the Global Securities
Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1
captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR
DECREASES IN GLOBAL SECURITY."
/3/ If the Security is a Private Exchange Security issued in a Private Exchange
to an Initial Purchaser holding an unsold portion of its initial allotment,
add the Restricted Securities Legend from Exhibit 1 to Appendix A and
replace the Assignment Form included in this Exhibit A with the Assignment
Form included in such Exhibit 1.
<PAGE>
AK Steel Corporation,
by
[Seal]
______________________________
Name:
Title:
______________________________
Name:
Title:
Dated: __________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
The Bank of New York,
as Trustee, certifies
that this is one of the
Securities referred to
in the Indenture.
by
____________________________
Authorized Signatory
-2-
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY
OR PRIVATE EXCHANGE SECURITY]
AK STEEL CORPORATION
9 1/8% Senior Note Due 2006
1. Interest
--------
AK Steel Corporation, a Delaware corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred to, being
herein called "AK Steel"), promises to pay interest on the principal amount of
this Security at the rate per annum shown above; provided, however, that if a
Registration Default (as defined in the Registration Rights Agreement) occurs,
interest will accrue on this Security at a rate of 9 1/8% per annum from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all Registration Defaults have been cured. AK Steel
will pay interest semiannually on June 15 and December 15 of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 17, 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. AK Steel shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
AK Steel will pay interest on the Securities (except defaulted
interest which AK Steel may pay on a special payment date) to the Persons who
are registered Holders of Securities at the close of business on the June 1 or
December 1 next preceding the interest payment date even if the Securities are
canceled after the record date and on or before the interest payment date.
Holders must surrender the Securities to a Paying Agent to collect principal
payments. AK Steel will 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. Payments in respect of the Securities represented by a Global
Security (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder of a
certificated Security of at least $1,000,000 aggregate principal amount of
Securities, by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee (as defined herein) or the Paying Agent
to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion).
-3-
<PAGE>
3. Paying Agent and Registrar
--------------------------
Initially, The Bank of New York (the "Trustee"), will act as Paying
Agent and Registrar. AK Steel may appoint and change any Paying Agent,
Registrar or co-registrar without notice. AK Steel or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-
registrar.
4. Indenture
---------
AK Steel issued the Securities under an Indenture dated as of December
17, 1996 (the "Indenture"), among AK Steel, AK Steel Holding Corporation
("Holding"), as Guarantor, and the Trustee. 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.C. (S)(S) 77aaa-77bbbb) as in effect
on the date of the Indenture (the "Act"). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in the Indenture. The
Securities are subject to all such terms, and Securityholders are referred to
the Indenture and the Act for a statement of those terms.
The Securities are senior unsecured obligations of AK Steel limited to
$550,000,000 aggregate principal amount (subject to Section 2.7 of the
Indenture). The Indenture imposes certain limitations on, among other things,
the issuance of Debt by AK Steel, the issuance of Debt and Preferred Equity
Interests by the Subsidiaries of AK Steel, the payment of dividends and other
distributions and acquisitions or retirements of AK Steel's capital stock and
subordinated obligations, issuance and sale of Equity Interests by the
Subsidiaries of AK Steel, restrictions on distributions by the Subsidiaries of
AK Steel, sales of assets, transactions with Affiliates, sale/leaseback
transactions, lines of business and the activities of Holding. In addition, the
Indenture requires AK Steel, under certain circumstances, to offer to purchase
Securities in the event of a Change in Control as described below and to offer
to repurchase Securities at a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase, with the net cash proceeds of certain sales or other dispositions of
assets..
5. Optional Redemption
-------------------
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to December 15, 2001. On and after that date, AK Steel may
redeem the Securities as a whole or from time to time in part at the following
redemption prices (expressed as percentages of principal amount) if redeemed
during the 12-month period beginning December 15 of the years indicated:
-4-
<PAGE>
Redemption
Year Price
---- ----------
2001 104.56%
2002 103.04%
2003 101.52%
2004 and thereafter 100.00%
together in the case of any such optional redemption with accrued interest (if
any) to the redemption date.
In addition, at any time prior to December 15, 1999, AK Steel may redeem up to
$175,000,000 aggregate principal amount of Securities with the proceeds of a
Public Equity Offering, at any time or from time to time, at a redemption price
(expressed as a percentage of principal amount) of 109.125% plus accrued
interest to the redemption date; provided, however, that at least $375,000,000
aggregate principal amount of the Securities remain outstanding after each such
redemption.
6. 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 his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. Put Provisions
--------------
Upon a Change in Control, any Holder of Securities will have the
right, subject to certain conditions, to cause AK Steel to repurchase all or any
part of the Securities of such Holder at a repurchase price equal to 101% of the
principal amount of the Securities to be repurchased plus accrued interest to
the date of repurchase as provided in, and subject to the terms of, the
Indenture.
8. Senior Note Guarantees
----------------------
As provided in the Indenture and subject to certain limitations
therein set forth, the Obligations of AK Steel under the Indenture and this
Security are Guaranteed on a senior basis pursuant to Senior Note Guarantees
endorsed hereon by the Guarantors, which includes Holding and each Guarantor
Subsidiary. The Indenture provides that a Guarantor Subsidiary shall be
released from its Senior Note Guarantee and that the Holder shall have no
further claim against such Guarantor Subsidiary upon compliance with certain
conditions.
-5-
<PAGE>
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 (or in the case of Definitive Securities sold to institutional
accredited investors as described in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, minimum denominations of $200,000) and whole multiples of
$1,000. A Holder may transfer or exchange securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar need not register
the transfer or exchange of any Securities (or portions thereof except the
portion of the Security not be redeemed) selected for redemption or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
---------------------
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. Unclaimed Money
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to AK Steel
at its request unless an abandoned property law designates another Person.
After any such payment, Holders entitled to the money must look only to AK Steel
and not to the Trustee for payment.
12. Defeasance
----------
Subject to certain conditions, AK Steel at any time may terminate some
or all of its obligations under the Securities and the Indenture if AK Steel
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal of, premium, if any, and interest on the Securities to redemption
or maturity, as the case may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (a) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (b) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, AK Steel and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to add guarantees with respect to the Securities, or to comply
with Article 5 of the Indenture, or to provide for uncertificated securities in
addition to or in place of certificated Securities, or to comply with the Act,
or to add to the covenants for the benefit of the Holders or surrender any right
or power conferred upon AK Steel or the Guarantors, or to reflect the release of
any Guarantor Subsidiary from its Senior Note Guarantee to the extent permitted
by the Indenture, or to make any change that does not adversely affect the
rights of any Securityholder.
-6-
<PAGE>
14. Defaults and Remedies
---------------------
Under the Indenture, Events of Default include (a) default in any
payment of interest on any Security when the same becomes due and payable, and
such default continues for a period of 30 days, (b) default in the payment of
the principal of any Security when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration or otherwise, (c) failure to
redeem or purchase Securities when required pursuant to the Indenture and the
Securities, (d) failure to (i) comply with the covenant described under Section
5.1 of the Indenture (ii) make or consummate an Offer in accordance with the
provisions of Section 4.10 of the Indenture or (iii) make or consummate a Change
in Control Offer in accordance with the provisions of Section 4.17 of the
Indenture, (e) failure to comply with any of the agreements in the Securities or
the Indenture (other than those referred to in subsection (a), (b), (c) or (d)
above), which continues for 60 days after there has been given to AK Steel by
the Trustee or to AK Steel and the Trustee by the Holders of at least 25% in
principal amount of Securities then outstanding a written notice specifying such
failure, (f) Debt of AK Steel or any Significant Subsidiary is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default, the total amount of such Debt unpaid or
accelerated exceeds $10.0 million or its foreign currency equivalent, (g) any
Senior Note Guarantee issued by Holding or any Significant Subsidiary ceases to
be in full force and effect other than in accordance with its terms, or Holding
or any Significant Subsidiary or any Person acting on behalf of Holding or such
Significant Subsidiary shall deny or disaffirm its obligations under its Senior
Note Guarantee, (h) certain events in bankruptcy, insolvency or reorganization
with respect to Holding, AK Steel or any Significant Subsidiary, and (i) any
judgment or decree for the payment of money in excess of $10.0 million is
rendered against Holding, AK Steel or any Significant Subsidiary and is not
discharged and either (i) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (ii) there is a period of 60 days
following such judgment during which such judgment or decree is not discharged,
waived or the execution thereof stayed.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities may declare all
the Securities to be due and payable immediately. Certain events of bankruptcy
or insolvency with respect to AK Steel, Holding or any Significant Subsidiary
are Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest on any Security) if it
determines that withholding notice is in their interest.
15. Trustee Dealings with AK Steel, Holding and their Affiliates
------------------------------------------------------------
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may
-7-
<PAGE>
otherwise deal with and collect obligations owed to it by AK Steel, Holding or
their Affiliates and may otherwise deal with AK Steel, Holding or their
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of AK Steel,
Holding or any Guarantor Subsidiary shall not have any liability for any
obligations of AK Steel, Holding or the Guarantor Subsidiary under the
Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Security, each
Securityholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
-------------
The rights and duties of AK Steel, Holding and the Trustee under the
Indenture, this Security and the Senior Note Guarantees shall, pursuant to New
York General Obligations Law Section 5-1401, be governed by the law of the State
of New York.
20. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, AK Steel has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
-8-
<PAGE>
AK Steel will furnish to any Securityholder upon written request and
without charge to the Securityholder a copy of the Indenture which has in it the
text of this Security in larger type. Requests may be made to:
AK STEEL CORPORATION
703 Curtis Street
Middletown, Ohio
45043
Attention: General
Counsel
-9-
<PAGE>
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's Soc. Sec. or tax I.D. No.)
And irrevocably appoint _____________________________
agent to transfer this Security on the books of AK Steel. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: _________________ Your Signature: ________________________
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
- --------------------------
Signature Guarantee:
-------------------------------------------------
(Signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by AK Steel
pursuant to Section 4.10 or 4.17 of the Indenture, check the box:
[_]
If you want to elect to have only part of this Security purchased by
AK Steel pursuant to Section 4.10 or 4.17 of the Indenture, state the amount:
Date: _______________ Your Signature: __________________________
(Sign exactly as your name appears on the other side
of the Security)
Signature Guarantee: ____________________________________________
(Signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include membership
or participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other "signature
guarantee program" as may be determined by the
Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B
FORM OF NOTATION ON SECURITY RELATING
TO SENIOR NOTE GUARANTEES
Holding and each Guarantor Subsidiary (which term includes any
successor Person under the Indenture), has jointly and severally,
unconditionally and absolutely Guaranteed, to the extent set forth in the
Indenture and subject to the provisions in the Indenture, the due and punctual
payment and performance of the Obligations in connection with the Indenture and
the Securities, and further agree to pay any and all expenses (including,
without limitation, all fees and disbursements of counsel) which may be paid or
incurred by the Trustee or the Holders in enforcing their rights under the
Senior Note Guarantees. In case of the failure of AK Steel punctually to
perform or make any such payment, each Guarantor hereby jointly and severally
agrees to cause such payment and performance to be made punctually.
The obligations of the Guarantors to the Holders and to the Trustee
pursuant to the Senior Note Guarantees and the Indenture are expressly set forth
in Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Senior Note Guarantees. Capitalized terms used herein
and not defined herein have the meanings ascribed thereto in the Indenture.
AK STEEL CORPORATION
By_______________________
Name:
Title:
AK STEEL HOLDING CORPORATION
By_______________________
Name:
Title:
_________________________
Attorney-in-Fact
As Attorney in Fact for each Guarantor Subsidiary
<PAGE>
EXHIBIT 4.4
_______________________________________
AK STEEL CORPORATION
____________
SUPPLEMENTAL INDENTURE
Dated as of December 11, 1996
to
INDENTURE
Dated as of April 1, 1994
_____________
THE BANK OF NEW YORK,
as Trustee
_______________________________________
<PAGE>
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE is dated as of December 11, 1996 among AK STEEL
CORPORATION, a Delaware corporation ("AK Steel"), AK STEEL HOLDING CORPORATION,
--------
a Delaware corporation, as Guarantor ("Holding"), and THE BANK OF NEW YORK, a
-------
New York banking corporation, as Trustee (the "Trustee").
-------
W I T N E S S E T H :
WHEREAS, AK Steel, Holding and the Trustee are parties to an Indenture
dated as of April 1, 1994 as heretofore amended by a Supplemental Indenture
dated as of September 21, 1994 (as so amended, the "Indenture"); and
---------
WHEREAS, AK Steel, Holding and the Trustee desire to amend the Indenture
pursuant to Section 9.1 thereof to cure an ambiguity therein; and
WHEREAS, AK Steel has represented to the Trustee that all conditions
precedent to the execution and delivery of this Supplemental Indenture have been
satisfied;
NOW, THEREFORE, the parties hereto agree as follows:
1. Effective as of the date hereof, Section 4.12 of the Indenture is
hereby amended by adding at the end of said section the following sentence:
"For the avoidance of ambiguity, it is understood that Liens referred to in
clauses (a) through (j) of this Section 4.12 may secure, in addition to the
principal of and premium (if any) on Debt referred to in such clauses, interest
and all other Obligations on and in respect of such Debt."
2. The Trustee accepts the amendment of the Indenture affected by this
Supplemental Indenture and agrees to execute the trust created by the Indenture,
as hereby amended, but only upon the terms and conditions set forth in the
Indenture, as hereby amended, including the terms and provisions defining and
limiting the liabilities and responsibilities of the Trustee, which terms and
provisions shall in like manner define and limit its liabilities in the
performance of the trust created by the Indenture, as hereby amended, and the
Trustee makes no representations as to the validity or sufficiency of this
Supplemental Indenture and shall incur no liability or responsibility in respect
of the validity thereof.
2
<PAGE>
3. AK Steel and Holding agree, jointly and severally, to indemnify the
Trustee and hold the Trustee harmless from and against any and all liabilities,
losses, damages, claims or actions to which the Trustee may become subject as a
result of or in connection with the execution of this Supplemental Indenture and
the amendment of the Indenture pursuant hereto, and will reimburse the Trustee
for any legal or other expenses reasonably incurred by the Trustee in connection
with investigating or defending any such liability, loss, damage, claim or
action.
4. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed, and all the terms, conditions and provisions thereof
shall remain in full force and effect.
5. This Supplemental Indenture shall form a part of
the Indenture for all purposes, and every holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
6. This Supplemental Indenture may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all of such counterparts shall together constitute one and the same
instrument.
7. THIS SUPPLEMENTAL INDENTURE SHALL 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 LAWS TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
3
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture to
be duly executed as of the date first above written.
AK STEEL CORPORATION
Attest:
/s/ JOHN G. HRITZ By: /s/ RICHARD E. NEWSTED
- -------------------------- -----------------------
John G. Hritz, Name: Richard E. Newsted
Secretary Title: Senior Vice President,
Chief Financial Officer
AK STEEL HOLDING CORPORATION, as
Guarantor
Attest:
/s/ JOHN G. HRITZ By: /s/ RICHARD E. NEWSTED
- -------------------------- ----------------------
John G. Hritz, Name: Richard E. Newsted
Secretary Title: Senior Vice President,
Chief Financial Officer
THE BANK OF NEW YORK, as Trustee
Attest:
/s/ PAUL J. SCHMALZEL By: /s/ MARY JANE MORRISSEY
- -------------------------- -----------------------
Paul J. Schmalzel, Name: Mary Jane Morrissey
Assistant Treasurer Title: Vice President
4
<PAGE>
EXHIBIT 4.5
================================================================================
AK STEEL CORPORATION
(AK STEEL HOLDING CORPORATION, as Guarantor)
Senior Secured Notes, Series A-E, due 2004
------------------------------------------------------------
NOTE PURCHASE AGREEMENT
------------------------------------------------------------
Dated as of December 17, 1996
================================================================================
<PAGE>
Table of Contents
Page
1. AUTHORIZATION OF NOTES, ETC.............................................1
1.1. The Notes; Interest Rate for Fixed Spread
Notes.......................................................1
1.2. The New Facility; the Pledged Assets and the
Mortgage....................................................2
1.3. The Parent Guarantee and Subsidiary
Guarantees..................................................3
2. SALE AND PURCHASE OF NOTES..............................................3
3. CLOSINGS................................................................4
4. CONDITIONS TO CLOSINGS..................................................5
4.1. First Closing...................................................5
4.2. Conditions to Each Closing......................................7
4.3. Additional Conditions to Second and Third
Closing.....................................................8
5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS..........................9
5.1. Organization; Power and Authority...............................9
5.2. Authorization, etc..............................................9
5.3. Disclosure......................................................10
5.4. Organization and Ownership of Shares of
Subsidiaries; Affiliates, etc...............................10
5.5. Financial Statements............................................11
5.6. Compliance with Laws, Other Instruments, etc....................11
5.7. Governmental Authorizations, etc................................12
5.8. Litigation; Observance of Agreements, Statutes
and Orders..................................................12
5.9. Taxes...........................................................12
5.10. Title to Property; Leases......................................13
5.11. Licenses, Permits, etc.........................................13
5.12. Compliance with ERISA..........................................14
5.13. Private Offering by the Obligors...............................15
5.14. Use of Proceeds; Margin Regulations............................15
5.15. Existing Debt; Future Liens....................................15
5.16. Foreign Assets Control Regulations, etc........................16
5.17. Status Under Certain Statutes..................................16
5.18. Environmental Matters..........................................16
6. REPRESENTATIONS OF THE PURCHASER........................................17
6.1. Purchase of Notes...............................................17
6.2. Source of Funds.................................................17
7. INFORMATION AS TO COMPANY...............................................18
7.1. Financial and Business Information..............................18
7.2. Officer's Certificate...........................................22
7.3. Inspection......................................................23
8. PREPAYMENT OF THE NOTES.................................................23
<PAGE>
8.1. Required Prepayments............................................23
8.2. Optional Prepayments; Make-Whole Computations...................24
8.3. Prepayment in Connection with Failure of
Second or Third Closing.....................................24
8.4. Prepayment in Connection with a Change in
Control.....................................................25
8.5. Allocation of Partial Prepayments...............................26
8.6. Maturity; Surrender, etc........................................26
8.7. Purchase of Notes...............................................26
8.8. Make-Whole Amount...............................................27
9. AFFIRMATIVE COVENANTS...................................................28
9.1. Compliance with Law.............................................28
9.2. Insurance.......................................................29
9.3. Maintenance of Properties.......................................29
9.4. Payment of Taxes and Claims.....................................29
9.5. Corporate Existence, etc........................................30
9.6. Subsidiary Guarantees; Release of Subsidiary
Guarantees..................................................30
9.7. Completion of the New Facility; Pledged
Assets, etc.................................................31
10. NEGATIVE COVENANTS.....................................................33
10.1. Subsidiary Debt................................................33
10.2. Liens..........................................................34
10.3. Limitation on Sale and Leaseback
Transactions................................................36
10.4. Maintenance of Certain Financial Conditions....................37
10.5. Asset Dispositions.............................................37
10.6. Limitation on Restricted Payments..............................38
10.7. Merger, Consolidation, etc.....................................40
10.8. Transactions with Affiliates...................................42
10.9. Lines of Business..............................................42
10.10. Limitations on Restrictions on Distributions
from Subsidiaries...........................................42
11. EVENTS OF DEFAULT......................................................43
12. REMEDIES ON DEFAULT, ETC...............................................46
12.1. Acceleration...................................................46
12.2. Other Remedies.................................................47
12.3. Rescission.....................................................47
12.4. No Waivers or Election of Remedies, Expenses,
etc.........................................................47
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..........................48
13.1. Registration of Notes..........................................48
13.2. Transfer and Exchange of Notes.................................48
13.3. Replacement of Notes...........................................49
14. PARENT GUARANTEE.......................................................49
14.1. Guarantee......................................................49
14.2. Subrogation and Contribution...................................51
(ii)
<PAGE>
15. PAYMENTS ON NOTES......................................................52
15.1. Place of Payment...............................................52
15.2. Home Office Payment............................................52
16. EXPENSES, ETC..........................................................53
16.1. Transaction Expenses...........................................53
16.2. Survival.......................................................54
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT............................................................54
18. AMENDMENT AND WAIVER...................................................54
18.1. Requirements...................................................54
18.2. Solicitation of Holders of Notes...............................54
18.3. Binding Effect, etc............................................55
18.4. Notes held by Company, etc.....................................55
19. NOTICES................................................................56
20. REPRODUCTION OF DOCUMENTS..............................................56
21. CONFIDENTIAL INFORMATION...............................................57
22. SUBSTITUTION OF PURCHASER..............................................58
23. MISCELLANEOUS..........................................................58
23.1. Successors and Assigns.........................................58
23.2. Construction...................................................58
23.3. Jurisdiction and Process; Waiver of Jury
Trial.......................................................58
23.4. Payments Due on Non-Business Days..............................59
23.5. Severability...................................................60
23.6. Accounting Terms; Pro Forma Calculations.......................60
23.7. Counterparts...................................................60
23.8. Governing Law..................................................60
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.3 -- Disclosure Documents
Schedule 5.4 -- Subsidiaries
Schedule 5.5 -- Financial Statements
Schedule 5.8 -- Litigation
Schedule 5.11 -- Licenses, etc.
Schedule 5.15 -- Existing Debt
Schedule 9.2 -- Schedules of Insurance
Exhibit 1.1 -- Form of Note
Exhibit 1.2(a) -- Form of Original Mortgage
Exhibit 1.2(b) -- Form of Collateral Agency Agreement
Exhibit 1.3 -- Form of Subsidiary Guarantee
Exhibit 4.1(b)(1) -- Form of First Closing Opinion of Special
Counsel for the Company
(iii)
<PAGE>
Exhibit 4.1(b)(2) -- Form of First Closing Opinion of John G.
Hritz, Esq.
Exhibit 4.1(b)(3) -- Form of First Closing Opinion of Special
Counsel for the Purchasers
Exhibit 4.1(b)(4) -- Form of Opinion of Indiana Special
Counsel for the Purchasers
Exhibit 4.3(b)(1) -- Form of Opinion of Special Counsel for
the Company at Subsequent Closings
Exhibit 4.3(b)(2) -- Form of Opinion of Special Counsel for
the Purchasers at Subsequent Closings
<PAGE>
AK STEEL HOLDING CORPORATION
AK STEEL CORPORATION
703 Curtis Street
Middletown, OH 45043
Senior Secured Notes, Series A-E, due 2004
As of December 17, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
AK STEEL CORPORATION, a Delaware corporation (the "COMPANY"), and AK
STEEL HOLDING CORPORATION, a Delaware corporation ("HOLDING" or the "PARENT"
and, together with the Company, individually an "OBLIGOR" and collectively the
"OBLIGORS"), agree with you as follows:
1. AUTHORIZATION OF NOTES, ETC.
1.1. THE NOTES; INTEREST RATE FOR FIXED SPREAD NOTES.
The Company has duly authorized the issue and sale of $250,000,000
aggregate principal amount of its Senior Secured Notes, to be issued in five
series, in the respective designations and aggregate principal amounts set forth
below:
<TABLE>
<CAPTION>
Series Principal Amount
- ----------------------- ----------------
<S> <C>
Senior Secured Notes, $ 80,000,000
Series A, due 2004
Senior Secured Notes, $ 12,500,000
Series B, due 2004
Senior Secured Notes, $ 20,000,000
Series C, due 2004
Senior Secured Notes, $ 7,500,000
Series D, due 2004
Senior Secured Notes, $130,000,000
Series E, due 2004
</TABLE>
As used herein: the term "NOTES" (irrespective of series unless otherwise
specified) means all notes originally delivered pursuant to this Agreement and
the Other Agreements referred to below and all notes delivered in substitution
or exchange for any such note and, where applicable, includes the singular
number as well as the plural; the terms "SERIES A NOTES", "SERIES B NOTES",
"SERIES C NOTES", "SERIES D NOTES" and "SERIES E NOTES" mean Notes of the
respective
<PAGE>
2
series described above; the term "FIXED COUPON NOTES" (irrespective of series)
means collectively the Series A Notes and the Series D Notes; and the term
"FIXED SPREAD NOTES" (irrespective of series unless otherwise specified) means
the Series B Notes, the Series C Notes and the Series E Notes. The Notes of each
series shall be substantially in the form set out in Exhibit l.1, in each case
duly completed. Certain capitalized and other terms used in this Agreement are
defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless
otherwise specified, to a Schedule or an Exhibit attached to this Agreement.
The interest rate to be borne by the Fixed Coupon Notes shall be 8.98%
per annum. The interest rate to be borne by the Fixed Spread Notes of each
series shall be determined on the second Business Day preceding the date of the
Closing for the purchase of Fixed Spread Notes of such series, and shall be
2.73% (273 basis points) over the yield reported as of 10:00 A.M. (New York City
time) on such second Business Day on the Bloomberg Financial Markets News screen
Px or equivalent screen provided by Bloomberg Financial Markets News (or any
nationally recognized publicly available on-line source of similar market data)
for the 5.750% Treasury Note due August 2003 (the "REFERENCE TREASURY
SECURITY"). Two Business Days prior to each Closing, the Company will deliver
to each purchaser of Fixed Spread Notes at such Closing a certificate of a
Senior Financial Officer of the Company specifying the interest rate on the
Fixed Spread Notes of such series (and accompanied by a copy of the applicable
Bloomberg screen from which the price of the Reference Treasury Security has
been determined). The Company will also give such purchaser of Fixed Spread
Notes notice of, and an opportunity to participate in, a conference telephone
call during which the interest rate is determined for such Closing.
<PAGE>
3
1.2. THE NEW FACILITY; THE PLEDGED ASSETS AND THE MORTGAGE.
The proceeds received by the Company from the sale of the Notes
together with proceeds from the sale of the Company's unsecured Senior Notes Due
2006 (the "UNSECURED NOTES"), will be applied to finance the acquisition of
approximately 1700 acres of land located in Spencer County, Indiana (the "NEW
FACILITY SITE"), and the construction on a portion of that site of a flat rolled
carbon and stainless steel finishing facility consisting of a cold rolling mill,
a hot dip galvanizing line, a continuous carbon and stainless steel pickling
line, a stainless steel annealing and pickling line, hydrogen annealing
facilities, a temper mill, and related storage, packaging and transportation
facilities (collectively the "NEW FACILITY ASSETS"). The New Facility Site and
the New Facility Assets are collectively called the "NEW FACILITY".
The Notes will be secured by a Mortgage, Security Agreement,
Assignment of Rents and Fixtures Filing dated on or before the date of the First
Closing, substantially in the form of Exhibit 1.2(a) (the "ORIGINAL MORTGAGE"),
from the Company to the Collateral Agent named below covering, inter alia, that
----- ----
portion of the New Facility Assets that comprises the cold rolling mill and the
hot dip galvanizing line (the "PLEDGED ASSETS"), the portion of the New Facility
Site (consisting of approximately three acres) on which the Company intends to
construct and install the Pledged Assets (the "PLEDGED ASSETS SITE"). NBD Bank,
N.A., Indianapolis, Indiana, will act as collateral agent (the "COLLATERAL
AGENT") pursuant to a Collateral Agency Agreement to be executed and dated on or
before the date of the First Closing, substantially in the form of Exhibit
1.2(b) (the "COLLATERAL AGENCY AGREEMENT").
Upon or immediately following Completion of the New Facility as
contemplated by Section 9.7, the Company may be required to supplement the
Original Mortgage to reflect any change in the location of the Pledged Assets
Site from that shown in the Original Mortgage, and as may otherwise be necessary
in order to describe more precisely the Pledged Assets, the Pledged Assets Site
and any other Mortgaged Property acquired or constructed after the First
Closing. The Original Mortgage as so supplemented from time to time is called
the "MORTGAGE".
<PAGE>
4
1.3. THE PARENT GUARANTEE AND SUBSIDIARY GUARANTEES.
(a) The Notes and the obligations of the Company hereunder and under
the Other Agreements will be unconditionally guaranteed by Holding pursuant to a
parent guarantee contained in Section 14 of this Agreement and the Other
Agreements (the "PARENT GUARANTEE").
(b) The obligations of the Obligors hereunder and under the Other
Agreements (including without limitation the obligations of Holding under the
Parent Guarantee) and the Notes will be unconditionally guaranteed by each
Person that after the date of this Agreement becomes a Subsidiary (other than a
Non-Recourse Subsidiary) and by each Person that is a Subsidiary (other than a
Non-Recourse Subsidiary) on the date of this Agreement if such Subsidiary
becomes a guarantor of any Debt of an Obligor after the date of this Agreement,
pursuant to a subsidiary guarantee substantially in the form of Exhibit 1.3
(individually a "SUBSIDIARY GUARANTEE" and collectively the "SUBSIDIARY
GUARANTEES").
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at one or
more of the Closings provided for in Section 3, Notes of the series and in the
principal amount or amounts specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS")
identical with this Agreement with the other purchasers named in Schedule A (the
"OTHER PURCHASERS"), providing for the sale at one or more of such Closings to
each of the Other Purchasers of Notes of the series and in the principal amount
or amounts specified opposite its name in Schedule A. Your obligation hereunder
and the obligations of the Other Purchasers under the Other Agreements are
several and not joint obligations and you shall have no obligation under any
Other Agreement and no liability to any Person for the performance or non-
performance by any Other Purchaser thereunder.
<PAGE>
5
3. CLOSINGS.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Willkie Farr & Gallagher, One
Citicorp Center, 153 East 53rd Street, New York, NY 10022 at 10:00 a.m., New
York time, at three closings (individually a "CLOSING" and respectively the
"FIRST CLOSING", the "SECOND CLOSING" and the "THIRD CLOSING"). The First
Closing shall be on June 16, 1997, or such other Business Day thereafter on or
prior to June 30, 1997 as may be agreed to by the Company and you (if you are
purchasing Notes at such Closing) and the Other Purchasers then purchasing
Notes. The Second Closing shall be on September 16, 1997, or such other
Business Day on or prior to September 30, 1997 as may be agreed to by the
Company and you (if you are purchasing Notes at such Closing) and the Other
Purchasers then purchasing Notes. The Third Closing shall be on December 16,
1997, or such other Business Day on or prior to December 31, 1997 as may be
agreed to by the Company and you (if you are purchasing Notes at such Closing).
At each Closing for your purchase of Notes the Company will deliver to you a
single Note of the series to be purchased by you at such Closing (or such
greater number of Notes of that series, in denominations of at least $500,000,
as you may request, in an aggregate principal amount equal to the principal
amount of Notes to be purchased by you at such Closing), dated the date of such
Closing and registered in your name (or in the name of your nominee), against
delivery by you of the purchase price therefor by wire transfer of immediately
available funds to PNC Bank Ohio, ABA No. 042-000398, for the Company's account
number 4110350675.
If the Company shall fail to tender the Notes to be purchased by you
at any Closing on or before the last date specified above in this Section 3 for
such Closing, or if any of the conditions specified in Section 4 with respect to
such Closing shall not have been fulfilled to your satisfaction on or before the
last date specified above for such Closing, you shall be relieved of all further
obligations to purchase Notes under this Agreement, without thereby waiving any
rights you may have by reason of such failure or such nonfulfillment (including
without limitation pursuant to Section 8.3).
4. CONDITIONS TO CLOSINGS.
4.1. FIRST CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the First Closing is subject to the fulfillment to your satisfaction, prior to
or at the First Closing, of the following conditions:
(a) Officer's Certificates. The Company shall have
----------------------
<PAGE>
6
delivered to you an Officer's Certificate, dated the date of the First
Closing, certifying that the conditions specified in paragraphs (d), (f)
and (g) of this Section 4.1 and paragraphs (a), (b) and (c) of Section 4.2
have been fulfilled. The Company shall have also delivered to you a
certificate of the Secretary or an Assistant Secretary of each of the
Obligors certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery
of the Notes, this Agreement and the Other Agreements, the Collateral
Agency Agreement and the Mortgage, as applicable.
(b) Opinions of Counsel. You shall have received opinions in form and
-------------------
substance satisfactory to you, dated the date of the First Closing, (i)
from Weil Gotshal & Manges LLP, special counsel for the Obligors,
substantially in the form set forth in Exhibit 4.1(b)(1) and covering such
other matters incident to the transactions contemplated hereby as you or
your counsel may reasonably request (and each Obligor hereby instructs its
counsel to deliver such opinion to you), (ii) from John G. Hritz, Esq.,
General Counsel of each of the Obligors, substantially in the form set
forth in Exhibit 4.1(b)(2) and covering such other matters incident to the
transactions contemplated hereby as you or your counsel may reasonably
request (and each of the Obligors hereby instructs its counsel to deliver
such opinion to you), (iii) from Willkie Farr & Gallagher, your special
counsel in connection with such transactions, substantially in the form set
forth in Exhibit 4.1(b)(3) and covering such other matters incident to such
transactions as you may reasonably request and (iv) from Bingham Summers
Welsh & Spilman, your special Indiana counsel, substantially in the form
set forth in Exhibit 4.1(b)(4) and covering such other matters incident to
such transactions as you may reasonably request.
(c) Private Placement Numbers. A Private Placement Number issued by
-------------------------
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners)
shall have been obtained for the Notes of each series.
(c) Changes in Corporate Structure. Neither Obligor shall have
------------------------------
changed its jurisdiction of incorporation or been a party to any merger or
consolidation (other than a merger or consolidation involving solely the
Company and Holding, in accordance with the provisions of Section 10.7 and
subject to modifications hereof, of the Other Agreements and of the
documents and instruments contemplated hereby and thereby necessary or
advisable in light of such transaction) or shall have succeeded to all or
any substantial part of the liabilities of any other entity (whether or not
the transaction would be permitted by Section 10.7, except as
<PAGE>
7
expressly permitted in this paragraph) at any time following the date of
the most recent financial statements referred to in Schedule 5.5 or
theretofore furnished to you pursuant to Section 7.1.
(e) Collateral Agency Agreement. The Collateral Agency Agreement
---------------------------
shall have been duly executed and delivered in the form hereinabove
recited, shall be in full force and effect and you shall have received a
counterpart thereof executed by the Collateral Agent.
(f) Original Mortgage, etc. Each of the following shall have
-----------------------
occurred:
(i) the Original Mortgage shall have been duly executed,
acknowledged and delivered by the Company substantially in the form
hereinabove recited, with such changes as may be necessary to comply
with local law as advised by Indiana counsel, and duly recorded in all
places necessary to perfect the Lien purported to be created thereby;
(ii) proper Financing Statements (Forms UCC-1 and UCC-2) shall
have been duly executed and filed under the Uniform Commercial Code in
all jurisdictions as may be necessary to perfect the Lien created by
the Original Mortgage (to the extent such perfection can be completed
by filing);
(iii) at least 15 days prior to the date of the First Closing
the Company shall have provided your special counsel and your special
Indiana counsel, for information purposes, with copies of all
available title insurance policies and surveys (whether as-built,
perimeter or otherwise) that the Company shall have obtained in
respect of the Pledged Asset Site or the New Facility Site and all
environmental assessments, reports or audits that the Company shall
have obtained in respect of the New Facility or the New Facility Site.
(iv) one or more mortgagee policies of title insurance issued by
the insurer or insurers which issued the policy or policies of title
insurance to the Company in connection with the acquisition of the New
Facility Site, and in face amounts not less than $10,000,000 in the
aggregate, together with all endorsements thereto reasonably required
by the Collateral Agent, insuring the Collateral Agent that the
Mortgage constitutes a valid first mortgage on the Pledged Asset Site
and the Pledged Assets constituting improvements to said Site, and
showing that title to the Pledged Asset Site is vested in the Company,
<PAGE>
8
subject only to Permitted Liens, together with evidence that the
premiums for such policies and endorsements have been paid in full.
(g) Issuance of Unsecured Notes. At least $550,000,000 aggregate
---------------------------
principal amount of Unsecured Notes shall have been issued and sold by the
Company.
4.2. CONDITIONS TO EACH CLOSING.
Your obligation to purchase and pay for the Notes to be purchased by
you hereunder at any Closing is subject to the fulfillment to your satisfaction,
prior to or at such Closing, of the following additional conditions:
(a) Performance; No Default. Each Obligor shall have performed all
-----------------------
agreements required on its part to be performed under this Agreement on or
prior to the date of such Closing; and No Default or Event of Default shall
have occurred and been continuing.
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Obligors in this Agreement shall be correct when made and
correct in all material respects at the time of such Closing.
(c) Progress on New Facility. After giving effect to the issuance of
------------------------
Notes at such Closing, the aggregate amount of the Company's cumulative
expenditures for, and then remaining contractual commitments in respect of,
the New Facility shall exceed 200% of the unpaid principal amount of the
Notes then outstanding.
(d) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
satisfactory to you and your special counsel, and you and your special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably request.
(e) Purchase Permitted By Applicable Law, etc. On the date of such
------------------------------------------
Closing your purchase of Notes shall (i) be permitted by the laws and
regulations of each jurisdiction to which you are subject, without recourse
to provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (ii) not violate any
applicable law or regulation (including without limitation Regulation G, T
or X of the Board of Governors of the Federal Reserve System) and (iii) not
subject you to any tax, penalty or liability
<PAGE>
9
under or pursuant to any applicable law or regulation then in effect but
not in effect on the date hereof. If requested by you, you shall have
received an Officer's Certificate certifying as to such matters of fact as
you may reasonably specify to enable you to determine whether such purchase
is so permitted.
(f) Sale of Notes to Other Purchasers. The Company shall sell to the
---------------------------------
Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at or before such Closing as specified in Schedule A.
(g) Payment of Special Counsel Fees. Without limiting the provisions
-------------------------------
of Section 16.1, the Company shall have paid on or before the date of such
Closing the fees, charges and disbursements of your special counsel and
special Indiana counsel referred to in Section 4.1(b) to the extent
reflected in statements of such counsel rendered to the Company at least
one Business Day prior to such Closing.
(h) Subsidiary Guarantees. The Company shall have provided a
---------------------
Subsidiary Guarantee, to be dated as of a date on or before such Closing,
from each Person required to execute a Subsidiary Guarantee pursuant to
Section 1.3(a) or 9.6.
4.3. ADDITIONAL CONDITIONS TO SECOND AND THIRD CLOSING.
Your obligation to purchase and pay for the Notes to be purchased by
you hereunder at the Second or Third Closing is subject to the fulfillment to
your satisfaction, prior to or at such Closing, of the following additional
conditions:
(a) Officer's Certificates. The Company shall have delivered to you
----------------------
an Officer's Certificate, dated the date of such Closing, certifying that
the conditions specified in paragraphs (a), (b) and (c) of Section 4.2 have
been fulfilled.
(b) Opinions of Counsel. You shall have received opinions in form and
-------------------
substance satisfactory to you, dated the date of such Closing, (i) from
Weil, Gotshal & Manges LLP, special counsel for the Obligors, substantially
in the form set forth in Exhibit 4.3(b)(1) and covering such other matters
incident to the transactions contemplated hereby as you or your counsel may
reasonably request (and each Obligor hereby instructs its counsel to
deliver such opinion to you), and (ii) from Willkie Farr & Gallagher, your
special counsel in connection with such transactions, substantially in the
form set forth in Exhibit 4.3(b)(2) and covering such other matters
incident to such transactions as you may reasonably request.
<PAGE>
10
5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.
The Obligors jointly and severally represent and warrant to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
Each Obligor is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Obligor has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and (in the case of the Company) the Notes, the
Collateral Agency Agreement and the Mortgage and to perform the provisions
hereof and thereof. Holding does not engage in any business and does not own
any assets other than the outstanding common stock of the Company.
5.2. AUTHORIZATION, ETC.
This Agreement, the Other Agreements, the Notes, the Collateral Agency
Agreement and the Mortgage have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note and the Mortgage will constitute, a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights and remedies generally and (b) general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). This Agreement and the Other Agreements have been duly
authorized by all necessary corporate action on the part of Holding and
constitute legal, valid and binding obligations of Holding enforceable against
Holding in accordance with their terms, except as such enforceability may be
limited as aforesaid.
<PAGE>
11
Disclosure.
The Company, through its agent, CS First Boston Corporation has
delivered to you a copy of a Direct Placement Memorandum dated October 1996 (the
"MEMORANDUM"), relating to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature of the business
and principal properties of the Company and its Subsidiaries and the New
Facility. The Memorandum and the documents listed in Schedule 5.3 (together
with the Memorandum, the "DISCLOSURE DOCUMENTS"), all of which have been
delivered to you by or on behalf of the Company, as supplemented by the
representations and warranties contained in this Section 5, and the financial
statements listed in Schedule 5.5, taken as a whole, do not as of the date
hereof (or as of the date of such Disclosure Document in the case of documents
of Holding filed with the Securities and Exchange Commission pursuant to the
Securities Act or the Exchange Act) contain any untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading in light of the circumstances under which they were made. Since
December 31, 1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except as disclosed in the Disclosure Documents or in the financial statements
listed in Schedule 5.5 and other changes that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. There is no
fact known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth herein or in the Disclosure
Documents.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES, ETC.
(a) Schedule 5.4 contains (except as noted therein) a complete and
correct list as of the date of this Agreement of the Company's (i) Subsidiaries,
showing, as to each Subsidiary, the correct name thereof, the jurisdiction of
its organization, whether it constitutes a Non-Recourse Subsidiary and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by Holding, the Company and each other Subsidiary,
(ii) Affiliates, other than Subsidiaries and other than Persons which are
Affiliates of the Company solely by virtue of their ownership of non-voting
equity securities of Holding, and (iii) directors and executive officers. The
Company is a Wholly-Owned Subsidiary of Holding and the only direct Subsidiary
of Holding. The Obligors agree to furnish you with a supplement to Schedule 5.4
prior to each Closing for your purchase of Notes and the representations in this
Section 5.4 as of each such Closing shall be deemed to be made with respect to
Schedule 5.4 as so supplemented prior to the date of such Closing.
<PAGE>
12
All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Company or any of its
Subsidiaries that owns outstanding shares of capital stock or similar equity
interests of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to you copies of the consolidated financial
statements of Holding and its consolidated Subsidiaries (including the Company)
listed in Schedule 5.5. All of said financial statements (including in each
case the related schedules and notes) fairly present in all material respects
the consolidated financial position of Holding and its consolidated Subsidiaries
as of the respective dates specified in such Schedule and the consolidated
results of their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP consistently applied
throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).
<PAGE>
13
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement, the Notes, the Collateral Agency Agreement and the Mortgage and by
Holding of this Agreement will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien (other than
the Lien of the Mortgage) in respect of any property of Holding, the Company or
any of its Subsidiaries under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which Holding, the Company or any of its Subsidiaries
is bound or by which Holding, the Company or any of its Subsidiaries or any of
their respective properties may be bound or affected, (ii) conflict with or
result in a breach of any of the terms, conditions or provisions of any order,
judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to Holding, the Company or any of its Subsidiaries or (iii) violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to Holding, the Company or any of its Subsidiaries.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required for the validity of the
execution, delivery or performance by the Company of this Agreement, the Notes,
the Collateral Agency Agreement or the Mortgage, by Holding of this Agreement or
by any Guarantor Subsidiary of its Subsidiary Guarantee, except filings and
recordings in respect of the Mortgage as contemplated by Section 9.7(d).
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits
or proceedings pending or, to the knowledge of the Obligors, threatened against
or affecting Holding, the Company or any Subsidiary or any property of the
Company or any Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Neither Holding, the Company nor any Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to
<PAGE>
14
have a Material Adverse Effect.
5.9. TAXES.
Holding and its Subsidiaries (including the Company) have filed all
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments (a)
currently payable without penalty or interest, (b) the amount of which is not
individually or in the aggregate Material or (c) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which Holding or a Subsidiary, as the case may
be, has established adequate reserves in accordance with GAAP. The Obligors
know of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of Holding and its Subsidiaries in respect of Federal, state or
other taxes for all fiscal periods are adequate. The consolidated Federal
income tax returns of Holding and its consolidated Subsidiaries for the fiscal
years ended December 31, 1994 and December 31, 1995 are currently being audited
by the Internal Revenue Service.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and marketable title to
their respective real properties and good and sufficient title to their
respective other properties, except for imperfections and defects in title as to
such real or other property as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, such title being in
each case free and clear of Liens prohibited by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
5.11. LICENSES, PERMITS, ETC.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
proprietary software, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict with
the rights of others;
(b) to the best knowledge of the Company, no product of the Company
infringes in any material respect any
<PAGE>
15
license, permit, franchise, authorization, patent, copyright, service mark,
proprietary software, trademark, trade name or other intangible
intellectual property right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
proprietary software, trademark, trade name or other intangible
intellectual property right owned or used by the Company or any of its
Subsidiaries and that is Material.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each of its ERISA Affiliates has operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The present value of the aggregate accrued benefits under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such accrued benefits. The actuarial assumptions specified in such
actuarial valuation report are reasonable in the aggregate, and no event has
occurred since the end of any such Plan's most recently ended plan year which
would materially adversely affect the funded status of such plan as described in
such actuarial valuation report.
(c) Neither the Company nor any ERISA Affiliate has incurred
withdrawal liabilities (or is subject to contingent withdrawal liabilities)
under section 4201 or 4204 of ERISA in respect of Multiemployer Plans, which
liabilities, individually or in the aggregate, would reasonably be expected to
have a
<PAGE>
16
Material Adverse Effect.
(d) Neither Obligor is a party in interest with respect to any
employee benefit plan disclosed by you in accordance with Section 6.2(b) or
6.2(e). The execution and delivery of this Agreement and the issuance and sale
of the Notes at any Closing hereunder will not involve any prohibited
transaction (as such term is defined in section 406(a) of ERISA and section
4975(c)(1)(A)-(D) of the Code), that could subject an Obligor or any holder of a
Note to any tax or penalty on prohibited transactions imposed under said section
4975 of the Code or by section 502(i) of ERISA. The representation by the
Obligors in the preceding sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of your representation in Section 6.2 as to the
source of the funds used to pay the purchase price of the Notes to be purchased
by you.
5.13. PRIVATE OFFERING BY THE OBLIGORS.
Neither Obligor nor anyone acting on its or their behalf has offered
the Notes or any similar securities for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than you, the Other Purchasers and not more than six
other Institutional Investors, each of which has been offered the Notes at a
private sale for investment. Neither Obligor nor anyone acting on its or their
behalf has taken, or will take, any action that would subject the offering or
sale of the Notes by the Obligors to the registration requirements of Section 5
of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the net proceeds of the sale of the Notes to
finance the acquisition, construction and installation of the New Facility. No
part of the proceeds from the sale of the Notes hereunder will be used, directly
or indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System
(12 CFR 207), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 5% of the value of the consolidated assets of the Company
and its Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 5% of the value of such assets. As used
in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING"
shall have the meanings assigned to them in said Regulation G.
<PAGE>
17
5.15. EXISTING DEBT; FUTURE LIENS.
(a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Company and its Subsidiaries (other than Non-Recourse
Subsidiaries) as of November 30, 1996, since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Debt of the Company or such Subsidiaries. Neither
the Company nor any Subsidiary is in default, and no waiver of default is
currently in effect, in the payment of any principal or interest on any Debt of
the Company or such Subsidiary, and no event or condition exists with respect to
any such Debt of the Company or any Subsidiary that would permit (or that with
the giving of notice or the lapse of time, or both, would permit) one or more
Persons to cause such Debt to become due and payable before its stated maturity
or before its regularly scheduled dates of payment. Holding has no outstanding
Debt except guarantees of Debt listed in Schedule 5.15.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by Section 10.2.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17. STATUS UNDER CERTAIN STATUTES.
Neither Obligor nor any Subsidiary is subject to regulation under the
Investment Company Act of 1940, as amended, the Public Utility Holding Company
Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal
Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
The Company has received no notice of any claim, and to its knowledge
no proceeding has been instituted raising any claim, against Holding, the
Company or any of its Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any Environmental Laws,
except, in each case, such as could not reasonably be expected to result in a
Material Adverse Effect. Except as otherwise disclosed to you in Schedule 5.18,
<PAGE>
18
(a) the Company has no knowledge of any facts which would give rise to
any claim, public or private, of violation of Environmental Laws or damage
to the environment emanating from, occurring on or in any way related to
real properties now or formerly owned, leased or operated by Holding, the
Company or any of its Subsidiaries or to other assets or their use, except,
in each case, such as could not reasonably be expected to result in a
Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them and has not disposed of any Hazardous Materials in
a manner contrary to any Environmental Laws in each case in any manner that
could reasonably be expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE OF NOTES.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
provided that the disposition of your or their property shall at all times be
within your or their control. You understand that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes under the Securities Act.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "SOURCE") to be used by
you to pay the purchase price of the Notes to be purchased by you at any Closing
hereunder:
(a) the Source is an "insurance company general account", as such term
is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July
12, 1995), and there is no plan with respect to which the aggregate amount
of such general account's reserves and liabilities for the contracts
<PAGE>
19
held by or on behalf of such plan and all other plans maintained by the
same employer (and affiliates thereof as defined in section V(a)(1) of PTE
95-60) or by the same employee organization (in each case determined in
accordance with PTE 95-60) exceeds or will exceed 10% of the total of all
reserves and liabilities of such general account (determined in accordance
with PTE 95-60, exclusive of separate account liabilities, plus any
applicable surplus) as of the date of such Closing; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except as you have disclosed to the Company in
writing pursuant to this paragraph (b), no employee benefit plan or group
of plans maintained by the same employer or employee organization
beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been identified to the Company in writing pursuant to this
paragraph (e); or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
<PAGE>
20
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to you (so long as you are obligated to
purchase Notes hereunder and thereafter so long as you shall hold any of the
Notes) and to each other holder of Notes that is an Institutional Investor:
Quarterly Statements -- within 45 days after the end of each fiscal
--------------------
quarter in each fiscal year of the Company (other than the last quarter of
each such fiscal year), duplicate copies of
(i) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in stockholders'
equity and cash flows of the Company and its consolidated
Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Quarterly
Report on Form 10-Q of Holding (or the Company, if the Company shall become
subject to the reporting obligations under Section 13 of the Exchange Act)
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(a) so long as such Report otherwise meets
the requirements of this Section 7.1(a);
(b) Annual Statements -- within 105 days after the end of each fiscal
-----------------
year of the Company and, duplicate copies of
(i) a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such
<PAGE>
21
year, and
(ii) consolidated statements of income, changes in stockholders'
equity and cash flows of the Company and its consolidated Subsidiaries
for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP,
and accompanied by
(A) an opinion thereon of independent public accountants of
recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the
financial position of the companies being reported upon and their
results of operations and cash flows and have been prepared in
conformity with GAAP, and that the examination of such accountants in
connection with such financial statements has been made in accordance
with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, and
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature
and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit),
provided that the delivery within the time period specified above of the
Annual Report on Form 10-K for such fiscal year (together with the annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) of Holding (or the Company, if the Company shall become
subject to the reporting obligations under Section 13 of the Exchange Act)
prepared in accordance with the requirements therefor and filed with the
Securities and Exchange Commission, together with the accountant's
certificate described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b) so long as such Report otherwise meets
the requirements of this Section 7.1(b);
<PAGE>
22
(c) SEC and Other Reports -- promptly upon their becoming available,
---------------------
one copy of (i) each financial statement, report, notice or proxy statement
sent by either Obligor or any Subsidiary (other than a Non-Recourse
Subsidiary) generally to its shareholders or to its creditors (other than
Holding, the Company or another Subsidiary), and (ii) each regular or
periodic report, each registration statement which becomes effective (other
than on Form S-8 or any successor form thereto and, except as expressly
requested by such holder, without exhibits), and each prospectus (other
than a re-offer prospectus under a registration statement on Form S-8) and
all amendments thereto filed by either Obligor or any Subsidiary (other
than a Non-Recourse Subsidiary) with the Securities and Exchange Commission
and of each press release and other statement made available generally by
either Obligor or any Subsidiary to the public concerning developments that
are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
-------------------------------------
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days after
-------------
a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
30-day notice thereof has not been waived pursuant to such regulations
as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by
<PAGE>
23
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or the penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other
such liabilities or Liens then existing, could reasonably be expected
to have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
-----------------------------------
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any Federal or state Governmental Authority relating to
any order, ruling, statute or other law or regulation that could reasonably
be expected to be Material to the Pledged Assets or to have a Material
Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
---------------------
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to construction of the New Facility or the ability
of the Company to perform its obligations hereunder and under the Notes and
the Mortgage or relating to the ability of Holding to perform its
obligations under the Parent Guarantee or a Guarantor Subsidiary to perform
its obligations under its respective Subsidiary Guarantee, in each case as
from time to time may be reasonably requested by you or any such holder of
Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance; Progress on New Facility -- (i) the
---------------------------------------------
information (including detailed calculations) required in order to
establish whether the Company was in compliance with the requirements of
Sections 10.1 through 10.10, inclusive, during the quarterly or annual
period covered by the statements then being furnished (including with
respect to each such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the
amount, ratio or percentage then in existence) and (ii) prior to
Completion, a brief summary of construction progress to date on the New
Facility and any material changes in the construction schedule or budget
(including a brief
<PAGE>
24
explanation of any such material changes); and
(b) Default -- a statement that such Senior Financial Officer has
-------
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions
of the Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date of
the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
(B) INSPECTION.
The Company shall permit your representative (so long as you are
obligated to purchase Notes hereunder and thereafter so long as you shall hold
any of the Notes) and the representatives of each other holder of Notes that is
an Institutional Investor (in each case in addition to inspection rights
contained in the Mortgage):
(a) No Default -- if no Default or Event of Default then exists, at
----------
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
officers of the Company, and (with the consent of the Company, which
consent will not be unreasonably withheld) its (or Holding's) independent
public accountants, and (with the consent of the Company, which consent
will not be unreasonably withheld) to visit the Company's principal
facilities (including the New Facility), all at such reasonable times and
as often as may be reasonably requested in writing, provided that, without
the prior written consent of the Company, which consent will not be
unreasonably withheld, neither you nor any such holder shall visit any such
properties of the Company more frequently than once during any calendar
year which commences after Completion; and
(b) Default -- if a Default or Event of Default then exists, at the
-------
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective
<PAGE>
25
officers, employees and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Subsidiaries), during normal
business hours and as often as may be requested.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal amount of
the Notes of each series at the final maturity thereof, the Company will make
required, and may make optional, prepayments in respect of the Notes as
hereinafter provided.
8.1. REQUIRED PREPAYMENTS.
On December 16, 2001, December 16, 2002 and December 16, 2003 the
Company will prepay an aggregate principal amount of the Notes of each series
equal to 25% of the aggregate principal amount (rounded to the nearest $1,000)
of Notes of such series originally issued under this Agreement and the Other
Agreements (or such lesser principal amount of the Notes of any series as shall
then be outstanding), such prepayment to be made at the principal amount to be
prepaid, together with accrued interest thereon to the date of such prepayment,
without premium and allocated as provided in Section 8.5, provided that upon any
partial prepayment of the Notes of any series pursuant to Section 8.2, 8.3 or
8.4, the principal amount of each required prepayment of the Notes of such
series becoming due under this Section 8.1 on and after the date of such
prepayment shall be reduced in the same proportion as the aggregate unpaid
principal amount of the Notes of such series is reduced as a result of such
prepayment.
<PAGE>
26
8.2. OPTIONAL PREPAYMENTS; MAKE-WHOLE COMPUTATIONS.
The Company may, at its option and upon notice as provided below,
prepay at any time after the Third Closing all, or from time to time any part
of, the Notes (in a minimum amount of $1,000,000 and otherwise in multiples of
$100,000) at the principal amount so prepaid, together with interest accrued
thereon to the date of such prepayment, plus the Make-Whole Amount for the Notes
of each series determined for the prepayment date with respect to such principal
amount to be prepaid. The Company will give each holder of Notes written notice
of each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify the date fixed for such prepayment (which shall be a Business
Day), the aggregate principal amount of the Notes of each series to be prepaid
on such date, the principal amount and series of Notes (if any) held by such
holder to be prepaid (determined in accordance with Section 8.5) and the
interest to be paid on the prepayment date with respect to such principal amount
being prepaid. Each prepayment pursuant to this Section 8.2 shall be applied to
all outstanding Notes (irrespective of series). Each such notice of prepayment
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount for the Notes of each series due in connection with
such prepayment (calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation.
Two Business Days prior to any prepayment of Notes pursuant to this
Agreement, the Company will deliver to each holder of the Notes being prepaid a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amounts as of the specified prepayment date.
<PAGE>
27
8.3. PREPAYMENT IN CONNECTION WITH FAILURE OF SECOND OR THIRD CLOSING.
If as of the last day specified in Section 3 for the Second or Third
Closing the purchases of Notes contemplated to be made at such Closing shall not
be made, other than by reason of the failure to satisfy the condition specified
in Section 4.2(f), the Company will give prompt written notice thereof to the
holders of all outstanding Notes, which notice shall (a) refer specifically to
this Section 8.3, (b) describe the circumstances of such failed Closing in
reasonable detail and specify the Special Prepayment Date and the Special
Prepayment Response Date (as respectively defined below) in respect thereof, (c)
offer to prepay all Notes at the price specified below on the date therein
specified (the "SPECIAL PREPAYMENT DATE"), which shall be a Business Day not
less than 15 nor more than 30 days after the date of such notice and (d) specify
the estimated Make-Whole Amount (if any) for the Notes of each series that is
applicable in connection with such prepayment (calculated as if the date of such
notice were the Special Prepayment Date), including details of such
calculations. Each holder of a Note will notify the Company of such holder's
acceptance or rejection of such offer by giving written notice of such
acceptance or rejection to the Company at least five days prior to the Special
Prepayment Date (the "SPECIAL PREPAYMENT RESPONSE DATE") except that the failure
by any such holder to respond in writing to such offer on or before the Special
Prepayment Response Date shall be deemed to be a rejection of such offer by such
holder in respect of such failed Closing.
On the Special Prepayment Date the Company will prepay all of the
Notes held by the holders as to which such offer has been accepted, at the
principal amount of each such Note, together with interest accrued thereon to
the Special Prepayment Date, plus the Make-Whole Amount for such Note.
If any holder shall reject such offer in respect of a failed Closing,
such holder shall be deemed to have waived its rights under this Section 8.3 to
require prepayment of all Notes held by such holder in respect of such Closing.
<PAGE>
28
8.4. PREPAYMENT IN CONNECTION WITH A CHANGE IN CONTROL
Within 30 days after the occurrence of a Change in Control, the
Company will give written notice thereof to the holders of all outstanding
Notes, which notice shall (a) refer specifically to this Section 8.4, (b)
describe the Change in Control in reasonable detail and specify the Change in
Control Prepayment Date and the Response Date (as respectively defined below) in
respect thereof and (c) offer to prepay all Notes at the price specified below
on the date therein specified (the "CHANGE IN CONTROL PREPAYMENT DATE"), which
shall be a Business Day not less than 45 nor more than 60 days after the date of
such notice. Each holder of a Note will notify the Company of such holder's
acceptance or rejection of such offer by giving written notice of such
acceptance or rejection to the Company at least five days prior to the Change in
Control Prepayment Date (the "RESPONSE DATE"), except that the failure by any
such holder to respond in writing to such offer on or before the Response Date
shall be deemed to be a rejection of such offer by such holder in respect of
such Change in Control.
On the Change in Control Prepayment Date the Company will prepay all
of the Notes held by the holders as to which such offer has been accepted, at
the principal amount of each such Note, together with interest accrued thereon
to the Change in Control Prepayment Date, plus a premium equal to 1% of such
principal amount.
If any holder shall reject such offer, such holder shall be deemed to
have waived its rights under this Section 8.4 to require prepayment of all Notes
held by such holder in respect of such Change in Control but not in respect of
any subsequent Change in Control.
8.5. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each required partial prepayment of the Notes of any
series pursuant to Section 8.1, the principal amount of the Notes of such series
to be prepaid shall be allocated among all the Notes of such series at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof and in the case of each partial prepayment of the
Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid
shall be allocated among all the Notes at the time outstanding in proportion as
aforesaid.
<PAGE>
29
8.6. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and Make-
Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and canceled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
8.7. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes.
Make-Whole Amount.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, provided that the Make-Whole Amount may in no
event be less than zero. For the purposes of determining the Make-Whole Amount,
the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or 8.3 or has
become or is declared to be immediately due and payable pursuant to Section
12.1, as the context requires.
"DISCOUNTED VALUE" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, 1.00% over the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business Day
preceding the
<PAGE>
30
Settlement Date with respect to such Called Principal, on the Bloomberg
Financial Markets News screen Px (bid side) or the equivalent screen
provided by Bloomberg Financial Markets News (or any nationally recognized
publicly available on-line source of similar market data) for actively
traded U.S. Treasury securities having a maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date, or (ii)
if such yields are not reported as of such time or the yields reported as
of such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (519) (or any comparable successor publication) for actively traded
U.S. Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such Settlement Date. Such
implied yield will be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between (1) the
actively traded U.S. Treasury security with a maturity closest to and
greater than the Remaining Average Life and (2) the actively traded U.S.
Treasury security with a maturity closest to and less than the Remaining
Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2, 8.3 or
12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of any
Note, the date on which such Called
<PAGE>
31
Principal is to be prepaid pursuant to Section 8.2 or 8.3 or has become or
is declared to be immediately due and payable pursuant to Section 12.1, as
the context requires.
9. AFFIRMATIVE COVENANTS.
The Company, and Holding to the extent specifically provided, jointly
and severally covenant that so long as you shall be obligated to purchase Notes
hereunder and thereafter so long as any of the Notes are outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including without limitation Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in each
case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.2. INSURANCE.
Without limiting any specific requirements of the Mortgage, the
Company will and will cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to the New
Facility and their respective other properties and businesses against such
casualties and contingencies, of such types, including business interruption, on
such terms and in such amounts (including deductibles, co-insurance and self-
insurance, if adequate reserves are maintained with respect thereto) as is both
(a) customary for integrated carbon steel producers of established reputation in
the United States and (b) consistent with the Company's past practices. In
furtherance of the foregoing the Company and its Subsidiaries will maintain
insurance coverages as to the same risks as are insured by and in amounts not
substantially less than the existing coverages (including without limitation as
to business interruption) described in Schedule 9.2(a) and coverages for the New
Facility as to the same risks as are insured by and in amounts not substantially
less than the coverages described in Schedule 9.2(b) (including without
limitation as to business interruption).
<PAGE>
32
9.3. MAINTENANCE OF PROPERTIES.
Without limiting the requirements of the Mortgage with respect to the
Mortgaged Property, the Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Company or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Sections 10.5 and 10.7, the Company
will at all times preserve and keep in full force and effect the corporate
existence of each of its Subsidiaries (unless merged into the Company or a
Subsidiary) and all rights and franchises (as franchisee) of the Company and its
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate
existence, right or franchise could not, individually or in the aggregate, have
a Material Adverse Effect.
<PAGE>
33
9.6. SUBSIDIARY GUARANTEES; RELEASE OF SUBSIDIARY GUARANTEES.
Forthwith after any Person becomes a Subsidiary (other than any Non-
Recourse Subsidiary) after the date of this Agreement or any Person that is a
Subsidiary (other than a Non-Recourse Subsidiary) on the date of this Agreement
becomes a guarantor of any Debt of an Obligor after the date of this Agreement
(if such Person is then a Subsidiary), the Company will cause such Person to
execute and deliver a Subsidiary Guarantee and promptly and in any event within
ten Business Days thereafter the Company will furnish each holder of the Notes
with a counterpart of such executed Subsidiary Guarantee, together with an
opinion of Weil Gotshal & Manges LLP or other counsel reasonably satisfactory to
the Required Holders (which opinion shall be reasonably satisfactory to the
Required Holders and may be subject to customary exceptions, qualifications and
limitations under the circumstances) to the effect that such Subsidiary
Guarantee has been duly authorized, executed and delivered by such Subsidiary
and is valid, binding and enforceable in accordance with its terms. The Company
will cause each Subsidiary Guarantee to remain in full force and effect at all
times after the execution and delivery thereof. Any Subsidiary the Equity
Interests of which are being disposed of in an Asset Disposition in accordance
with the provisions of Section 10.5 shall, at the Company's request, be
discharged from all of its obligations and liabilities under its Subsidiary
Guarantee by the Required Holders entering into a release in form and substance
reasonably satisfactory to the Required Holders, and you and each other holder
of a Note, by acceptance of such Note, agree to enter into such a satisfactory
release promptly upon request, except that this sentence shall not apply (a) if
a Default or Event of Default has occurred and is continuing either before or
after giving effect to such Asset Disposition, (b) to a Subsidiary if any amount
is then due and payable under its Subsidiary Guarantee or (c) to a Subsidiary
which at the time is a guarantor of any other Debt of the Company or another
Subsidiary party to a Subsidiary Guarantee that is not also concurrently being
released.
9.7. COMPLETION OF THE NEW FACILITY; PLEDGED ASSETS, ETC.
In order for the Company or a Significant Subsidiary that is a
Guarantor Subsidiary to be permitted to create, assume, incur or suffer to exist
any Lien upon or with respect to Inventory pursuant to Section 10.2(i), and in
any event within six months after Completion, the Company shall have fulfilled
the following additional conditions (the latest date as of which such conditions
are fulfilled is called the "COMPLETION CERTIFICATION DATE"):
(a) Completion of New Facility. The Company shall have acquired all
--------------------------
real property interests which are required for the ownership and operation
of the New Facility; and the
<PAGE>
34
Pledged Assets shall have been completed and installed and commercial
production from the Pledged Assets, substantially as described in the
Memorandum, shall have commenced (fulfillment of this condition is called
"COMPLETION").
(b) Authorizations, Etc. All material authorizations, consents,
-------------------
approvals, waivers, exemptions, variances, franchises, permissions, permits
and licenses of, and filings or declarations with, all Governmental
Authorities as are legally necessary in connection with the construction,
ownership and operation of the New Facility shall have been obtained or
made, shall be valid, in full force and effect, and not subject to appeal
or review.
(c) Pledged Assets Cost. The Collateral Agent and the holders of the
-------------------
Notes shall have been furnished with a letter or certificate addressed to
them from a nationally recognized independent accounting firm stating that
the aggregate amount expended by the Company for the then existing Pledged
Assets is equal to or greater than 200% of the unpaid principal amount of
the Notes at the time outstanding.
(d) The Mortgage. The Original Mortgage, as supplemented, and all
------------
necessary recordings and filings shall have been done in connection with
the Mortgage in order to perfect, preserve and protect the Lien (and the
priority thereof) created or intended to be created thereby and all taxes,
fees and other charges payable in connection with the recordation of the
Mortgage shall have been paid.
(d) Survey. The Collateral Agent shall have received an "as-built"
------
survey of the Pledged Asset Site (a copy of which shall have been received
by your special counsel and special Indiana counsel at least five days
prior to Completion Certification Date) made by a licensed surveyor
reasonably satisfactory to the Required Holders and certified to the
holders of the Notes and the Collateral Agent, showing access to the
Pledged Asset Site from an open public road by a valid and enforceable
easement and showing all improvements thereon constituting any part of the
Pledged Assets and no encroachments thereon (other than by other portions
of the New Facility) or encroachments by said improvements on adjoining
property (except for Permitted Liens) and showing no other state of facts
(other than the existence of Permitted Liens) which would render title to
the New Facility Site or the Pledged Asset Site and the Pledged Assets
unmarketable.
(f) Insurance. At least five days prior to the Completion
---------
Certification Date your special counsel shall have received: (i) an
Officer's Certificate, setting forth the insurance obtained by the Company
in respect of the New
<PAGE>
35
Facility and stating that such insurance is in full force and effect and in
compliance with Section 9.2 and the Mortgage, all premiums then due thereon
have been paid and (ii) a written report, dated reasonably near the
Completion Certification Date, of a firm of independent insurance brokers
of nationally recognized standing, which may be a firm regularly engaged by
the Company to implement its risk management program, as to such insurance
and stating that, in their opinion, such insurance is in compliance with
the provisions of Section 9.2 and the Mortgage and is comparable in all
respects with insurance carried by responsible owners and operators of
properties similar to the New Facility.
(g) Legal and Environmental Matters. The New Facility shall be in
-------------------------------
substantial compliance with the requirements of all laws, ordinances,
rules, regulations and agreements applicable thereto, including without
limitation all Environmental Laws.
(h) No Default. No Default or Event of Default shall have occurred
----------
and be continuing as of the Completion Certification Date.
(i) Officer's Certificate. The Company shall have delivered to each
---------------------
holder of the Notes and the Collateral Agent an Officer's Certificate,
dated the Completion Certification Date, certifying that the conditions
specified in paragraphs (a), (b), (c), (d), (g) and (h) above have been
satisfied.
(j) Opinions of Counsel. If a supplement to the Original Mortgage is
-------------------
executed and delivered as aforesaid in connection with Completion, each
holder of the Notes and the Collateral Agent shall have received an opinion
in form and substance reasonably satisfactory to the Required Holders,
dated the Completion Certification Date, from counsel for the Company as to
the due authorization, execution and delivery of such supplement and the
enforceability of the Mortgage (subject only to customary exceptions,
qualifications and limitations).
10. NEGATIVE COVENANTS.
The Obligors jointly and severally covenant that so long as you shall
be obligated to purchase Notes hereunder and thereafter so long as any of the
Notes are outstanding:
10.1. SUBSIDIARY DEBT.
The Company will not permit any Subsidiary to create, assume, incur,
guarantee or otherwise become liable in respect of any Debt or issue any
Preferred Equity Interests, except:
<PAGE>
36
(a) Debt secured by Liens permitted by clauses (b) through (k) of
Section 10.2;
(b) Debt or Preferred Equity Interests issued to and held by the
Company or a Wholly-Owned Subsidiary;
(c) Debt or Preferred Equity Interests of a Person outstanding on the
date on which such Person becomes a Subsidiary (other than Debt or
Preferred Equity Interests issued as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Person
becomes a Subsidiary);
(d) Debt or Preferred Equity Interests issued in exchange for, or the
proceeds of which are used to refund or refinance, Debt or Preferred Equity
Interests outstanding on the date of this Agreement or referred to in
clause (a) or (c) above, provided that (i) the principal amount or
liquidation value, as applicable, of such Debt or Preferred Equity
Interests so issued shall not exceed the principal amount or the
liquidation value, as applicable, of the Debt or Preferred Equity Interests
so exchanged, refunded or refinanced and (ii) the Debt or Preferred Equity
Interests so issued (A) shall have a Stated Maturity later than the Stated
Maturity of the Debt or Preferred Equity Interests being exchanged or
refinanced and (B) shall have Remaining Average Life equal to or greater
than the Remaining Average Life of the Debt or Preferred Equity Interests
being exchanged or refinanced;
(e) Non-Recourse Debt or Preferred Equity Interests of a Non-Recourse
Subsidiary;
Guarantees by any Guarantor Subsidiary in respect of the Notes or any
other Debt of the Company; and
(g) other Debt, provided that after giving effect to the incurrence of
any such Debt, the sum (without duplication) of (i) the aggregate amount of
Debt of all Subsidiaries (other than Debt owed by a Subsidiary to the
Company or to a Wholly-Owned Subsidiary and Subsidiary Guarantees in
respect of the Notes) plus (ii) the aggregate amount of Debt secured by
Liens permitted by Section 10.2(l) plus (iii) the aggregate Attributable
Debt in respect of sale and leaseback transactions of the Company and its
Subsidiaries entered into after the date of this Agreement (exclusive of
transactions permitted by Section 10.3(a)) does not exceed 15% of Adjusted
Consolidated Capitalization.
For purposes of this Section 10.1, a Subsidiary shall be deemed to
have incurred Debt or issued Preferred Equity Interests in respect of any Debt
previously owed to, or any
<PAGE>
37
Preferred Equity Interest previously held by, the Company or a Wholly-Owned
Subsidiary on the date the obligee or holder ceases for any reason to be the
Company or a Wholly-Owned Subsidiary.
10.2. LIENS.
The Company will not and will not permit any Subsidiary to create,
assume, incur or suffer to exist any Lien upon or with respect to any property
or assets, whether now owned or hereafter acquired, without making effective
provision (pursuant to documentation in form and substance reasonably
satisfactory to the Required Holders after a reasonable opportunity to review
such documentation) whereby the Notes shall be secured by such Lien equally and
ratably with or prior to any and all Debt and other obligations to be secured
thereby for so long as such Debt or other obligations are so secured, provided
that if such Debt or other obligation is subordinated the Lien securing such
Debt or other obligation shall be subordinated and junior to the Lien securing
the Notes with the same or lesser relative priority as such subordinated
obligation shall have with respect to the Notes. The foregoing shall not
prohibit (subject, however, to the final paragraph of this Section):
(a) Liens in respect of property of the Company or a Subsidiary
existing on the date of this Agreement and described in Schedule 5.15;
(b) the Mortgage and other Liens securing the Notes;
(c) Liens in respect of property acquired or constructed by the
Company or a Subsidiary after the date of this Agreement, which are created
at the time of or within 90 days after acquisition or completion of
construction of such property to secure Debt assumed or incurred to finance
all or any part of the purchase price or cost of construction of such
property, provided in any such case that
(i) no such Lien shall extend to or cover any other property of
the Company or such Subsidiary, as the case may be, and
(ii) the aggregate principal amount of Debt secured by all such
Liens in respect of any such property shall not exceed the cost of
such property and any improvements then being financed;
(d) Liens in respect of property acquired by the Company or a
Subsidiary after the date of this Agreement, existing on such property at
the time of acquisition thereof (and not created in anticipation thereof),
or in the case of any Person that after the date of this Agreement becomes
a Subsidiary or is consolidated with or merged with or into
<PAGE>
38
the Company or a Subsidiary or sells, leases or otherwise disposes of all
or substantially all of its property to the Company or a Subsidiary, Liens
existing at the time such Person becomes a Subsidiary or is so consolidated
or merged or effects such sale, lease or other disposition of property (and
not created in anticipation thereof), provided that in any such case no
such Lien shall extend to or cover any other property of the Company or
such Subsidiary, as the case may be;
(e) Liens securing Debt owed by a Subsidiary to the Company or to a
Wholly-Owned Subsidiary;
(f) Permitted Liens;
(g) Liens securing Debt issued to refinance Debt which has been
secured by a Lien otherwise permitted by this Section 10.2, provided that
no such Lien extends to or covers any property of the Company or any
Subsidiary not securing the Debt so refinanced, and the principal amount
(or accreted value) of the Debt so secured is not increased except as
otherwise permitted pursuant to this Section 10.2;
(h) Liens on the Accounts Receivable of the Company or any Significant
Subsidiary that is a Guarantor Subsidiary securing Debt under a Permitted
Credit Facility;
(i) after Completion of the Pledged Assets and subject to compliance
with the requirements of Section 9.7, Liens on Inventory of the Company or
any Significant Subsidiary that is a Guarantor Subsidiary securing Debt
under a Permitted Credit Facility, provided that any Lien on Intangible
Property included in such Inventory shall limit the rights of the holder of
such Lien with respect to Intangible Property to the use of such Intangible
Property to manufacture, process and sell other Inventory with respect to
which such holder has a Lien;
(j) Liens securing industrial revenue or pollution control bonds
issued by the Company, provided that (i) the aggregate principal amount of
Debt secured by such Liens in respect of any property financed shall not
exceed the lesser of cost or fair market value, as determined in good faith
by the Board of Directors of Holding, of such property and (ii) no such
Lien shall extend to or cover any other property of the Company or any of
its Subsidiaries;
(k) Liens on the Equity Interests or property of a Non-Recourse
Subsidiary securing Non-Recourse Debt of such Non-Recourse Subsidiary; and
(l) Liens which would otherwise be prohibited by clauses (a) through
(k) above unless the Notes are equally
<PAGE>
39
and ratably secured as aforesaid, provided that after giving effect to the
incurrence of the Debt secured by any such Lien, the sum (without
duplication) of (i) the aggregate amount of Debt secured by such Liens and
all other Liens (exclusive of Liens permitted by clauses (a) through (k)
above) plus (ii) the aggregate Attributable Debt in respect of sale and
leaseback transactions of the Company and its Subsidiaries entered into
after the date of this Agreement (exclusive of transactions permitted by
Section 10.3(a)) plus (iii) the aggregate amount of Debt of Subsidiaries
(other than Debt owed by a Subsidiary to the Company or to a Wholly-Owned
Subsidiary and Subsidiary Guarantees in respect of the Notes) does not
exceed 15% of Adjusted Consolidated Capitalization.
For purposes of this Section 10.2, a Subsidiary shall be deemed to
have created Liens in respect of any Debt previously owed to the Company or a
Wholly-Owned Subsidiary on the date the obligee ceases for any reason to be the
Company or a Wholly-Owned Subsidiary.
Notwithstanding the foregoing provisions, the Company will not and
will not permit any Subsidiary to create, assume or suffer to exist any Liens on
the Pledged Assets and the Mortgaged Property other than Permitted Liens and
Liens securing only the Notes.
10.3. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company will not and will not permit any Subsidiary to sell,
lease, transfer or otherwise dispose of (collectively, a "TRANSFER") any asset
on terms whereby the asset or a substantially similar asset is or may be leased
or reacquired by the Company or any Subsidiary, unless
the lease is between the Company and a Wholly-Owned Guarantor
Subsidiary or between Wholly-Owned Guarantor Subsidiaries;
(b) an amount equal to the proceeds from such transaction are applied
within 90 days after such transaction to prepay Debt (which repayment may,
but need not, include prepayment of Notes pursuant to Section 8.2);
(c) the Company or a Subsidiary could create a Lien under clauses (b)
through (k) of Section 10.2 on such property to secure Debt in an amount at
least equal to the Attributable Debt in respect of such transaction; or
(d) after giving effect to such transaction and the incurrence of
Attributable Debt in respect thereof, the sum (without duplication) of (i)
the aggregate unpaid amount of Debt secured by Liens permitted by Section
10.2(l) plus (ii)
<PAGE>
40
the aggregate unpaid amount of Debt of Subsidiaries (other than Debt owed
by a Subsidiary to the Company or to a Wholly-Owned Subsidiary and
Subsidiary Guarantees in respect of the Notes) plus (iii) the aggregate
Attributable Debt in connection with all sale and leaseback transactions of
the Company and its Subsidiaries entered into after the date of this
Agreement (exclusive of transactions permitted by clause (a) above), does
not exceed 15% of Adjusted Consolidated Capitalization.
10.4. MAINTENANCE OF CERTAIN FINANCIAL CONDITIONS.
(a) The Company will not permit Consolidated Net Worth at any time to
be less than the sum of (i) $500,000,000 plus (ii) 25% of Consolidated Net
Income for each fiscal year (beginning with the fiscal year ending after
December 31, 1996) for which Consolidated Net Income is positive.
(b) The Company will not permit Consolidated Debt to exceed (i) 65% of
Consolidated Capitalization at any time during the period commencing on the date
of the First Closing and ending on December 31, 2001 or (ii) 55% of Consolidated
Capitalization at any time thereafter.
10.5. ASSET DISPOSITIONS.
The Company will not and will not permit any Subsidiary (other than a
Non-Recourse Subsidiary) to, directly or indirectly, make any Asset Disposition
other than
(a) Asset Dispositions of Pledged Assets to the extent permitted by
the Mortgage; or
(b) other Asset Dispositions not involving the Pledged Assets,
provided that in each case
immediately before and after giving effect thereto, no Default or
Event of Default shall have occurred and be continuing, and
(ii) the aggregate net book value of property or assets disposed
of in such Asset Disposition and all other Asset Dispositions by the
Company and its Subsidiaries during the immediately preceding twelve
months does not exceed 15% of Consolidated Capitalization (as of the
last day of the quarterly accounting period ending on or most recently
prior to the last day of such twelve month period),
and provided further that for purposes of clause (ii) above there shall be
excluded the net book value of property or assets disposed of in an Asset
Disposition if and to the extent such Asset Disposition is made for cash,
payable in
<PAGE>
41
full upon the completion of such Asset Disposition, and an amount equal to
the net proceeds realized upon such Asset Disposition is applied by the
Company or such Subsidiary, as the case may be, (x) within one year after
the effective date of such Asset Disposition to reinvest in similar
categories of property or assets for use in the business of the Company and
its Subsidiaries (other than Non-Recourse Subsidiaries) or (y) within 90
days after the effective date of such Asset Disposition to repay Debt
(which repayment may, but need not, include prepayment of Notes pursuant to
Section 8.2).
10.6. LIMITATION ON RESTRICTED PAYMENTS.
Holding will not and will not permit any Subsidiary of Holding to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or in respect of, or make any distribution to the holders of, Equity
Interests of Holding (except dividends or distributions payable solely in its
Non-Convertible Equity Interests or in options, warrants or other rights to
acquire its Non-Convertible Equity Interests and except dividends or
distributions payable to the Company or a Wholly-Owned Guarantor Subsidiary),
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of Holding, (iii) declare or pay any dividend or make any distribution
on or in respect of, or make any distribution to holders of, Equity Interests of
any Subsidiary of Holding (other than with respect to any such Equity Interests
held by Holding or a Wholly-Owned Guarantor Subsidiary), (iv) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition), or (v) make any Investment
other than Permitted Investments (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
is called a "RESTRICTED PAYMENT") unless upon giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be
continuing, and
(b) the aggregate amount of all Restricted Payments made or declared,
directly or indirectly, during the period from October 1, 1996 to and
including the date of such payment or declaration (the "COMPUTATION
PERIOD") would not exceed the sum of
(i) 50% of Consolidated Net Income accrued during the period
(treated as one accounting period) from October 1, 1996 through the
last full fiscal quarter
<PAGE>
42
for which quarterly or annual financial statements are available prior
to the date of such Restricted Payment (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit), plus
----
(ii) the aggregate Net Cash Proceeds received by Holding during
the Computation Period from the issue or sale of its Equity Interests
(other than Redeemable Equity Interests or Exchangeable Equity
Interests and other than sales to a Subsidiary of Holding or an
employee stock ownership plan or similar trust), plus
----
(iii) the aggregate Net Cash Proceeds received by Holding
during the Computation Period from the issue or sale of its Equity
Interests (other than Redeemable Equity Interests or Exchangeable
Equity Interests) to an employee stock ownership plan, provided that
if such employee stock ownership plan issues any Debt only to the
extent that any such proceeds are equal to any increase in
Consolidated Net Worth resulting from principal repayments made by
such employee stock ownership plan with respect to Debt issued by it
to finance the purchase of such Equity Interests, plus
(iv) the amount by which Consolidated Debt is reduced on the
Holding's balance sheet upon the conversion or exchange (other than by
a Subsidiary of Holding) during the Computation Period of any Debt of
the Company or any of its Subsidiaries convertible or exchangeable for
Equity Interests (other than Redeemable Equity Interests or
Exchangeable Equity Interests) of Holding (less the amount of any
cash, or other property, distributed by Holding or any of its
Subsidiaries upon such conversion or exchange).
The limitations on Restricted Payments in clause (b) above shall not
prohibit: (A) any purchase or redemption of Equity Interests of Holding or
Subordinated Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Equity Interests of Holding (other than
Redeemable Equity Interests or Exchangeable Equity Interests and other than
Equity Interests issued or sold to a Subsidiary or an employee stock ownership
plan), provided that (x) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (y) the Net Cash Proceeds
from such sale shall be excluded from clauses (b)(ii) and (b)(iii) above; (B)
any purchase or redemption of Subordinated Obligations (other than Redeemable
Equity Interests) made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Debt of Holding other than to a Subsidiary of
Holding and provided that such Debt (x) shall be subordinated to the Notes to at
least the same extent as the Subordinated Obligations so exchanged, purchased or
redeemed, (y) shall have a Stated Maturity later
<PAGE>
43
than the Stated Maturity of the Notes and (z) shall have a Remaining Average
Life greater than the Remaining Average Life of the Notes and provided further
that such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; (C) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted by Section 10.6,
provided that such purchase or redemption shall be excluded in the calculation
of the amount of Restricted Payments; (D) dividends paid within 60 days after
the date of declaration if at such date of declaration such dividend would have
complied with this provision, provided that such dividend shall be included in
the calculation of the amount of Restricted Payments; (E) any repurchase by
Holding of employee stock granted under an employee stock option plan, provided
that the aggregate amount of such repurchases in any calendar year shall not
exceed $5,000,000 (it being understood that the excess of any such amounts
permitted to be expended under this subclause (E) during any calendar year over
the amount actually expended during such period shall not be carried forward)
and provided further that such repurchase shall be included in the calculation
of the amount of Restricted Payments; or (F) any purchase, repurchase,
redemption, defeasance or other acquisition by any Non-Recourse Subsidiary of
Holding of Non-Recourse Debt of such Non-Recourse Subsidiary, provided that the
amount of such purchase, repurchase, redemption, defeasance or other acquisition
shall be excluded in the calculation of the amount of Restricted Payments.
The limitations on Restricted Payments in clause (b) above shall not
prohibit the declaration and payment by Holding of one or more dividends on or
before December 31, 1998 in an aggregate amount not to exceed $50,000,000,
provided that all such dividends shall be excluded in the calculation of the
amount of Restricted Payments.
10.7. MERGER, CONSOLIDATION, ETC.
The Obligors will not and will not permit any Subsidiary (other than a
Non-Recourse Subsidiary) to consolidate with or merge with any other corporation
or convey, transfer or lease all or substantially all of its assets in a single
transaction or series of transactions to any Person unless:
(a) the successor formed by such consolidation or the survivor of such
merger or the Person that acquires by conveyance, transfer or lease
substantially all of the assets of Holding, the Company or a Subsidiary, as
the case may be, shall be a solvent corporation organized and existing
under the laws of the United States or any State thereof (including the
District of Columbia);
(b) in the case of any such transaction involving the Company, if the
Company is not the continuing, surviving or acquiring corporation (the
"SURVIVING CORPORATION"), the
<PAGE>
44
surviving corporation shall have executed and delivered to each holder of
the Notes its assumption of the due and punctual performance and observance
of all obligations of the Company under this Agreement, the Notes, the
Collateral Agency Agreement and the Mortgage;
(c) in the case of any transaction involving Holding, if the surviving
corporation is not Holding, the surviving corporation shall have executed
and delivered to each holder of the Notes its assumption of the due and
punctual performance and observance of all obligations of Holding under
this Agreement (including the Parent Guarantee);
(d) in the case of any such transaction involving a Subsidiary, if the
surviving corporation is not the Company or such Subsidiary, the surviving
corporation (i) shall be Controlled by the Company at least to the same
extent as such Subsidiary and (ii) shall have executed and delivered to
each holder of the Notes a Subsidiary Guarantee and otherwise complied with
the requirements of Section 9.6;
(e) the Company shall have caused to be delivered to each holder of
the Notes an opinion of nationally recognized counsel reasonably
satisfactory to the Required Holders to the effect that all agreements or
instruments effecting such assumption are enforceable in accordance with
their terms and comply with the terms hereof; and
(f) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing and, if such
transaction involves a Change in Control, the Company shall have given
notice in respect thereof and otherwise be in compliance with its
obligations under Section 8.4 with respect to such Change in Control.
Notwithstanding the foregoing, a Subsidiary may consolidate with or merge with
the Company or another Subsidiary (other than a Non-Recourse Subsidiary) or
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to the Company or another Subsidiary
(other than a Non-Recourse Subsidiary), provided that in the case of any such
transaction with another Subsidiary, such other Subsidiary is Controlled by the
Company at least to the same extent as such Subsidiary.
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45
10.8. TRANSACTIONS WITH AFFILIATES.
The Company will not and will not permit any Subsidiary to enter into
directly or indirectly any transaction or Material group of related transactions
(including without limitation the purchase, lease, sale or exchange of
properties of any kind or the rendering of any service) with any Affiliate
(other than the Company or a Wholly-Owned Subsidiary that is not a Non-Recourse
Subsidiary), except in the ordinary course and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
10.9. LINES OF BUSINESS.
The Company will not and will not permit any Subsidiary to engage to
any substantial extent in any business other than the business in which the
Company and its Subsidiaries are engaged on the date of this Agreement as
described in the Memorandum and business reasonably related thereto or in
furtherance thereof. Holding will not engage in any business and will not own
any assets other than the outstanding common stock of the Company.
10.10. LIMITATIONS ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES.
(a) The Company will not and will not permit any Subsidiary to create
or permit to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary to (i) pay dividends or make any other
distributions on its Equity Interests or pay any Debt or other obligation owed
to the Company or any Subsidiary, (ii) make any Investment in the Company or any
Subsidiary or (iii) transfer any of its property or assets to the Company or any
Subsidiary.
(b) Notwithstanding paragraph (a) above, the Company may and may
permit any Subsidiary to suffer to exist any such encumbrance or restriction:
(i) pursuant to an agreement in effect at or entered into on the date
of this Agreement and described on Schedule 5.15;
with respect to a Subsidiary pursuant to an agreement relating to any
Debt issued by such Subsidiary on or prior to the date on which such
Subsidiary became a Subsidiary (other than Debt issued as consideration in,
or to provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary) and outstanding
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46
on such date;
(iii) pursuant to an agreement effecting a refinancing of Debt
issued pursuant to an agreement referred to in clause (i) or (ii) above or
contained in any amendment to an agreement referred to in clause (i) or
(ii) above, provided that the encumbrances and restrictions contained in
any of such refinancing agreement or amendment are no less favorable to the
holders of the Notes than encumbrances and restrictions contained in such
agreements;
(iv) consisting of customary nonassignment provisions in leases
governing leasehold interests to the extent such provisions restrict the
transfer of the lease;
(v) in the case of clause (iii) of this paragraph (a) above,
restrictions contained in security agreements securing Debt of a Subsidiary
otherwise permitted under this Agreement, to the extent such restrictions
restrict the transfer of the property subject to such security agreements;
and
(vi) relating to a Non-Recourse Subsidiary.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) default in the payment of any principal or Make-Whole Amount, if
any, on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise; or
(b) default in the payment of any interest on any Note for more than
ten Business Days after the same becomes due and payable; or
(c) default in the performance of or compliance with any term
contained in Section 7.1(d), 8.3, 8.4 or Sections 10.1 to 10.7, inclusive,
or a Mortgage Default (as defined in the Original Mortgage), and, in the
case of any such default under Section 10.4, such default shall have
continued for a period of 30 days after a Responsible Officer obtains
knowledge thereof (if and so long as the Company is proceeding diligently
and in good faith, by issuing equity securities or otherwise, to remedy
such default under Section 10.4 during such 30-day period); or
(d) default in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a), (b) and
(c) of this Section 11) and such default is not remedied within 30 days
after a Responsible
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47
Officer obtains knowledge of such default, or default in the performance of
or compliance with any term contained in the Original Mortgage (other than
a Mortgage Default) and such default is not remedied within 30 days after
the Collateral Agent gives notice thereof to the Company; or
(e) any representation or warranty made in writing by or on behalf of
either Obligor or by any officer of either Obligor in this Agreement or in
any writing furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any material respect on
the date as of which made; or
(f) (i) Holding, the Company or any Significant Subsidiary is in
default (as principal or as guarantor or other surety) in the payment of
any principal of or premium or make-whole amount or interest on any Debt
beyond any period of grace provided with respect thereto, or (ii) Holding,
the Company or any Significant Subsidiary is in default in the performance
of or compliance with any term of any evidence of any Debt or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Debt has become, or has been declared (or one or more Persons are entitled
to declare such Debt to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii) as a consequence
of the occurrence or continuation of any event or condition (other than the
passage of time or the right of the holder of Debt to convert such Debt
into equity interests or a sale of assets or other transaction that is
permitted if made in connection with a repayment of Debt), the Company or
any Subsidiary has become obligated to purchase or repay Debt before its
regular maturity or before its regularly scheduled dates of payment,
provided that the aggregate amount of Debt described in clauses (i), (ii)
and (iii) above shall be at least $10,000,000; or
(g) Holding, the Company or any Significant Subsidiary (i) is
generally not paying, or admits in writing its inability to pay, its debts
as they become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or
other similar law of any jurisdiction, (iii) makes an assignment for the
benefit of its creditors, (iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it
or with respect to any substantial part of its property, (v) is adjudicated
as insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
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48
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by Holding, the Company or any
Significant Subsidiary, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency law
of any jurisdiction, or ordering the dissolution, winding-up or liquidation
of Holding, the Company or any such Subsidiary, or any such petition shall
be filed against the Company or any such Subsidiary and such petition shall
not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money aggregating
in excess of $10,000,000 are rendered against one or more of Holding, the
Company and its Significant Subsidiaries which judgments are not, within 60
days after entry thereof, bonded, paid, discharged or stayed pending
appeal, or are not discharged within 60 days after the expiration of such
stay; or
(j) a material provision of the Parent Guarantee, a Subsidiary
Guarantee or the Mortgage shall cease to be in full force and effect and
enforceable in accordance with its terms for any reason whatsoever or
Holding, the Company or a Subsidiary or any Subsidiary (or any Person at
its authorized direction or on its behalf) shall assert in writing that the
Parent Guarantee or a Subsidiary Guarantee or the Mortgage is invalid or
unenforceable for any reason whatsoever, or the Notes shall cease to be
entitled to the benefits of the Mortgage for any reason; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan subject to Title IV of ERISA shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or appoint a
trustee to administer any Plan subject to Title IV of ERISA or the PBGC
shall have notified the Company or any ERISA Affiliate that a Plan subject
to Title IV of ERISA may become a subject of any such proceedings, (iii)
the aggregate "amount of unfunded benefit liabilities" (within the meaning
of section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $1,000,000, (iv) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
<PAGE>
49
provisions of the Code relating to employee benefit plans, (v) the Company
or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the
Company or any Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect.
As used in Section 11(k), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 has occurred, all the Notes then outstanding
shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Majority Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes at the time outstanding to be immediately due
and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus (x) all accrued and
unpaid interest thereon and (y) the Make-Whole Amount for the Notes of each
series determined in respect of such principal amount (to the full extent
permitted by applicable law), shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all of
which are hereby waived. The Company acknowledges, and the parties hereto
agree, that each holder of a Note has the right to maintain its investment in
the Notes free from repayment by the Company (except as herein specifically
provided) and that the provision for payment of a Make-Whole Amount by the
Company in the event that the Notes are prepaid or are accelerated as a result
of an Event of Default, is intended to provide compensation for the deprivation
of such right under
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such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the Required Holders, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Notes, all
principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Make-Whole Amount, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
the non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this Section
12.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred in
any enforcement or collection under this Section 12, including without
limitation reasonable attorneys' fees, expenses and disbursements.
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51
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the name
and address of each transferee of one or more Notes shall be registered in such
register. Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as the owner
and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary. The Company shall give to
any holder of a Note that is an Institutional Investor promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), within five Business
Days thereafter the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) of the same series in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request. Each such
new Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Note or dated the date of the surrendered Note
if no interest shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $1,000,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $1,000,000.
You agree that the Company shall not be required to register the
transfer of any Note to any Person (other than your nominee) or to any separate
account maintained by you unless the Company receives from the transferee a
representation to the Company (and appropriate information as to any separate
accounts or other matters) to the same or similar effect with respect to the
transferee as is contained in Section 6.2 or other assurances reasonably
satisfactory to the Company that such transfer does
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52
not involve a prohibited transaction (as such term is used in Section 5.12(e).
You shall not be liable for any damages in connection with any such
representations or assurances provided to the Company by any transferee.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a
nominee for, an original Purchaser or any other Institutional Investor,
such Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
within five Business Days thereafter the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note of the same series, dated and
bearing interest from the date to which interest shall have been paid on such
lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
14. PARENT GUARANTEE.
14.1. GUARANTEE.
(a) Guaranteed Obligations. The Parent hereby unconditionally and
----------------------
irrevocably guarantees, as primary obligor and not merely as surety,
(i) the punctual payment when due, whether at stated maturity, by
prepayment, by acceleration or otherwise, of all obligations of the Company
arising under this Agreement, the Other Agreements, the Mortgage and the
Notes, whether for principal, interest (including without limitation
interest on any overdue principal, premium and interest at the rate
specified in the Notes and interest accruing or becoming owing both prior
to and subsequent to the commencement of any bankruptcy, reorganization or
similar proceeding involving either Obligor), Make-Whole Amount, fees,
expenses, indemnification or otherwise, and
the due and punctual performance and observance by the
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53
Company of all covenants, agreements and conditions on its part to be
performed and observed under this Agreement, the Other Agreements, the
Notes and the Mortgage.
The obligations guaranteed by this Parent Guarantee are sometimes called the
"GUARANTEED OBLIGATIONS".
Without limiting the generality of the foregoing, this Parent
Guarantee guarantees, to the extent provided herein, the payment of all amounts
which constitute part of the Guaranteed Obligations and would be owed by any
other Person to any holder of a Note but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving such Person.
(b) Guarantee Absolute. This Parent Guarantee constitutes a present
------------------
and continuing guarantee of payment and not of collectability and the Parent
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of this Agreement, the Other Agreements, the Mortgage and the
Notes, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of any holder of a
Note with respect thereto. The obligations of the Parent under this Parent
Guarantee are independent of the Guaranteed Obligations, and a separate action
or actions may be brought and prosecuted against the Parent to enforce this
Parent Guarantee, irrespective of whether any action is brought against the
Issuer or any other Person liable for the Guaranteed Obligations or whether the
Issuer or any other such Person is joined in any such action or actions. The
liability of the Parent under this Parent Guarantee shall be primary, absolute,
irrevocable, and unconditional irrespective of:
(i) any lack of validity or enforceability of any Guaranteed
Obligation, this Agreement, the Other Agreements, the Notes, the Collateral
Agency Agreement, the Mortgage or any agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from this Agreement, the
Other Agreements, the Notes, the Collateral Agency Agreement, the Mortgage
or this Parent Guarantee;
(iii) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure by the Parent or other Person liable, or any other guarantee, for
all or any of the Guaranteed Obligations;
any manner of application of collateral, or proceeds thereof, to all
or any of the Guaranteed Obligations, or any
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54
manner of sale or other disposition of any collateral or any other assets
of the Company or any other Subsidiary;
(v) any change, restructuring or termination of the corporate
structure or existence of the Company or any other Subsidiary; or
(vi) any other circumstance (including without limitation any statute
of limitations) that might otherwise constitute a defense, offset or
counterclaim available to, or a discharge of, the Company or Holding.
This Parent Guarantee shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any of the Guaranteed
Obligations is rescinded or must otherwise be returned by any holder of a Note,
or any other Person upon the insolvency, bankruptcy or reorganization of the
Issuer or otherwise, all as though such payment had not been made.
(c) Waivers by the Parent. The Parent hereby irrevocably waives, to
---------------------
the extent permitted by applicable law:
(i) promptness, diligence, presentment, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and this
Parent Guarantee;
(ii) any requirement that any holder of a Note or any other Person
protect, secure, perfect or insure any Lien or any property subject thereto
or exhaust any right or take any action against the Company or any other
Person or any collateral;
(iii) any defense, offset or counterclaim arising by reason of any
claim or defense based upon any action by any holder of a Note;
(iv) any duty on the part of any holder of a Note to disclose to the
Parent any matter, fact or thing relating to the business, operation or
condition of any Person and its assets now known or hereafter known by such
holder; and
(v) any rights by which it might be entitled to require suit on an
accrued right of action in respect of any of the Guaranteed Obligations or
require suit against the Company or the Parent or any other Person.
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55
14.2. SUBROGATION AND CONTRIBUTION.
The Parent shall not assert, enforce, or otherwise exercise (a) any
right of subrogation to any of the rights, remedies, powers, privileges or liens
of any holder of a Note or any other beneficiary against the Company or any
other obligor on the Guaranteed Obligations or any collateral or other security,
or (b) any right of recourse, reimbursement, contribution, indemnification, or
similar right against the Company, and the Parent hereby waives any and all of
the foregoing rights, remedies, powers, privileges and the benefit of, and any
right to participate in, any collateral or other security given to any holder of
a Note or any other beneficiary to secure payment of the Guaranteed Obligations.
15. PAYMENTS ON NOTES.
15.1. PLACE OF PAYMENT.
Subject to Section 15.2, payments of principal, premium, if any, and
interest becoming due and payable on the Notes shall be made at the principal
office of Citibank, N.A. in New York City. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in New York City or the principal office of a bank or trust company in
New York City.
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56
15.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 15.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 15.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 15.2 to any Institutional Investor that is the direct
or indirect transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have made in this
Section 15.2.
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EXPENSES, ETC.
16.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company agrees to pay all costs and expenses (including reasonable
attorneys' fees of your special counsel and your special Indiana counsel and, if
reasonably required, other counsel) incurred by you and each Other Purchaser or
holder of a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement, the
Notes, the Mortgage or the Collateral Agency Agreement (whether or not such
amendment, waiver or consent becomes effective), including without limitation:
(a) the fees and expenses of ICF Kaiser Engineers Group for their due diligence
analysis of the New Facility, (b) the costs and expenses incurred in connection
with the satisfaction by the Company of the conditions specified in Section 9.7
in respect of Completion of the Pledged Assets, (c) the fees and expenses of the
Collateral Agent, (d) all filing and recording fees and taxes in connection with
the Mortgage, (e) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this
Agreement, the Notes or the Mortgage or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement, the Notes, the Mortgage or the Collateral Agency Agreement, or by
reason of being a holder of any Note, and (f) the costs and expenses, including
financial advisors' fees, incurred in connection with a significant
recapitalization of the Company or the insolvency or bankruptcy of the Company
or any Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes, the Mortgage and the
Collateral Agency Agreement. The Company agrees to pay, and will save you and
each other holder of a Note harmless from, all claims in respect of any fees,
costs or expenses if any, of brokers and finders (other than those retained by
you).
In furtherance of the foregoing, promptly after the execution and
delivery of this Agreement, and thereafter on the date of each Closing, the
Company will pay or cause to be paid the reasonable fees and disbursements of
your special counsel and your special Indiana counsel which are reflected in the
statements of such special counsel submitted to the Company after execution and
delivery of this Agreement, and thereafter on or before the date of a Closing.
The Company will also pay, promptly upon receipt of supplemental statements
therefor, reasonable additional fees, if any, and disbursements of such special
counsel in connection with the transactions hereby contemplated (including
disbursements unposted as of the date of a statement to the extent such
disbursements exceed estimated disbursements covered by prior statements and
additional fees and disbursements in connection with the matters described in
Section
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9.7).
Survival.
The obligations of the Company under this Section 16 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of either Obligor pursuant to this Agreement shall be
deemed representations and warranties of the Obligors under this Agreement.
Subject to the preceding sentence, this Agreement, the Notes, the Mortgage, the
Collateral Agency Agreement and the Subsidiary Guarantees embody the entire
agreement and understanding between you and the Obligors and supersede all prior
agreements and understandings relating to the subject matter hereof.
18. AMENDMENT AND WAIVER.
18.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 22, or any defined term (as it is used
in said Sections), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding, (i) subject to the provisions
of Section 12 relating to acceleration or rescission, change the amount or time
of any prepayment or payment of principal of, or change the rate or the time of
payment or method of computation of interest or of the Make-Whole Amount on, the
Notes of either series, (ii) change the percentage of the principal amount of
the Notes the holders of which are required to consent to any such amendment or
waiver, or (iii) amend any of Sections 8, 9.7, 11(a), 11(b), 12, 14, 18 or 21.
<PAGE>
59
18.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Obligors will provide each holder of the Notes
------------
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Obligors will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 18 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. Neither of the Obligors will directly or indirectly pay
-------
or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder of
Notes as consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.
18.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 18
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Obligors without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Obligors and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall operate
as a waiver of any rights of any holder of such Note. As used herein, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
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60
18.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to either Obligor, to the Company at its address set forth
at the beginning hereof to the attention of the Chief Financial Officer, or
at such other address as the Company shall have specified to the holder of
each Note in writing.
Notices under this Section 19 will be deemed given only when actually received.
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61
20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at any Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Obligors agree and stipulate that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 20
shall not prohibit either Obligor or any other holder of Notes from contesting
any such reproduction to the same extent that it could contest the original, or
from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
<PAGE>
62
CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, "CONFIDENTIAL INFORMATION" means
information delivered to you by or on behalf of an Obligor or any Subsidiary in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to you prior
to the time of such disclosure, (b) subsequently becomes publicly known through
no act or omission by you or any person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary or (d) constitutes financial statements delivered to you under
Section 7.1 that are otherwise publicly available. You will maintain the
confidentiality of such Confidential Information in accordance with procedures
adopted by you in good faith to protect confidential information of third
parties delivered to you, provided that you may deliver or disclose Confidential
Information to (i) your directors, officers, trustees, employees, agents,
attorneys and affiliates (to the extent such disclosure reasonably relates to
the administration of the investment represented by your Notes), (ii) your
financial advisors and other professional advisors whose duties require them to
hold confidential the Confidential Information substantially in accordance with
the terms of this Section 21, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 21), (v) any Person from which you offer to purchase any security
of the Company (if such Person has agreed in writing prior to its receipt of
such Confidential Information to be bound by the provisions of this Section 21),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which you are a party or (z) if an Event of Default has occurred
and is continuing, to the extent you may reasonably determine such delivery and
disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under your Notes and this Agreement. Each
holder of a Note, by its acceptance of a Note, will be deemed to have agreed to
be bound by and to be entitled to the benefits of this Section 21 as though it
were a party to this Agreement. On
<PAGE>
63
reasonable request by the Company in connection with the delivery to any holder
of a Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Obligors embodying the provisions of this Section 21.
22. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 22), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement, such word shall no longer be
deemed to refer to such Affiliate, but shall refer to you, and you shall have
all the rights of an original holder of the Notes under this Agreement.
23. MISCELLANEOUS.
23.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note) whether so expressed or not.
23.2. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
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64
23.3. JURISDICTION AND PROCESS; WAIVER OF JURY TRIAL.
(a) Each Obligor irrevocably submits to the non-exclusive in personam
-- --------
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement, the Notes, the Collateral Agency Agreement or
the Mortgage. To the fullest extent permitted by applicable law, each Obligor
irrevocably waives and agrees not to assert, by way of motion, as a defense or
otherwise, any claim that it is not subject to the in personam jurisdiction of
-- --------
any such court, any objection that it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding brought in any such court and
any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(b) Each Obligor consents to process being served in any suit, action
or proceeding of the nature referred to in Section 23.3(a) by mailing a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to such Obligor at its address specified in Section 19 or at such
other address of which you shall then have been notified pursuant to said
Section. Each Obligor agrees that such service upon receipt (i) shall be deemed
in every respect effective service of process upon it in any such suit, action
or proceeding and (ii) shall, to the fullest extent permitted by applicable law,
be taken and held to be valid personal service upon and personal delivery to
such Obligor. Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal Service or
any reputable commercial delivery service.
(c) Nothing in this Section 23.3 shall affect the right of any holder
of a Note to serve process in any manner permitted by law, or limit any right
that the holders of any of the Notes may have to bring proceedings against
either or both of the Obligors in the courts of any appropriate jurisdiction or
to enforce in any lawful manner a judgment obtained in one jurisdiction in any
other jurisdiction.
(d) EACH OBLIGOR WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS AGREEMENT, THE OTHER AGREEMENTS, THE NOTES OR ANY OTHER DOCUMENT
EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
<PAGE>
65
23.4. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding (but without limiting the requirement in Section 8.2, 8.3 or 8.4
that notice of any optional prepayment specify a Business Day as the date fixed
for such prepayment), any payment of principal of or Make-Whole Amount (if any)
or interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day.
Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
23.6. ACCOUNTING TERMS; PRO FORMA CALCULATIONS.
All accounting terms used herein which are not expressly defined in
this Agreement have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP. Except as otherwise specifically provided herein, any
consolidated financial statement or financial computation shall be done in
accordance with GAAP; and, if at the time that any such statement or computation
is required to be made the Company shall not have any Subsidiary, such terms
shall mean a financial statement or a financial computation, as the case may be,
with respect to the Company only.
Any pro forma computation required to be made hereby shall include
adjustments (without limitation as to other appropriate pro forma adjustments in
accordance with generally accepted financial practice) giving effect to all
acquisitions and dispositions made during the period with respect to which such
computation is being made as if such acquisitions and dispositions were made on
the first day of such period.
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66
23.7. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
23.8. GOVERNING LAW.
This Agreement and the Notes shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
<PAGE>
67
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Obligors.
Very truly yours,
AK STEEL CORPORATION
By _________________________
Richard E. Newsted
Senior Vice President,
Chief Financial Officer
AK STEEL HOLDING CORPORATION
By _________________________
Richard E. Newsted
Senior Vice President,
Chief Financial Officer
The foregoing is hereby agreed
to as of the date thereof.
[PURCHASER]
By___________________
<PAGE>
SCHEDULE B
DEFINED TERMS
-------------
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"ACCOUNTS RECEIVABLE" of any Person means any and all accounts,
contract rights, chattel paper, instruments, documents, general intangibles and
other obligations of any kind relating to the sale or lease of goods and the
rendering of services by such Person, all rights relating thereto, all deposit
accounts containing the proceeds thereof, all books and records relating thereto
and the proceeds thereof.
"ADJUSTED CONSOLIDATED CAPITALIZATION" means, at any date, the sum of
(a) Consolidated Capitalization plus (b) post-retirement benefit obligations of
the Company and its Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"AFFILIATE" means, at any time, (a) with respect to any Person
(including without limitation an Obligor), any other Person that at such time
directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first Person, and (b) with
respect to an Obligor, any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of equity securities or interests of an
Obligor or any Subsidiary or any corporation of which Holding and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of equity securities or interests. Unless the context
otherwise clearly requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.
"ASSET DISPOSITION" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) of
Equity Interests of a Subsidiary (other than directors' qualifying shares),
property or other assets (each referred to for the purposes of this definition
as a "disposition") by the Company or any of its Subsidiaries, including any
disposition by means of a merger, consolidation or similar transaction, other
than (a) a disposition by the Company or a Subsidiary to the Company or a
Wholly-Owned Guarantor Subsidiary, (b) a disposition of property or assets at
fair market value (as determined in good faith by the Board of Directors of
Holding) in the ordinary course of business, (c) a disposition of obsolete
assets in the ordinary course of business, (d) a disposition that constitutes a
sale and leaseback transaction subject to Section 10.3 and (e) a sale or other
transfer of Accounts Receivable under a Permitted Credit Facility.
Schedule B
<PAGE>
-2-
"ATTRIBUTABLE DEBT" means, as to any particular lease relating to a
sale and leaseback transaction, the total amount of rent (discounted
semiannually from the respective due dates thereof at the interest rate implicit
in such lease) required to be paid by the lessee under such lease during the
remaining term thereof. The amount of rent required to be paid under any such
lease for any such period shall be (a) the total amount of the rent payable by
the lessee with respect to such period after excluding amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments,
utilities, operating and labor costs and similar charges plus (b) without
duplication, any guaranteed residual value in respect of such lease to the
extent such guarantee would be included in indebtedness in accordance with GAAP.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" means with respect to any Person, all
outstanding obligations of such Person in respect of Capital Leases, taken at
the capitalized amount thereof accounted for as indebtedness in accordance with
GAAP.
"CASH EQUIVALENTS" means
(a) Investments in U.S. Government Obligations maturing within 365
days of the date of the acquisition thereof;
(b) Investments in certificates of deposit or Eurodollar deposits
maturing within 365 days of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the United
States or any state thereof and which has a combined capital and surplus of
at least $1.0 billion and rated at least A3 by Moody's Investors Service,
Inc.;
(c) Investments in repurchase agreements, involving Investments in
U.S. Government Obligations or other Cash Equivalents entered, into with
any bank, trust company or investment bank rated at least A- and A-1 by
Standard & Poor's and at least A3 and P-1 by Moody's Investors Service,
Inc.;
(d) Investments in commercial paper maturing not more than 90 days
from the date of acquisition thereof and rated at least A-1 by Standard &
Poor's and at least P-1 by Moody's Investors Service, Inc. issued by a
corporation
Schedule B
<PAGE>
-3-
(except Holding, the Company or an Affiliate of the Company) that is
organized under the laws of any state of the United States or the District
of Columbia; and
(e) Investments in money market accounts or funds whose assets solely
consists of cash or Cash Equivalents.
"CHANGE IN CONTROL" means the occurrence of any of the following
events:
(a) any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be
deemed to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 40%
of the total voting power of the Voting Equity Interests of Holding;
provided, however, that the Person shall not be deemed the "beneficial
owner" of shares tendered pursuant to a tender or exchange offer made by
that Person or any Affiliate of that Person until the tendered shares are
accepted for purchase or exchange;
(b) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holding
(together with any new directors whose election by such Board of Directors
of Holding, or whose nomination for election by the shareholders of
Holding, as the case may be, was approved by a vote of 66 2/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board of
Directors of Holding then in office; or
(c) Holding fails to own 100% of the Equity Interests of the Company;
provided, however, that it shall not be deemed a Change in Control if
Holding merges into the Company except that, in such case, the Company
shall be substituted for Holding for purposes of this definition of "Change
in Control" and this clause (c) shall not longer be applicable.
"CLOSING" is defined in Section 3.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COLLATERAL AGENT" is defined in Section 1.2.
"COLLATERAL AGENCY AGREEMENT" is defined in Section 1.2.
Schedule B
<PAGE>
-4-
"COMPANY" means AK Steel Corporation, a Delaware corporation.
"COMPLETION" is defined in Section 9.7(a).
"CONFIDENTIAL INFORMATION" is defined in Section 21.
"CONSOLIDATED CAPITALIZATION" means, at any date, the sum of (a)
Consolidated Debt plus (b) Consolidated Net Worth.
"CONSOLIDATED DEBT" means, at any date, all Debt of the Company and
its Subsidiaries (other than Non-Recourse Subsidiaries) consolidated in
accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the net income of the
Company and its Subsidiaries (other than Non-Recourse Subsidiaries) for such
period, determined on a consolidated basis in accordance with GAAP, excluding
(a) the proceeds of any life insurance policy,
(b) any gains arising from (i) the sale or other disposition of any
assets (other than current assets) to the extent that the aggregate amount
of the gains during such period exceeds the aggregate amount of the losses
during such period from the sale, abandonment or other disposition of
assets (other than current assets), (ii) any write-up of assets or (iii)
the acquisition of outstanding securities of the Company or any Subsidiary,
(c) any amount representing any interest in the undistributed earnings
of any other Person (other than a Subsidiary which is not a Non-Recourse
Subsidiary),
(d) any earnings, prior to the date of acquisition, of any Person
acquired in any manner, and any earnings of any Subsidiary prior to its
becoming a Subsidiary,
(e) any earnings of a successor to or transferee of the assets of the
Company prior to its becoming such successor or transferee,
(f) any deferred credit (or amortization of a deferred credit) arising
from the acquisition of any Person, and
(g) any extraordinary gains not covered by clause (b) above.
"CONSOLIDATED NET WORTH" means, at any date, the total of the amounts
shown on the balance sheet of the Company and its Subsidiaries (other than Non-
Recourse Subsidiaries), determined on a consolidated basis in accordance with
GAAP, as of the end of the fiscal quarter then most recently ended, as (a) the
par or
Schedule B
<PAGE>
-5-
stated value of all outstanding Equity Interests plus (b) paid-in capital
or capital surplus relating to such Equity Interests plus (c) any retained
earnings or earned surplus plus (d) any non-cash direct charges to shareholder's
equity less (i) any accumulated deficit (ii) any amounts attributable to
Redeemable Equity Interests and (iii) any amounts attributable to Exchangeable
Equity Interests.
"CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"DEBT" of any Person means, without duplication:
(a) all obligations of such Person in respect of (i) indebtedness for
money borrowed and (ii) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable;
(b) all Capitalized Lease Obligations of such Person;
(c) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person
and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of
business);
(d) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (not described in clauses (a) through (c) above)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following
payment on the letter of credit);
(e) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Equity
Interests (but excluding any accrued dividends);
(f) all obligations of such Person under interest rate swap or similar
agreements, or foreign currency or commodity hedge, exchange or similar
agreements of such Person;
(g) all obligations of the type referred to in clauses (a) through (f)
above of other Persons and all
Schedule B
<PAGE>
-6-
dividends of other Persons for the payment of which, in either case, such
Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guaranty; and
(h) all obligations of the type referred to in clauses (a) through (g)
above of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
Notwithstanding the foregoing, the following shall not constitute "Debt" of the
Company: guarantees by the Company of obligations in respect of bonds or notes
in an aggregate principal amount not exceeding $60,000,000 which are payable
solely from the proceeds of (x) taxes payable by the Company on new real or
depreciable personal property relating to the New Facility or (y) charges
payable by the Company for sewer and water services relating to the New Facility
and, to the extent that such taxes or charges are insufficient to make such
payments, payments under such guarantees (provided that the payments under such
bonds or notes or such guarantees are not required to be prefunded by more than
an aggregate amount equal to one year of debt service on such bonds or notes and
are not subject to acceleration by the express terms thereof or otherwise).
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the giving of notice or the lapse of time, or both, become an
Event of Default.
"DEFAULT RATE" means: when used with respect of the Notes of any
series, that rate of interest that is the greater of (i) 2% per annum above the
stated interest rate borne by the Notes of such series and (ii) 2% above the
rate of interest publicly announced by Citibank, N.A. from time to time at its
principal office in New York City as its prime rate; and when used for any other
purpose in this Agreement, the highest Default Rate applicable to the Notes of
any series.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"EQUITY INTERESTS" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interest
in (however designated) corporate
Schedule B
<PAGE>
-7-
stock or other equity participations, including partnership interests, whether
general or limited, including any Preferred Equity Interests.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"EXCHANGEABLE EQUITY INTERESTS" of any Person means any Equity
Interest which is exchangeable for or convertible into another security (other
than any Equity Interest of such Person which is neither an Exchangeable Equity
Interest nor a Redeemable Equity Interest).
"FIRST CLOSING" is defined in Section 3.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
"GUARANTOR SUBSIDIARY" means, at any date, any Subsidiary that has
executed and delivered a Subsidiary Guarantee.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt, dividend or other obligation of any other Person in any manner,
Schedule B
<PAGE>
-8-
whether directly or indirectly, including without limitation obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Debt or obligation or any property constituting
security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
Debt or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other
Person or otherwise to advance or make available funds for the purchase or
payment of such Debt or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Debt or obligation
of the ability of any other Person to make payment of the Debt or
obligation; or
(d) otherwise to assure the owner of such Debt or obligation against
loss in respect thereof.
In any computation of the Debt or other liabilities of the obligor under any
Guaranty, the Debt or other obligations that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law (including
without limitation asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"HOLDING" means AK Steel Holding Corporation, a Delaware corporation.
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note,
(b) any holder of a Note holding (together with one or more of its Affiliates)
more than 1% of the aggregate principal amount of the Notes then outstanding,
and (c) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
Schedule B
<PAGE>
-9-
"INTEREST RATE PROTECTION AGREEMENT" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Company or any Subsidiary against
fluctuations in interest rates (and not for speculation).
"INVENTORY" of any Person means any and all inventory of any kind of
such Person, including without limitation, any or all of the following:
inventory, merchandise, goods and other tangible personal property that are held
for sale or lease by such Person; all materials used or consumed in the business
of such Person, but excluding from the foregoing equipment of such Person; all
trademarks, servicemarks, trade names and similar intangible property owned or
used by such Person in its business, together with the goodwill of the business
symbolized thereby and all rights relating thereto ("Intangible Property"); and
all books and records relating to the foregoing and the proceeds thereof.
"INVESTMENT" in any person means any loan or advance to, any
acquisition of Equity Interests, equity interest, obligation or other security
of, or capital contribution or other investment in, such Person.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAJORITY HOLDERS" means, at any time, the holders of at least a
majority in unpaid principal amount of the Notes at the time outstanding.
Unless the context otherwise clearly requires, any reference to the "Majority
Holders" is a reference to the Majority Holders of all Notes.
"MAKE-WHOLE AMOUNT" is defined in Section 8.8.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Subsidiaries taken as a whole, (b) the ability of the Company to
perform its obligations under this Agreement, the Notes or the Mortgage or (c)
the validity or enforceability of this Agreement (including the Parent
Guarantee), the Notes, the Mortgage or any Subsidiary Guarantee.
Schedule B
<PAGE>
-10-
"MEMORANDUM" is defined in Section 5.3.
"MORTGAGE" is defined in Section 1.2.
"MORTGAGED PROPERTY" is defined in the Mortgage.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NET AVAILABLE CASH" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets or received in any other noncash form) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be accrued as a liability under GAAP, as a consequence
of such Asset Disposition, and in each case net of all payments made on any Debt
that is secured by any assets subject to such Asset Disposition, in accordance
with the terms of any Lien upon or with respect to such assets, or that must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
and net of all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition.
"NET CASH PROCEEDS" with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NEW FACILITY" is defined in Section 1.2.
"NEW FACILITY ASSETS" is defined in Section 1.2.
"NEW FACILITY SITE" is defined in Section 1.2.
"NON-CONVERTIBLE EQUITY INTERESTS" means, with respect to any Person,
any non-convertible Equity Interests of such Person and any Equity Interests of
such Person convertible solely into non-convertible Equity Interests of such
Person, provided that Non-Convertible Equity Interests shall not include any
Redeemable Equity Interests or Exchangeable Equity Interests.
Schedule B
<PAGE>
-11-
"NON-RECOURSE DEBT" means Debt or that portion of Debt (a) issued to a
Person other than Holding, the Company or any Subsidiary (other than a Non-
Recourse Subsidiary) and (b) no default with respect to which (including any
rights which the holders thereof may have to take enforcement action against a
Non-Recourse Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any other Debt of Holding, the Company or any Subsidiary (other than a
Non-Recourse Subsidiary) to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity.
"NON-RECOURSE SUBSIDIARY" means a Subsidiary of the Company in respect
of any obligation of which neither Holding, the Company nor any Subsidiary
(other than another Non-Recourse Subsidiary) has issued a Guaranty and which (a)
has not acquired any assets directly or indirectly from Holding, the Company or
any Subsidiary (other than Accounts Receivable that have been sold or otherwise
transferred to such Subsidiary in an Accounts Receivable financing for the
Company or such other Subsidiary), (b) only owns properties acquired after the
date of this Agreement and (c) has no Debt other than (i) Non-Recourse Debt and
(ii) Debt issued to the Company or a Wholly-Owned Guarantor Subsidiary.
"NOTES" is defined in Section 1.1.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company or Holding, as the case may be,
whose responsibilities extend to the subject matter of such certificate.
"ORIGINAL MORTGAGE" is defined in Section 1.2.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERMITTED CREDIT FACILITY" or "FACILITIES" means any agreement or
agreements providing for: (a) the making of a loan or loans or the advancing of
credit, (b) the sale of Accounts Receivable under any asset securitization
facility or (c) the issuance of letters of credit and/or the creation of
bankers' acceptances, provided that the aggregate amount that is or may be
borrowed or otherwise obtained as a result of the foregoing transactions,
together with the aggregate face amount of Accounts Receivable outstanding under
asset securitization facilities, shall not at any time exceed the greater of (i)
$75,000,000 and (ii) the sum of (x) 100% of the book value of the consolidated
Accounts Receivable of the Company and its Significant Subsidiaries that are
Guarantor Subsidiaries or Non-Recourse
Schedule B
<PAGE>
-12-
Subsidiaries plus (y) 100% of the book value (excluding last-in-first-out
reserves) of the consolidated Inventory of the Company and its Subsidiaries that
are Guarantor Subsidiaries.
"PERMITTED INVESTMENTS" means:
(a) Cash Equivalents;
(b) Investments in Holding, the Company or a Wholly-Owned Guarantor
Subsidiary (or any Person which will become a Wholly-Owned Guarantor
Subsidiary as a result of such Investment);
(c) loans and reasonable advances to employees of the Company or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(d) Investments in obligations the interest on which is excluded from
income for Federal income tax purposes and that have been issued or
guaranteed by any state of the United States of America, the District of
Columbia or the Commonwealth of Puerto Rico or any political subdivision,
agency, authority or instrumentality of any of the foregoing, provided,
that at the date of acquisition of any such obligation (i) its remaining
life to maturity shall be less than one year and (ii) the issuer or
guarantor thereof shall have a short-term debt rating of at least A-1 from
Standard & Poor's Ratings Group and at least P-1 from Moody's Investors
Service, Inc.;
(e) Investments resulting from the transfer of Accounts Receivable of
the Company or its Significant Subsidiaries that are Guarantor Subsidiaries
to a Non-Recourse Subsidiary, the only business of which is the acquisition
and financing of such Accounts Receivable under a Permitted Credit
Facility; and
(f) Investments resulting from the transfer of Accounts Receivable of
the Company or its Significant Subsidiaries that are Guarantor Subsidiaries
(or Non-Recourse Subsidiaries) to a trust, the only purpose of which is the
acquisition and financing of such Accounts Receivable, provided that the
aggregate amount of outstanding Debt issued by such trust to, and
outstanding Investments in such trust made by, Persons other than the
Company and its Significant Subsidiaries that are Guarantor Subsidiaries or
Non-Recourse Subsidiaries shall not at any time exceed the greater of (i)
$75,000,000 and (ii) an amount equal to (1) 100% of the book value of the
consolidated Accounts Receivable of the Company and its Significant
Subsidiaries that are Guarantor Subsidiaries or Non-Recourse Subsidiaries
plus (2) 100% of the book value (excluding last-in-first-out reserves) of
the consolidated Inventory of the Company and
Schedule B
<PAGE>
-13-
its Subsidiaries that are Guarantor Subsidiaries, minus (3) the aggregate
principal amount of outstanding Debt secured by any Accounts Receivable or
Inventory of the Company or any of its Subsidiaries, other than to the
extent included in clause (4) below, minus (4) other outstanding
Investments (other than Investments in such trust) under any asset
securitization or similar facility in respect of Accounts Receivable or
Inventory of the Company or any of its Subsidiaries.
"PERMITTED LIENS" means, with respect to any Person, (a) pledges or
deposits by such Person under workers' compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Debt) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits or cash or United States government bonds 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, in each case
incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings; (c) Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review or time for appeal has not yet expired (so long as the enforcement of any
such Lien is stayed); (d) Liens for property taxes not yet subject to penalties
for non-payment or which are being contested in good faith by appropriate
proceedings; (e) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business provided that such letters of credit do not
constitute Debt of such Person; (f) survey exceptions, encumbrances, easements
or reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the ownership of
its properties which do not secure Debt and which do not in the aggregate
materially adversely affect the value of said properties or materially impair
their use in the operation of the business of such Person; (g) Liens securing an
Interest Rate Protection Agreement so long as the related Debt is, and is
permitted hereunder to be, secured by a Lien on the same property securing the
Interest Rate Protection Agreement; and (h) leases and subleases of real
property which do not interfere with the ordinary conduct of the business of the
Company or any of its Subsidiaries, and which are made on customary and usual
terms applicable to similar properties.
"PERSON" means an individual, partnership, corporation,
Schedule B
<PAGE>
-14-
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PLEDGED ASSETS" is defined in Section 1.2.
"PLEDGED ASSETS SITE" is defined in Section 1.2.
"PREFERRED EQUITY INTERESTS" as applied to the Equity Interests of any
Person, means Equity Interests of any class (however designated) which is
preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Equity Interests of any other class of such
Person.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, inchoate
or otherwise.
"PTE" is defined in Section 6.2.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued on March 13, 1984 by the United States Department of Labor.
"REDEEMABLE EQUITY INTERESTS" means any Equity Interests that by its
terms or otherwise is required to be redeemed on or prior to the first
anniversary of the Stated Maturity of the Notes or is redeemable at the option
of the holder thereof at any time on or prior to the first anniversary of the
Stated Maturity of the Notes.
"REMAINING AVERAGE LIFE" is defined in Section 8.6.
"REQUIRED HOLDERS" means, at any time, the holders of at least 66 2/3%
in unpaid principal amount of the Notes at the time outstanding. Unless the
context otherwise clearly requires, any reference to the "Required Holders" is a
reference to the Required Holders of all Notes.
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
Schedule B
<PAGE>
-15-
"SECOND CLOSING" is defined in Section 3.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company or
Holding, as the case may be.
"SERIES A NOTES" is defined in Section 1.1.
"SERIES B NOTES" is defined in Section 1.1.
"SERIES C NOTES" is defined in Section 1.1.
"SERIES D NOTES" is defined in Section 1.1.
"SERIES E NOTES" is defined in Section 1.1.
"SIGNIFICANT SUBSIDIARY" means, at any date, a Subsidiary (a) which,
together with its Subsidiaries, produced more than 5% of Consolidated Net Income
for the fiscal year then most recently ended (calculated on a pro forma basis in
the case of any Person which became a Subsidiary during or after the end of such
fiscal year) or (b) the assets of which, together with the assets of its
Subsidiaries, exceeded 5% of the consolidated total assets (fixed and current)
of the Company and its Subsidiaries as of the last day of such fiscal year
(calculated on a pro forma basis as of the last day of such fiscal year in the
case of any Person which became a Subsidiary thereafter).
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"SUBORDINATED OBLIGATION" means any Debt of the Company (whether
outstanding on the date on which the Notes were originally issued or thereafter
issued) which is subordinate or junior in right of payment to the Notes.
"SUBSIDIARY" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of Equity Interests or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, through one or more intermediaries, or both,
by such Person. Unless the context otherwise clearly requires, any reference to
a "Subsidiary" is a
Schedule B
<PAGE>
-16-
reference to a Subsidiary of the Company.
"SUBSIDIARY GUARANTEE" is defined in Section 1.3.
"THIRD CLOSING" is defined in Section 3.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"VOTING EQUITY INTERESTS" of a corporation or other entity means all
classes of Equity Interests of a corporation or other entity then outstanding
and normally entitled to vote in the election of directors or other governing
body of such corporation or other entity.
"WHOLLY-OWNED GUARANTOR SUBSIDIARY" means any Wholly-Owned Subsidiary
that is a Guarantor Subsidiary.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary all of
the equity interests (except directors' qualifying shares) and voting interests
of which are owned by any one or more of the Company and the Company's other
Wholly-Owned Subsidiaries at such time.
Schedule B
<PAGE>
EXHIBIT 1.1
[FORM OF NOTE] TO NOTE
PURCHASE
AGREEMENT
AK STEEL CORPORATION
[___]%/*/ SENIOR SECURED NOTE, SERIES [ ], DUE 2004
No. R- New York, New York
[_______]$[Date]
PPN: [ ]
FOR VALUE RECEIVED, the undersigned, AK STEEL CORPORATION (the
"COMPANY"), a Delaware corporation, hereby promises to pay to
[______________________], or registered assigns, the principal sum of
[_______________________________] DOLLARS on December 16, 2004, with interest
(computed on the basis of a 360-day year of twelve 30-day months) (a) from the
date hereof on the unpaid balance thereof at the rate of [___%]* per annum,
payable semiannually on June 16 and December 16 in each year, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment of principal, any overdue payment of interest (to the extent permitted
by applicable law) and any overdue payment of any premium or Make-Whole Amount
(as defined in the Note Purchase Agreements referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand) at a rate per annum from time to time equal to the greater of (i)
[___%]/**/ and (ii) 2% above the rate of interest publicly announced by
Citibank, N.A. from time to time at its principal office in New York City as its
prime rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at said principal office of Citibank, N.A. in New York City or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreements referred to below.
This Note is one of an issue of Senior Secured Notes issued pursuant
to separate Note Purchase Agreements dated as of December 17, 1996 (as from time
to time amended, the "NOTE PURCHASE AGREEMENTS") between the Company and AK
Steel Holding Corporation and the respective Purchasers named therein and is
entitled to the benefits thereof. This Note is also entitled to the benefits of
a Parent Guarantee included in the Note Purchase Agreements and a Mortgage and
Collateral Agency Agreement and
/*/ Coupon for the Notes to be 8.98% for the Fixed Coupon Notes of each series
and the rate determined as provided in Section 1.1 for the Fixed Spread
Notes of each series.
/**/ 2% above the coupon
<PAGE>
2
certain Subsidiary Guarantees from time to time executed and delivered pursuant
to the Note Purchase Agreements. Each holder of this Note will be deemed, by its
acceptance hereof, to have agreed to the confidentiality provisions set forth in
Section 21 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note of the same series for a like principal amount will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
The Company will make required prepayments of principal on the dates
and in the amounts specified in the Note Purchase Agreements. This Note is also
subject to optional prepayment, in whole or from time to time in part, and under
certain circumstances the Company may be required to offer to prepay this Note,
all at the times and on the terms specified in the Note Purchase Agreements, but
not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable premium or Make-Whole Amount) and with the effect provided in the
Note Purchase Agreements.
This Note shall be construed and enforced in accordance with, and the
rights of the Company and the holder hereof shall be governed by, the laws of
the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
AK STEEL CORPORATION
By_________________________
Title:
<PAGE>
EXHIBIT 1.2(a)
to Note Purchase Agreement
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
RENTS AND FIXTURE FILING
from
AK STEEL CORPORATION,
as Mortgagor
to
NBD BANK, N.A.,
as Collateral Agent, as Mortgagee
Dated as of _______, 1997
<PAGE>
Table of Contents
-----------------
Page
----
Article I.
Representations, Warranties and Covenants of Mortgagor 6
SECTION 1.1. Title..................................................... 6
SECTION 1.2. Certain Amounts........................................... 8
SECTION 1.3. Payment of Taxes, Liens and Charges; Removal
of Liens................................................ 9
SECTION 1.4. Maintenance, Alterations and Waste........................ 10
SECTION 1.5. Plans..................................................... 11
SECTION 1.6. Insurance................................................. 11
SECTION 1.7. Assignment of Leases and Rents............................ 11
SECTION 1.8. Restrictions on Transfers and Encumbrances................ 13
SECTION 1.9. Security Agreement; Fixture Filing........................ 13
SECTION 1.10. Filing and Recording...................................... 14
SECTION 1.11. Further Assurances. Upon demand by....................... 14
SECTION 1.12. Additions to Mortgaged Property. All..................... 15
SECTION 1.14. Subrogation............................................... 15
SECTION 1.15. Flood Insurance........................................... 16
SECTION 1.16. Environmental Representations, Covenants
and Indemnification..................................... 17
SECTION 1.17. Indemnification........................................... 20
SECTION 1.18. Compliance with Legal Requirements;
Recorded Documents...................................... 21
Article II.
Defaults and Remedies
SECTION 2.1. Events of Default......................................... 23
SECTION 2.2. Demand for Payment........................................ 23
SECTION 2.3. Rights to Take Possession, Operate and
Apply Revenues.......................................... 24
SECTION 2.4. Right to Cure Mortgagor's Failure to Perform.............. 25
SECTION 2.5. Right to a Receiver....................................... 26
SECTION 2.6. Foreclosure............................................... 26
SECTION 2.7. Other Remedies............................................ 27
SECTION 2.8. Application of Sale Proceeds and Rents.................... 28
SECTION 2.9. Waiver of Appraisement, Valuation, Stay,
Extension and Redemption Laws........................... 29
SECTION 2.10. Discontinuance of Proceedings............................. 29
SECTION 2.11. Suits to Protect the Mortgaged Property................... 30
SECTION 2.12. Filing Proofs of Claim.................................... 30
SECTION 2.13. Possession by Mortgagee................................... 30
SECTION 2.14. Waiver.................................................... 30
SECTION 2.15. Remedies Cumulative....................................... 31
SECTION 2.16. Unavailability of Remedies................................ 31
<PAGE>
Article III.
Casualty and Condemnation................................................. 32
SECTION 3.1. Property Casualty and Condemnation........................ 32
SECTION 3.2. Casualty and Condemnation Cash Collateral Account......... 36
Article IV.
Miscellaneous
SECTION 4.1. Partial Invalidity. In the event any..................... 37
SECTION 4.2. Notices. All notices to be sent.......................... 37
SECTION 4.3. Successors and Assigns.................................... 37
SECTION 4.4. Counterparts.............................................. 37
SECTION 4.6. Definition of Terms Used in the Note Purchase
Agreements.............................................. 37
SECTION 4.7. Definition of Certain Terms Used Herein................... 38
SECTION 4.8. Definitions Generally..................................... 40
SECTION 4.9. Right of Entry............................................ 41
SECTION 4.10. No Merger................................................. 41
SECTION 4.11. Tax Reduction Proceedings................................. 41
SECTION 4.12. Sole Discretion of Mortgagee.............................. 42
SECTION 4.13. No Joint Venture or Partnership........................... 42
SECTION 4.14. Completion of Construction................................ 42
Article V.
Particular Provisions
SECTION 5.1. Applicable Law; Certain Particular Provisions............. 42
SECTION 5.2. Future Advances; Maximum Amount of
Indebtedness............................................ 43
<PAGE>
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
RENTS AND FIXTURE FILING
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING dated as of _________, 1997 (as supplemented,
amended or modified from time to time, this "Mortgage"), from AK
STEEL CORPORATION, a Delaware corporation, having an office at
703 Curtis Street, Middletown, OH 45043 ("Mortgagor"), to NBD BANK, N.A., a
national banking association having an office One Indiana Square, Indianapolis,
IN 46266, acting in its capacity as collateral agent, as mortgagee
("Mortgagee").
WITNESSETH:
A. Reference is made to the several Note Purchase
Agreements dated as of December 17, 1996 (as amended or modified from time to
time, the "Note Purchase Agreements"), between Mortgagor and the several
Purchasers named therein (the "Note Purchasers", which term shall include the
holders from time to time of the Notes issued thereunder), pursuant to which the
Note Purchasers have agreed to purchase $250,000,000 aggregate original
principal amount of Mortgagor's Senior Secured Notes, Series A-E due 2004 (the
"Notes"), of which Notes the unpaid principal amountof $92,500,000 are
outstanding on the date of this Mortgage and Notes in the respective aggregate
principal amounts of $20,000,000 and $137,500,000 will be issued at closings to
be held in June 1997 and December 1997.
B. The Note Purchasers and Mortgagee are parties to a
Collateral Agency Agreement dated as of December 17, 1996 (as amended or
modified from time to time, the "Collateral Agency Agreement") pursuant to which
Mortgagee has been appointed to serve as collateral agent for the Note
Purchasers.
C. The Note Purchase Agreements require that,
Mortgagor execute and deliver a mortgage in the form hereof to secure (a) the
due and punctual payment of (i) the principal of and premium, if any, and
interest on all Notes from time to time issued under the Note Purchase
Agreements, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, and (ii) all other monetary
obligations including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise, of Mortgagor to the Secured
Parties under this Mortgageor any of the other Transaction Documents and (b) the
due and punctual performance of all covenants, agreements, obligations and
liabilities of Mortgagor under or pursuant to this Mortgage and the other
Transaction Documents (collectively the "Obligations").
NOW THEREFORE, IN CONSIDERATION OF the foregoing and in
order to secure the (A) due and punctual payment and performance
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2
of the Obligations by Mortgagor, (B) the due and punctual payment by Mortgagor
of all taxes, common area charges and insurance premiums relating to the
Mortgaged Property and (C) all disbursements made by Mortgagee for the payment
of taxes, common area charges or insurance premiums, all fees, expenses or
advances in connection with or relating to the Mortgaged Property, and interest
on such disbursements and other amounts not timely paid in accordance with the
terms of the Note Purchase Agreements, this Mortgage and the other Transaction
Documents, Mortgagor hereby mortgages, warrants, assigns and conveys as
security, grants a security interest in, hypothecates, pledges and sets over
unto Mortgagee, with mortgage covenants, all estate, right, title and interest
of Mortgagor in and to the following described property, whether now owned or
held or hereafter acquired (the "Mortgaged Property"):
GRANTING CLAUSE FIRST
The land more particularly described on Exhibit A
hereto (the "Land"), together with all rights appurtenant thereto including the
easements over certain other adjoining land granted by any easement agreements,
covenant or restrictive agreements and all air rights, mineral rights, water
rights, oil and gas rights and development rights, if any, relating thereto, and
also together with all of the other easements, rights, privileges, interests,
permits, hereditaments and appurtenances thereunto belonging or in anywise
appertaining and whatsoever of Mortgagor therein and in the streets and ways
adjacent thereto, either in law or in equity, in possession or expectancy (the
"Premises");
GRANTING CLAUSE SECOND
All buildings, improvements, structures, paving,
parking areas, walkways and landscaping now or hereafter erected or located upon
the Land and all additions to and replacements or substitutions of any of the
foregoing (collectively, the "Improvements");
GRANTING CLAUSE THIRD
All non-trade fixtures of every kind and type affixed
to the Premises or attached to or forming part of any structures, buildings or
improvements now or hereafter erected or located upon the Land and used in
connection with the same as distinguished from the fixtures used in connection
with the manufacturing and other business operations of Mortgagor conducted at
the Premises or Improvements (such non-trade fixtures are hereafter called the
"Fixtures");
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3
GRANTING CLAUSE FOURTH
The continuous cold mill situated on the Premises
including without limitation all welders and accumulators forming an integral
part thereof and all storage, packaging, loading and unloading facilities used
or useful in connection with the foregoing and forming an integral part thereof,
and all additions to and replacements or substitutions of any of the foregoing
(collectively, the "Cold Mill"), together with the hot-dip galvanizing line
situated on the Premises including without limitation all furnaces, finish
coating knives, skin pass mills, coaters and inspection stations forming an
integral part thereof and all storage, packaging, loading and unloading
facilities used or useful in connection with the foregoing and forming an
integral part thereof, and all additions to and replacements or substitutions of
any of the foregoing (collectively, the "Hot Dip Line", and together with the
Cold Mill, collectively, the "Major Units");
GRANTING CLAUSE FIFTH
All apparatus, movable appliances, building materials,
equipment, fittings, furnishings, furniture, machinery and other articles of
tangible personal property of every kind and nature, and replacements thereof,
now or at any time hereafter (i) placed upon and used in any way in connection
with the use, enjoyment, occupancy or operation of the Improvements and the
Premises or the Fixtures or (ii) forming an integral part of the Major Units, as
distinguished from the manufacturing and other business operations of Mortgagor
conducted at the Premises or the Improvements, it being understood that the
enumeration of any specific articles of property shall in no way result in or be
held to exclude any items of property not specifically mentioned to the extent
such items of property form an integral part of the Major Units or are necessary
for the general use, enjoyment or occupancy of the Improvements, the Fixtures or
the Premises as distinguished from the general manufacturing and other business
of Mortgagor conducted at the Premises or the Improvements (collectively the
"Personal Property");
GRANTING CLAUSE SIXTH
All general intangibles relating to design,
development, operation, management and use of the Premises, the Fixtures, the
Major Units or the Improvements, all certificates of occupancy, zoning
variances, building, use or other permits, approvals, authorizations and
consents obtained from and all materials prepared for filing or filed with any
governmental agency in connection with the development, use, operation or
management of the Premises and Improvements, all construction, service,
engineering, consulting, leasing, architectural and other similar contracts
concerning the design, construction, management, operation, occupancy and/or use
of the Premises, the Improvements, the Fixtures or the Major Units, all
architectural drawings,
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4
plans, specifications, soil tests, feasibility studies, appraisals,
environmental studies, engineering reports and similar materials relating to any
portion of or all of the Premises and Improvements, and all payment and
performance bonds or warranties or guarantees relating to the Premises, the
Improvements, the Fixtures or the Major Units all to the extent assignable,
provided, however, the foregoing shall not include items which do not form an
integral part of the Major Units and which are not necessary for the general
use, enjoyment or occupancy of the Improvements, the Fixtures or the Premises
(collectively the "Permits, Plans and Warranties");
GRANTING CLAUSE SEVENTH
All leases or licenses (under which Mortgagor is
landlord or licensor) and subleases (under which Mortgagor is sublandlord),
concession, management, mineral or other agreements of a similar kind that
permit the use or occupancy of the Premises, the Major Units or the Improvements
for any purpose in return for any payment (collectively "Leases"), all credits,
cash or security deposits, advance rentals and payments of similar nature and
guarantees or other security held by Mortgagor in connection therewith, and all
agreements or contracts for the sale or other disposition of all or any part of
the Premises, the Fixtures, the Major Units or the Improvements, now or
hereafter entered into by Mortgagor, together with all charges, fees, income,
issues, profits, receipts, rents, revenues or royalties payable thereunder
("Rents");
GRANTING CLAUSE EIGHTH
All real estate tax refunds and all proceeds of the
conversion, voluntary or involuntary, of any of the Mortgaged Property into cash
or liquidated claims ("Proceeds") including Proceeds of insurance maintained by
Mortgagor and condemnation awards, any awards which may become due by reason of
the taking by eminent domain or any transfer in lieu thereof of the whole or any
part of the Premises, the Fixtures, the Major Units or the Improvements or any
rights appurtenant thereto, and any awards for change of grade of streets,
together with any and all moneys now or hereafter on deposit for the payment of
real estate taxes, assessments or common area charges levied against the
Mortgaged Property, unearned premiums on policies of fire and other insurance
maintained by Mortgagor covering any interest in the Mortgaged Property;
GRANTING CLAUSE NINTH
All computer software and databases including all
contracts, undertakings, other agreements, trademarks, patents, copyrights,
licenses, other rights in intellectual property, proprietary or confidential
information, technical information, procedures, designs, knowledge, know-how,
data, processes, models, drawings, materials, computer tapes, chips or disks,
flow
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5
diagrams, specification sheets, source codes and object codes, in
each case related to such computer software and any other
physical manifestations thereof (collectively, the "Software") necessary in
connection with the operation of the Major Units.
GRANTING CLAUSE TENTH
The right, during the continuance of an Event of
Default, in the name and on behalf of Mortgagor, to appear in and defend any
action or proceeding brought with respect to the Premises, the Improvements, the
Fixtures, the Major Units or the Personal Property and to commence any action or
proceeding to protect the interest of Mortgagee in the Premises, the
Improvements, the Fixtures, the Major Units or the Personal Property, all right,
title and interest of every nature of Mortgagor in all monies deposited or to be
deposited in any funds or accounts maintained or deposited with Mortgagee, or
its assigns, in connection herewith, all claims against any Person with respect
to any damage to the Premises, the Fixtures, the Improvements, the Major Units
or the Personal Property including without limitation damage arising from any
defect in or with respect to the design or construction of the Improvements, the
Fixtures, the Major Units or the Personal Property and any damage resulting
therefrom;
GRANTING CLAUSE ELEVENTH
To the fullest extent permitted by law, all extensions,
improvements, betterments, renewals, substitutes and replacements of and all
additions and appurtenances to, the hereinabove granted property hereinafter
acquired by or released to Mortgagor or constructed, assembled or placed by
Mortgagor on the Land, the Premises or the Improvements, and all conversions of
the security constituted thereby, immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and in
each such case, without any further mortgage, deed of trust, conveyance,
assignment or other act by Mortgagor, all of which shall become subject to the
Lien of this Mortgage as fully and completely, and with the same effect, as
though now owned by Mortgagor and specifically described herein.
TO HAVE AND TO HOLD the Mortgaged Property and all
parts, rights, members and appurtenances thereof, by Mortgagee for the ratable
benefit of the Secured Parties, in fee simple forever, subject only to Permitted
Liens, and Mortgagor does warrant and will forever defend the title thereto
against the claims of all persons whomsoever, except as to Permitted Liens.
Article I.
Representations, Warranties and Covenants of Mortgagor
Mortgagor agrees, covenants, represents and/or warrants
as follows:
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6
SECTION 1.1. Title.
(a) Mortgagor has good and marketable title to an
indefeasible fee estate in the Land subject to no Lien, except for, and this
Mortgage is and will remain a valid and enforceable first and prior Lien on the
Premises, and the Rents, in each case, subject only to Permitted Liens (as
defined in the Note Purchase Agreements). Mortgagor has good and marketable
title to an indefeasible fee estate in the Improvements, Fixtures and the Major
Units, subject to no Lien except for, and this Mortgage is and will remain a
valid and enforceable first and prior Lien on the Improvements, Fixtures and the
Major Units subject only to, Permitted Liens. The provisions of this Section are
for the benefit of the Secured Parties only and may not be relied on by, and are
not being made for the benefit of, any other Person.
(b) Mortgagor has good and marketable title to all the
Personal Property and Software subject to no Lien, charge or encumbrance other
than this Mortgage and Permitted Liens. Neither the Personal Property nor the
Software is or will become the subject matter of any lease or other arrangement
that is not a Permitted Lien; none of the Personal Property or Software will be
removed from the Premises or the Improvements unless the same is obsolete, non-
functioning or no longer desirable for the continued operations of Mortgagor as
currently operated at the Premises and the Improvements (or as then operated, to
the extent that any change from the current manner of operation was not
prohibited by the Note Purchase Agreements) or is replaced by other Personal
Property or Software of substantially equal or greater utility and value; and
Mortgagor will not create or cause to be created (other than Permitted Liens)
any security interest covering any of the Personal Property or Software other
than the security interest in the Personal Property and Software created in
favor of Mortgagee by this Mortgage or any other agreement collateral hereto.
(c) All Leases affecting the Mortgaged Property are
subject and subordinate to this Mortgage. No tenant under a Lease or any other
Person has an option or right of first refusal to purchase any portion of the
Mortgaged Property.
(d) All easement agreements, covenants or restrictive
agreements, supplemental agreements and any other instruments hereinabove
referred to and mortgaged hereby are and will remain valid, subsisting and in
full force and effect, unless the failure to remain valid, subsisting and in
full force and effect, could not, individually or in the aggregate, have or
result in a Material Adverse Effect, and Mortgagor is not in default thereunder
and has fully performed the material terms thereof required to be performed
through the date hereof, and has no knowledge of any default thereunder or
failure to fully perform the terms thereof by any other party, nor of the
occurrence of any event which after notice or the passage of time or both will
constitute a default thereunder which, in each such instance, could,
individually or in the aggregate, have or result in a
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7
Material Adverse Effect. The Mortgaged Property is fully served by water, gas,
electric, storm and sanitary sewage facilities, such utilities serving the
Premises and the Improvements are located in, and adequate vehicular access to
the Premises and the Improvements is provided by, either a public right-of-way
abutting and contiguous with the Land or valid recorded unsubordinated
easements.
(e) Mortgagor has good and lawful right and full power
and authority to grant this Mortgage with respect to the Mortgaged Property.
(f) This Mortgage, when duly recorded in the
appropriate public records and when financing statements are duly filed in the
appropriate public records, will create a valid, perfected and enforceable first
priority Lien upon and security interest in all the Mortgaged Property free and
clear of all Liens other than Permitted Liens and there are no defenses or
offsets to this Mortgage or to any of the Obligations secured hereby.
(g) No condemnation, eminent domain or similar
proceeding has been commenced or, to Mortgagor's knowledge, is contemplated with
respect to all or any portion of the Mortgaged Property or for the relocation of
roadways providing access to the Mortgaged Property.
(h) The Mortgaged Property is made up of one or more
parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot that is not owned in fee by
Mortgagor. If the Mortgaged Property or portion thereof constitutes a portion of
any other tax lot, Mortgagor shall promptly, after demand of Mortgagee made
after the occurrence and during the continuance of an Event of Default, cause
the Mortgaged Property to be separately subdivided in accordance with all Legal
Requirements.
(i) The Mortgaged Property is covered by a title
insurance policy, insuring Mortgagor, its successors and assigns, as to its fee
simple title to the Premises, Improvements and Fixtures free of all Liens except
Permitted Liens. No claims have been made under such title insurance policy and
to the knowledge of Mortgagor, Mortgagor has not, by act or omission, done
anything which would impair the coverage of such title insurance policy.
(j) To Mortgagor's knowledge, the Improvements are
structurally sound and in safe and insurable condition and have been constructed
and installed in substantial compliance with the plans and specifications and
Legal Requirements relating thereto. To Mortgagor's knowledge, all major
building systems located within the Improvements including without limitation
the heating and air conditioning systems and the electrical and plumbing
systems, are in good working order and condition.
(k) The Mortgaged Property including without
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8
limitation the location, existence, use, occupancy and operation of the
Mortgaged Property, is in compliance with all applicable Legal Requirements
including without limitation the building and zoning laws (except subdivision)
of the jurisdiction in which the Mortgaged Property is situated and all
easements, declarations, covenants and restrictions affecting the Mortgaged
Property with respect to which noncompliance could, individually or in the
aggregate, have or result in a Material Adverse Effect. All material licenses
and permits which may be required with respect to the use, occupancy, operation
and maintenance of the Mortgaged Property have been obtained and are in full
force and effect and each Improvement complies therewith except to the extent
that failure to maintain the same could not, individually or in the aggregate,
have or result in a Material Adverse Effect. No notices of violations of any
Legal Requirements have been entered or received by Mortgagor and to Mortgagor's
knowledge there is no basis for the entering of such notices except to the
extent that any such violations could not, individually or in the aggregate,
have or result in a Material Adverse Effect.
(l) On the Completion Date, the Mortgaged Property
will include all property that is necessary for the operation of the processes
described on Exhibit B attached hereto.
(m) The Premises contain valid and enforceable rights
of pedestrian and vehicular access to an open public road by an easement
appurtenant to and running with the Land.
SECTION 1.2. Certain Amounts.
(a) This Mortgage is given pursuant to the Note
Purchase Agreements. Each and every term and provision of the Collateral Agency
Agreement and the Note Purchase Agreements including the rights, remedies,
obligations, covenants, conditions, agreements, indemnities, representations and
warranties of the parties thereto shall be considered as if a part of this
Mortgage.
(b) If any remedy or right of Mortgagee pursuant
hereto is acted upon by Mortgagee or if any actions or proceedings (including
any bankruptcy, insolvency or reorganization proceedings) are commenced in which
Mortgagee is made a party and is obliged to defend or uphold or enforce this
Mortgage or the rights of Mortgagee hereunder or the terms of any Lease, or if a
condemnation proceeding is instituted affecting the Mortgaged Property,
Mortgagor will pay all sums including reasonable attorneys' fees and
disbursements actually incurred by Mortgagee related to the exercise of any
remedy or right of Mortgagee pursuant hereto, at law or in equity or for the
expense of any such action or proceeding together with all statutory or other
costs, disbursements and allowances, together with interest thereon from the
date of demand for payment thereof at the Default Rate provided for in the Note
Purchase Agreements, and such sums and the interest thereon shall, to the extent
permissible by law,
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9
be a Lien on the Mortgaged Property prior to any right, title to, interest in or
claim upon the Mortgaged Property attaching or accruing subsequent to the
recording of this Mortgage and shall be secured by this Mortgage to the extent
permitted by law.
SECTION 1.3. Payment of Taxes, Liens and Charges;
Removal of Liens.
(a) Except as may be permitted by Section 9.4 of the
Note Purchase Agreements, Mortgagor will pay and discharge from time to time
before the same become delinquent, all taxes of every kind and nature, all
general and special assessments, levies, permits, inspection and license fees,
all water and sewer rents, all vault charges, and all other public charges, and
all service charges, common area charges, private maintenance charges, utility
charges and all other private charges, whether of a like or different nature,
imposed upon or assessed against the Mortgaged Property or any part thereof or
upon the Rents from the Mortgaged Property or arising in respect of the
occupancy, use or possession thereof.
(b) Mortgagor shall have the right, after prior
written notice to Mortgagee, to contest by appropriate legal proceedings
diligently conducted in good faith, without cost or expense to Mortgagee, the
validity or application of any tax, assessment, levy, fee, rent or charge that
pursuant to the preceding paragraph Mortgagor is required to pay and discharge
and to suspend compliance therewith if permitted under applicable Legal
Requirements, provided (i) failure to comply therewith may not subject Mortgagee
to any civil or criminal liability, (ii) no Event of Default shall exist during
such proceedings and (iii) such contest shall not subject the Mortgaged Property
to any Lien the enforcement of which is not suspended or otherwise affect the
priority of the Lien of this Mortgage.
(c) In the event of the passage of any state, federal,
municipal or other governmental law, order, rule or regulation subsequent to the
date hereof (i) deducting from the value of real property for the purpose of
taxation any Lien or encumbrance thereon or in any manner changing or modifying
the laws now in force governing the taxation of this Mortgage or debts secured
by mortgages (other than laws governing income, franchise and similar taxes
generally) or the manner of collecting taxes thereon and (ii) imposing a tax to
be paid by Mortgagee, either directly or indirectly, on this Mortgage or any of
the Transaction Documents or to require an amount of taxes to be withheld or
deducted therefrom, Mortgagor will promptly notify Mortgagee of such event. In
such event Mortgagor shall (i) agree to enter into such further instruments as
may be reasonably necessary or desirable to obligate Mortgagor to make any
applicable additional payments, and (ii) Mortgagor shall make such additional
payments. If Mortgagor is not permitted by law to do that which is required by
the preceding sentence, Mortgagee shall be entitled to exercise any or all of
its rights and remedies under the Transaction Documents
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10
including the right to accelerate the Obligations.
(d) Mortgagor shall, at its expense, maintain this
Mortgage as a first priority Lien on the Mortgaged Property subject to Permitted
Liens and shall keep the Mortgaged Property free and clear of all Liens of any
kind and nature other than Permitted Liens. Mortgagor shall prior to the date
when any enforcement right would accrue to the lienor at issue promptly
discharge of record, by payment, bonding or otherwise, any Liens other than
Permitted Liens and, promptly upon request by Mortgagee, (i) deliver to
Mortgagee evidence reasonably satisfactory to Mortgagee of the discharge thereof
or (ii) furnish (A) a bond satisfactory to Mortgagee in the amount of the claim
out of which the Lien arises, (B) a cash deposit in the amount of the claim out
of which the Lien arises, or (C) other security reasonably satisfactory to
Mortgagee in an amount sufficient to discharge the claim out of which the Lien
arises.
(e) If Mortgagor fails to comply with the requirements
of paragraph (d) of this Section, then, upon ten Business Days' prior notice to
Mortgagor, Mortgagee may, but shall not be obligated to, pay any such Lien, and
Mortgagor shall, within ten Business Days after Mortgagee's demand therefor,
reimburse Mortgagee for all sums so expended, together with interest thereon at
the Default Rate from the date advanced, all of which shall be deemed part of
the Obligations.
SECTION 1.4. Maintenance, Alterations and Waste.
Mortgagor will not erect any additions to the existing Improvements or other
structures on the Premises which will materially and adversely interfere with
the operation of Mortgagor's business as conducted and as proposed to be
conducted thereon on the date hereof, without the prior written consent of
Mortgagee. Mortgagor will not commit any material waste on the Mortgaged
Property or make any alteration to, or change in the use of, the Mortgaged
Property which will materially diminish the fair market value thereof, but in no
event shall any such alteration or change be contrary to the terms of any
insurance policy required to be kept pursuant to Section 1.6. Mortgagor will not
abandon or demolish (except in connection with an alteration) the Mortgaged
Property. Mortgagor will maintain and operate the Mortgaged Property in good
repair, working order and condition, reasonable wear and tear excepted. All
repairs made by Mortgagor shall be made with first-class materials, in a good
and workmanlike manner, shall be equal or better in quality and class to the
original work and shall comply with all applicable Legal Requirements and
Insurance Requirements except such noncompliance as could not, individually or
in the aggregate, have or result in a Material Adverse Effect. As used herein,
the terms "repair" and "repairs" shall be deemed to include all necessary
replacements.
SECTION 1.5. Plans. Mortgagor shall maintain a
substantially complete set of final plans, specifications,
blueprints and drawings for the Premises, Improvements and Major
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11
Units either at the Mortgaged Property or in a particular office
at the headquarters of Mortgagor to which Mortgagee shall have
access upon reasonable advance notice.
SECTION 1.6. Insurance. Mortgagor will keep or cause
to be kept the Mortgaged Property insured against such risks, and in the manner,
required by Section 9.2 of the Note Purchase Agreements.
SECTION 1.7. Assignment of Leases and Rents.
(a) Subject to Section 1.7(d) Mortgagor hereby
irrevocably and absolutely grants, transfers and assigns all of its right title
and interest in each Lease, if any, together with any and all extensions and
renewals thereof and in all Rents for purposes of securing and discharging the
performance by Mortgagor of the Obligations. Mortgagor has not assigned or
executed any assignment of, and will not assign or execute any assignment of,
any Lease or their respective Rents to anyone other than Mortgagee.
(b) Without Mortgagee's prior written consent, which
consent shall not be unreasonably withheld, Mortgagor shall not enter into,
modify, amend, terminate or consent to the cancellation or surrender of any
Lease which is superior to the Mortgage. All Leases shall expressly provide that
in the event of a foreclosure of this Mortgage the lessee thereunder will attorn
to the Mortgagee or its successor, designee or assign.
(c) Subject to Section 1.7(d), Mortgagor has assigned
and transferred to Mortgagee all of Mortgagor's right, title and interest in and
to the Rents now or hereafter arising from each Lease, if any, heretofore or
hereafter made or agreed to by Mortgagor, it being intended that this assignment
establish, subject to Section 1.7(d), an absolute present transfer and
assignment of all Rents and each such Lease, if any, to Mortgagee and not merely
to grant a security interest therein. Subject to Section 1.7(d), Mortgagee may
in Mortgagor's name and stead (with or without first taking possession of any of
the Mortgaged Property personally or by receiver as provided herein) operate the
Mortgaged Property and rent, lease or let all or any portion of any of the
Mortgaged Property to any party or parties at such rental and upon such terms as
Mortgagee shall, in its sole discre-tion, determine, and may collect and have
the benefit of all of said Rents arising from or accruing at any time thereafter
or that may thereafter become due under each Lease.
(d) Until an Event of Default occurs or after an Event
of Default has occurred but is no longer continuing, Mortgagee will not exercise
any of its rights under Section 1.7(c), and Mortgagor shall receive and collect
the Rents accruing under any Lease; but during the continuance of any Event of
Default, Mortgagee may, at its option, receive and collect all Rents and enter
upon the Premises and Improvements through its officers,
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12
agents, employees or attorneys for such purpose and for the opera-tion and
maintenance thereof. Upon the happening of an Event of Default, Mortgagor hereby
irrevocably authorizes and directs each tenant, if any, and each successor, if
any, to the interest of any tenant under each Lease, if any, to rely upon any
notice of a claimed Event of Default sent by Mortgagee to any such tenant or any
of its successors in interest, and thereafter to pay Rents to Mortgagee without
any obligation or right to inquire as to whether an Event of Default actually
exists. Each tenant or any of their successors in interest from whom Mortgagee
or any officer, agent, attorney or employee of Mortgagee shall have collected
any Rents, shall be authorized to pay Rents to Mortgagor only after such tenant
or any of its successors in interest shall have received written notice from
Mortgagee that the Event of Default is no longer continuing, which notice
Mortgagee shall be obligated to give if Mortgagee agrees that such Event of
Default is no longer continuing or if a court of competent jurisdiction has
issued an order that no Event of Default is continuing, unless and until a
further notice of an Event of Default is given by Mortgagee to such tenant or
any of their successors in interest.
(e) Mortgagee will not become an agent in possession
so long as it does not enter or take actual possession of the Mortgaged
Property. In addition, Mortgagee shall not be responsible or liable for
performing any of the obligations of the landlord under any Lease, for any waste
by any tenant, or others, for any dangerous or defective conditions of any of
the Mortgaged Property, for negligence in the management, upkeep, repair or
control of any of the Mortgaged Property or any other act or omission by any
other person.
(f) Mortgagor shall furnish to Mortgagee, within
30 days after a request by Mortgagee to do so, a written statement containing
the names of all tenants, subtenants and concessionaires of the Premises or
Improvements, the terms of each Lease, the space occupied and the rentals or
license fees payable thereunder.
SECTION 1.8. Restrictions on Transfers and
Encumbrances. Except as permitted hereby and the Note Purchase Agreements,
Mortgagor shall not directly or indirectly sell, convey, alienate, assign,
lease, sublease, license, mortgage, pledge, encumber or otherwise transfer,
create, consent to or suffer the creation of any Lien upon any interest in or
any part of the Mortgaged Property, or be divested of its title to the Mortgaged
Property or any interest therein in any manner or way, whether voluntarily or
involuntarily (other than resulting from a taking), or engage in any common,
cooperative, joint, time-sharing or other congregate ownership of all or part
thereof, provided that Mortgagor may (i) in the ordinary course of business (and
upon fair and reasonable terms no less favorable to Mortgagor than would be
obtainable in a comparable arms'-length transaction with a non-affiliate) grant
easements which bind and burden the Mortgaged Property for utilities, roads,
construction of
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13
improvements, lighting, fire and service corridors and such other purposes as
shall be reasonably required by Mortgagor in connection with its use of adjacent
property, provided the same do not materially and adversely affect the use and
operation of the Mortgaged Property and (ii) merge or consolidate with Holding
as permitted by Section 4.1(d) of the Note Purchase Agreements. This Mortgage
shall automatically and without further action be subject and subordinate to
such easements. Mortgagee shall, at Mortgagor's expense, within 60 days of
demand execute and deliver such documentation, in recordable form, as Mortgagor
may reasonably request to confirm such subordination of record.
SECTION 1.9. Security Agreement; Fixture Filing.
This Mortgage is both a mortgage of real property and a grant of a security
interest in personal property, and shall constitute and serve as a "security
agreement" within the meaning of the Uniform Commercial Code as adopted in the
State wherein the Premises are located. Mortgagor has hereby granted unto
Mortgagee a security interest in and to all the Mortgaged Property described in
this Mortgage that is not real property, and simultaneously with the recording
of this Mortgage, Mortgagor has executed or will execute Uniform Commercial Code
financing statements for filing at the appropriate offices in the State in which
the Premises are located to perfect the security interest granted by this
Mortgage in all the Mortgaged Property that is not real property. Mortgagor
hereby appoints Mortgagee as its true and lawful attorney-in-fact and agent for
Mortgagor and in its name, place and stead, in any and all capacities, to
execute any document and to file the same in the appropriate offices (to the
extent it may lawfully do so), and to perform each and every act and thing
requisite and necessary to be done to perfect the security interest contemplated
by the preceding sentence. Mortgagee shall have all rights with respect to the
part of the Mortgaged Property that is the subject of a security interest
afforded by the Uniform Commercial Code as adopted in the State wherein the
Premises are located in addition to, but not in limitation of, the other rights
afforded Mortgagee hereunder. Part of the Mortgaged Property is or may become
fixtures. It is intended that, as to such fixtures, this Mortgage shall be
effective as a financing statement filed as a fixture filing from the date of
the filing of the Mortgage for record with the Recorder of Spencer County,
Indiana. The information provided in this Section is provided in order that this
Mortgage shall comply with the requirements of the Uniform Commercial Code as
enacted in the State wherein the Premises are located for a mortgage instrument
to be filed as a financing statement. Mortgagor is the "Debtor" and its name and
mailing address are set forth in the preamble of this Mortgage. The "Secured
Party" is Mortgagee and its name and mailing address from which information
concerning the security interest granted herein may be obtained are as set forth
in the preamble of this Mortgage. A statement describing the portion of the
Mortgaged Property comprising of goods or other personal property that may now
be or hereafter become fixtures hereby secured is set forth in the Granting
Clauses hereof. The record owner of the Mortgaged Property is
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14
Mortgagor.
SECTION 1.10. Filing and Recording. Mortgagor will
cause this Mortgage, any other security instrument creating a security interest
in or evidencing the Lien hereof upon the Mortgaged Property, and each
instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect the Lien hereof upon, and the
security interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay
all filing, registration or recording fees, and all expenses incidental to the
execution and acknowledgment of this Mortgage, any mortgage supplemental hereto,
any security instrument with respect to the Personal Property, and any
instrument of further assurance and all federal, state, county and municipal
recording, documentary or intangible taxes and other taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution,
delivery and recording of this Mortgage, any mortgage supplemental hereto, any
security instrument with respect to the Personal Property or any instrument of
further assurance.
SECTION 1.11. Further Assurances. Upon demand by
Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to
Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Mortgagee shall from time to time reasonably require for the
better assuring, conveying, assigning, transferring and confirming unto
Mortgagee the property and rights hereby conveyed or assigned or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound to
convey or assign to Mortgagee, or for carrying out the intention or facilitating
the performance of the terms of this Mortgage, or for filing, registering or
recording this Mortgage, and promptly on demand, Mortgagor will also execute and
deliver and hereby appoints Mortgagee as its true and lawful attorney-in-fact
and agent, for Mortgagor and in its name, place and stead, in any and all
capacities, to execute and file to the extent it may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments
reasonably requested by Mortgagee to evidence more effectively the Lien hereof
upon the Personal Property and to perform each and every act and thing requisite
and necessary to be done to accomplish the same.
SECTION 1.12. Additions to Mortgaged Property. All
right, title and interest of Mortgagor in and to all extensions, improvements,
betterments, renewals, substitutes and replacements of, and all additions and
appurtenances to, the Mortgaged Property hereafter acquired by or released to
Mortgagor or constructed, assembled or placed by Mortgagor upon the Premises or
the Improvements, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling, placement
or conversion, as the case may be, and in
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15
each such case to the full extent permitted by law without any further mortgage,
conveyance, assignment or other act by Mortgagor, shall become subject to the
Lien and security interest of this Mortgage as fully and completely and with the
same effect as though now owned by Mortgagor and specifically described in the
grant of the Mortgaged Property above, but at any and all times Mortgagor will
execute and deliver to Mortgagee any and all such further assurances, mortgages,
conveyances or assignments thereof as Mortgagee may reasonably require for the
purpose of expressly and specifically subjecting the same to the Lien and
security interest of this Mortgage.
SECTION 1.13. No Claims Against Mortgagee. Nothing
contained in this Mortgage shall constitute any consent or request by Mortgagee,
express or implied, for the performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, nor as giving Mortgagor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Mortgagee in respect thereof.
SECTION 1.14. Subrogation. Mortgagee shall be
subrogated to all right, title, equity, Liens and claims of all persons to whom
Mortgagee has paid or pays money in settlement of claims, Liens, encumbrances or
charges or in the acquisition of any right or title for Mortgagee's benefit
under this Mortgage or for the benefit and account of Mortgagor.
SECTION 1.15. Flood Insurance.
(a) Mortgagor represents and certifies to Mortgagee
that no part of the Mortgaged Property lies within a "special flood hazard area"
as defined and specified by the Federal Emergency Management Agency or other
Governmental Authority having jurisdiction pursuant to the Flood Disaster
Protection Act of 1973. In the event that the rules or regulations of the
Federal Reserve Board, the Comptroller of the Currency or any other governing
agency licensing or regulating the operations of Mortgagee or any Secured Party
require that flood insurance coverage be obtained for the Mortgaged Property or
any part thereof in order for Mortgagee or any Secured Party to comply with such
rules or regulations or with the Flood Disaster Protection Act of 1973 as then
in effect, then Mortgagor, upon receiving written notice from Mortgagee of such
determination: (i) shall promptly purchase and pay the premiums for such flood
insurance policies as required by such agency or agencies and so that Mortgagee
or any Secured Party shall be in compliance with the rules and regulations of
such agency or agencies and with the Flood Disaster Protection Act of 1973 as
then in effect; and (ii) shall deliver such policies to Mortgagee together with
evidence satisfactory to Mortgagee that the premiums therefor have been paid.
Such policies of flood insurance shall name Mortgagee as an additional insured
and loss-payee, shall be in form, and amount as
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16
is customary for integrated carbon steel producers of established reputation in
the United States and consistent with the Company's past practices and shall be
noncancellable as to Mortgagee except upon thirty days prior written notice
given by the insurer to Mortgagee. Mortgagor shall promptly give written notice
to Mortgagee of any notice which Mortgagor receives stating that the Mortgaged
Property or any part thereof is in any way affected by the National Flood
Insurance Program of the United States Department of Housing & Urban
Development's Federal Insurance Administration or by any other similar program
now or hereafter in effect.
(b) All policies of insurance required hereunder or
under the Note Purchase Agreements with respect to the Mortgaged Property shall
be maintained under valid and enforceable policies issued by financially
responsible insurers authorized to do business in the State where the Mortgaged
Property is located, and shall name Mortgagee as an additional insured, shall
provide for loss payable solely to Mortgagee and shall contain: (i) standard
"non-contributory mortgagee" endorsement or its equivalent; (ii) a waiver of
subrogation endorsement as to Mortgagee; and (iii) a provision that such
policies shall not be canceled or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least 30 days
prior written notice to Mortgagee in each instance.
SECTION 1.16. Environmental Representations, Covenants
and Indemnification.
(a) Except as disclosed in Environmental Assessment
dated October, 1996 by ENSR Consulting and Engineering, to
Mortgagor's knowledge the Mortgaged Property is in substantial
compliance with all Environmental Laws in all material respects.
(b) Mortgagor shall comply with all applicable
Environmental Laws and obtain all permits, licenses and similar approvals
required by Environmental Laws and any other federal, state or local
environmental statute, regulation or common law affecting or imposed upon
Mortgagor or the Mortgaged Property unless the failure to comply could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
(c) Mortgagor represents and warrants to Mortgagee
that to Mortgagor's knowledge after due inquiry none of the Mortgaged Property
is within the definition of the term "property" contained in Section IC 13-11-2-
174 of the Indiana Code other than property with respect to which Mortgagor has
delivered the disclosure document required by the Indiana Responsible Property
Transfer Law (IC 13-25-3) ("IRPTL"). Mortgagor shall observe, perform and comply
with the requirements of IRPTL in connection with the Mortgage and the
transaction evidenced by the Mortgage. Mortgagee hereby waives the requirement
under IRPTL that Mortgagor deliver a disclosure document to Mortgagee thirty
days prior to the First Closing. Mortgagor shall deliver any required
<PAGE>
17
disclosure statement not later than the day immediately prior to
such closing.
(d) Mortgagor will, promptly upon gaining knowledge of
the release of any Hazardous Materials in, on, over, under, to or from the
Mortgaged Property or any portion thereof, or onto, over, or under any
contiguous real property, notify Mortgagee of the presence and/or release of
such Hazardous Material and of any request for information or any inspection of
the Mortgaged Property or any part thereof by any Governmental Authority with
respect to any Hazardous Materials and provide Mortgagee with copies of such
request and any response to any such request or inspection. Mortgagor covenants
that it will, in compliance with applicable Legal Requirements, promptly and
diligently conduct and complete all investigations, studies, sampling and
testing (and promptly shall provide Mortgagee with copies of any such studies
and the results of any such test) and all remedial, removal and other actions
necessary to clean up and remove all Hazardous Materials in, on, over, under,
from or affecting the Mortgaged Property or any part thereof in accordance with
all such Legal Requirements applicable to the Mortgaged Property or any part
thereof.
(e) Mortgagor shall have the right, after prior
written notice to Mortgagee, to contest by appropriate legal proceedings
diligently conducted in good faith, without cost or expense to Mortgagee, the
validity or application of any Environmental Law, provided that in the case of
Environmental Laws required to be complied with by Mortgagor pursuant to this
Mortgage (i) failure to comply therewith may not subject Mortgagee to any civil
or criminal liability, (ii) no Event of Default shall exist during such
proceedings and (iii) such contest shall not subject the Mortgaged Property to
any Lien the enforcement of which is not suspended or otherwise affect the
priority of the Lien of this Mortgage.
(f) Following the occurrence and during the
continuance of an Event of Default hereunder, and without regard to whether
Mortgagee shall have taken possession of the Mortgaged Property or a receiver
has been requested or appointed or any other right or remedy of Mortgagee has or
may be exercised hereunder, Mortgagee shall have the right (but no obligation),
from time to time, to conduct such investigations, studies, sampling and/or
testing of the Mortgaged Property or any part thereof as Mortgagee may, in its
discretion, determine to conduct, relative to Hazardous Materials and take any
action including without limitation any remedial measures or removal as
Mortgagee may determine in its sole discretion. All costs and expenses incurred
in connection therewith including without limitation consultants' fees and
disbursements and laboratory fees, shall constitute a part of the Obligations
and shall, upon demand by Mortgagee, be immediately due and payable and shall
bear interest at the Default Rate from the date so demanded by Mortgagee until
reimbursed.
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18
(g) Mortgagor will comply with any federal, state, or
local legal requirement or common law requirement of notice, recordation, or
other disclosure of the presence or use of Hazardous Materials at the Mortgaged
Property unless the failure to comply could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(h) At Mortgagee's election, from time to time,
Mortgagor will accept a release from the Lien of this Mortgage of any portion of
the Mortgaged Property with respect to which Mortgagee believes in good faith
Hazardous Materials have been discovered on, at, in, under, or above and have or
are or reasonably likely to have a material adverse effect on the Mortgaged
Property, Mortgagor, Mortgagee or the Lien or priority of this Mortgage, or with
respect to which Mortgagee believes in good faith an Environmental Law has been
or may have been violated which has or is reasonably likely to have a material
adverse effect on the Mortgaged Property, Mortgagor, Mortgagee or the Lien or
priority of this Mortgage. Mortgagor will, at Mortgagor's expense, cause any
consents, agreements and instruments to be entered into that may be reasonably
required by Mortgagee in connection with such release including without
limitation subdivision consents, appropriate surveys, appraisals of the
subdivisions, consents of tenants, access agreements, easement agreements,
consents of parties to existing agreements and consents of subordinate lienors.
Mortgagor will pay for any new title insurance policy or endorsement required by
Mortgagee in connection with any such release, provided such policy or
endorsement shall not increase the amount of such insurance.
(i) Mortgagor will defend, indemnify and hold harmless
the Secured Parties, and their respective successors and assigns, and each of
their respective employees, agents, officers, directors and trustees
(collectively, the "Indemnified Parties"), from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, economic loss, costs and
expenses of whatever kind or nature, known or unknown, contingent or otherwise
including without limitation reasonable attorneys' and consultants' fees and
disbursements and investigations and laboratory fees (collectively, "Costs")
arising out of, or in any way related to:
(i) the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threat of release of any Hazardous Materials
in, on, over, under, from or affecting the Mortgaged Property or any part
thereof whether or not disclosed by any environmental report relative to the
Mortgaged Property;
(ii) any personal injury (including without limitation wrongful death,
disease or other health condition related to or caused by, in whole or in
part, any Hazardous Materials) or property damage (real or personal) arising
out of or related to any Hazardous Materials in, on, over, under,
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19
from or affecting the Mortgaged Property or any part thereof
whether or not disclosed by any environmental report relative
to the Mortgaged Property;
(iii) any action, suit or proceeding brought or threatened, settlement
reached or order of any Governmental Authority relating to such Hazardous
Materials whether or not disclosed by any environmental report relative to
the Mortgaged Property;
(iv) any violation of the provisions, covenants, representations or
warranties of this Section 1.16 or of any requirements of law which is based
on or arises from any Hazardous Materials in, on, over, under, from or
affecting the Mortgaged Property or any part thereof including without
limitation the cost of any work performed and materials furnished in order
to comply therewith whether or not disclosed by any environmental report
relative to the Mortgaged Property or to enforce the provisions of this
Section 1.16 including without limitation the cost of assessment,
containment and/or removal of any and all Hazardous Materials from all or
any portion of the Mortgaged Property and, to the extent the same is
determined to be the legal responsibility of Mortgagor, any surrounding
areas, the cost of any actions taken in response to the presence, release or
threat of release of any Hazardous Materials on, in, under or affecting any
portion of the Mortgaged Property and, to the extent the same is determined
to be the legal responsibility of Mortgagor, any surrounding areas to
prevent or minimize such release or threat of release so that it does not
migrate or otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to comply
with the Environmental Laws in connection with all or any portion of the
Mortgaged Property and, to the extent the same is determined to be the legal
responsibility of Mortgagor, any surrounding areas; or
(v) any act or omission of Mortgagor, its officers, employees, agents,
contractors, invitees, licensees, or permitees giving rise to liability
under any Environmental Law applicable to the Mortgaged Property.
(vi) Notwithstanding the foregoing, Mortgagor shall have no obligation
to indemnify any Indemnified Party for any Costs which (a) results from such
Indemnified Party's willful misconduct or gross negligence or (b) arise in
connection with Hazardous Materials placed on the Mortgaged Property after
the date that Mortgagor no longer occupies the Premises as a result of the
exercise by Mortgagee of its remedies under the Transaction Documents or as
a result of a deed in lieu of foreclosure unless such Costs arise out of
Hazardous Materials placed on the Premises by Mortgagor or entities
controlled by Mortgagor. Any amounts payable to Mortgagee by reason of the
application of this Section 1.16
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20
shall, upon demand by Mortgagee, become immediately due and payable and
shall bear interest at the Default Rate from the date so demanded by
Mortgagee until paid. The indemnification set forth in this Section 1.16
shall survive the termination of this Mortgage whether by repayment of the
Obligations, foreclosure or deed in lieu thereof, assignment, or otherwise.
Nothing in this Section 1.16 shall be deemed to deprive Mortgagee of any
rights or remedies otherwise available to Mortgagee, at law or in equity
including without limitation those rights and remedies provided elsewhere in
this Mortgage.
SECTION 1.17. Indemnification.
(a) In addition and without limitation to any other
provision of this Mortgage, Mortgagor will defend, indemnify and hold harmless
the Indemnified Parties from and against any Costs arising out of, or in any way
related to, the following: (i) ownership of this Mortgage, the Mortgaged
Property or any part thereof or any interest therein or receipt of any Rents;
(ii) any accident, injury to or death of any Person or loss of or damage to
property occurring in, on or about the Mortgaged Property or any part thereof or
on the adjoining sidewalks, curbs, parking areas, streets or ways; (iii) any
use, nonuse or condition in, on or about, or possession, alteration, repair,
operation, maintenance or management of, the Mortgaged Property or any part
thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways;
(iv) any failure on the part of Mortgagor to perform or comply with any of the
terms of this Mortgage; (v) performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; (vi) any claim by brokers, finders or similar
Persons claiming to be entitled to a commission in connection with any Lease or
other transaction involving the Mortgaged Property or any part thereof; (vii)
any Lien or claim arising on or against the Mortgaged Property or any part
thereof under any Legal Requirement or any liability asserted against Mortgagee
with respect thereto; or (viii) the claims of any tenant or any Person acting
through or under any tenant or otherwise arising under or as a consequence of
any Lease.
(b) Notwithstanding the foregoing, Mortgagor shall
have no obligation to indemnify any Indemnified Party for any Costs which
results from such Indemnified Party's willful misconduct or gross negligence.
Any amounts payable to Mortgagee by reason of the application of this Section
1.17 shall, upon demand by Mortgagee, become immediately due and payable and
shall bear interest at the Default Rate from the date so demanded by Mortgagee
until paid. Subject to Section 1.16(j), the indemnification set forth in this
Section 1.17 shall survive the termination of this Mortgage whether by repayment
of the Obligations, foreclosure or deed in lieu thereof, assignment, or
otherwise. Nothing in this Section 1.17 shall be deemed to deprive Mortgagee of
any rights or remedies otherwise available to
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21
Mortgagee, at law or in equity including without limitation those
rights and remedies provided elsewhere in this Mortgage.
SECTION 1.18. Compliance with Legal Requirements;
Recorded Documents.
(a) Mortgagor will comply and cause the Mortgaged
Property and the use thereof to be, in compliance with all present and future
Legal Requirements, foreseen and unforeseen, ordinary and extraordinary, whether
requiring structural or nonstructural repairs or alterations including without
limitation all zoning, subdivision (except as qualified in Section 1.1(h)
above), building, safety and environmental protection, land use and development
Legal Requirements, and all Legal Requirements which may be applicable to the
curbs adjoining the Mortgaged Property or to the use or manner of use thereof,
the noncompliance with which, in Mortgagee's opinion, may materially adversely
affect the rights or remedies of Mortgagee hereunder, the value of the Mortgaged
Property or the Lien of this Mortgage. Mortgagor will not suffer or permit the
Mortgaged Property or any portion thereof to be used by the public or any Person
not subject to a Lease in such manner as might impair Mortgagor's title to the
Mortgaged Property, or in such manner as may give rise to a claim or claims of
adverse usage or adverse possession by the public, or of implied dedication of
the Mortgaged Property or any part thereof.
(b) Mortgagor shall have the right, after prior
written notice to Mortgagee, to contest by appropriate legal proceedings
diligently conducted in good faith, without cost or expense to Mortgagee, the
validity or application of any Legal Requirement that Mortgagor is required to
comply with pursuant to the preceding paragraph and to suspend compliance
therewith if permitted under applicable Legal Requirements, provided (i) failure
to comply therewith may not subject Mortgagee to any civil or criminal
liability, (ii) no Event of Default shall exist during such proceedings and
(iii) such contest shall not subject the Mortgaged Property to any Lien the
enforcement of which is not suspended or otherwise affect the priority of the
Lien of this Mortgage.
(c) Mortgagor will comply in all material respects
with all present and future codes, orders, rules, regulations, restrictions and
requirements of any Board of Fire Underwriters having jurisdiction over the
Mortgaged Property.
(d) Mortgagor will keep all licenses and permits in
respect of the Mortgaged Property in full force and effect at all times during
the terms thereof except to the extent failure to do so could not, individually
or in the aggregate, have or result in a Material Adverse Effect. Mortgagor will
not permit or suffer to permit a violation of any certificate of occupancy
relating to the Mortgaged Property except to the extent any such violation could
not, individually or in the aggregate, have or result in a Material Adverse
Effect.
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22
(e) Mortgagor will not seek, make, suffer, consent to
or acquiesce in any change in the zoning or conditions of use of the Premises or
the Improvements except if required in connection with its business operations
and provided such change could not, individually or in the aggregate, have or
result in a Material Adverse Effect. If, under applicable zoning provisions, the
use of all or any part of the Premises and/or the Improvements is or becomes a
nonconforming use, Mortgagor will not cause or permit such use to be
discontinued except if required in connection with its business operations and
provided such change could not, individually or in the aggregate, have or result
in a Material Adverse Effect.
(f) Mortgagor will promptly perform and observe or
cause to be performed and observed, all of the terms, covenants and conditions
of all instruments of record affecting the Mortgaged Property and any instrument
the noncompliance with which could, individually or in the aggregate, have or
result in a Material Adverse Effect.
Article II.
Defaults and Remedies
SECTION 2.1. Events of Default. It shall be an Event
of Default under this Mortgage if any Event of Default (as therein defined)
shall exist pursuant to the Note Purchase Agreements or if any one or more of
the following events (each, a "Mortgage Default") shall occur:
(a) if the insurance policies in respect of the
Mortgaged Property required hereunder or under the Note Purchase Agreements are
not kept in full force and effect and such default continues for 10 days after a
Responsible Officer obtains knowledge of such default, or if the insurance
policies and proceeds are not assigned and delivered to Mortgagee as herein or
in the Note Purchase Agreements provided and such default continues for 30 days
after a Responsible Officer obtains knowledge of such default;
(b) if Mortgagor attempts to assign its rights under
this Mortgage or any interest herein or if Mortgagor defaults in the performance
of or compliance with any term contained in Section 1.8;
(c) if the Mortgaged Property becomes subject to any
Lien which is superior to the Lien of this Mortgage, other than a Lien for real
estate taxes and assessments not due and payable and other than a Permitted
Lien, and such Lien shall not be discharged (by payment, bonding, or otherwise)
within 60 days; or (d) if Mortgagor discontinues Mortgagor's operations at the
Premises for a period in excess of one year (except to the extent such
discontinuance is in connection with a casualty, condemnation, repair or
alteration) or otherwise abandons the
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23
Mortgaged Property.
SECTION 2.2. Demand for Payment. If an Event of
Default as set forth herein shall occur and be continuing, then, upon written
demand of Mortgagee, Mortgagor will pay to Mortgagee upon demand all amounts due
hereunder and such further amount as shall be sufficient to cover the costs and
expenses of collection including reasonable attorneys' fees, disbursements and
expenses incurred by Mortgagee; and all such expenses with interest thereon at
the Default Rate shall, until paid, be secured by this Mortgage. In case
Mortgagor shall fail forthwith to pay such amounts or any amounts due under any
other Section of this Mortgage upon Mortgagee's demand, Mortgagee shall be
entitled and empowered to institute an action or proceedings at law or in equity
as advised by counsel for the collection of the sums so due and unpaid, to
prosecute any such action or proceedings to judgment or final decree, to enforce
any such judgment or final decree against Mortgagor and to collect, in any
manner provided by law, all monies adjudged or decreed to be payable.
SECTION 2.3. Rights to Take Possession, Operate and
Apply Revenues.
(a) If an Event of Default shall occur and be
continuing, Mortgagor shall, upon demand of Mortgagee, to the extent permitted
by law, forthwith surrender to Mortgagee actual possession of the Mortgaged
Property and, if and to the extent permitted by law, Mortgagee itself, or by
such officers or agents as it may appoint, may then enter and take possession of
all the Mortgaged Property without the appointment of a receiver or an
application therefor, exclude Mortgagor and its agents and employees wholly
therefrom, and have access to the books, papers and accounts of Mortgagor.
(b) If Mortgagor shall for any reason fail to
surrender or deliver the Mortgaged Property or any part thereof after such
demand by Mortgagee, Mortgagee may obtain a judgment or decree conferring upon
Mortgagee the right to immediate possession or requiring Mortgagor to deliver
immediate possession of the Mortgaged Property to Mortgagee, to the entry of
which judgment ordecree Mortgagor hereby specifically consents. Mortgagor will
pay to Mortgagee, upon demand, all expenses actually incurred in obtaining such
judgment or decree including reasonable compensation to Mortgagee's attorneys
and agents with interest thereon at the Default Rate; and all such expenses and
compensation shall, until paid, be secured by this Mortgage.
(c) Upon every such entry or taking of possession,
Mortgagee may hold, store, use, operate, manage and control the Mortgaged
Property, conduct the business thereof and, from time to time, (1) make all
necessary and proper maintenance, repairs, renewals, replacements, additions,
betterments and improvements thereto and thereon, (2) purchase or otherwise
acquire additional fixtures, personalty and other property, (3) insure or keep
the
<PAGE>
24
Mortgaged Property insured, (4) manage and operate the Mortgaged Property and
exercise all the rights and powers of Mortgagor to the same extent as Mortgagor
could in its own name or otherwise with respect to the same, or (5) enter into
any and all agreements with respect to the exercise by others of any of the
powers herein granted Mortgagee, all as may from time to time be directed or
determined by Mortgagee to be in its best interest and Mortgagor hereby appoints
Mortgagee as its true and lawful attorney-in-fact and agent, for Mortgagor and
in its name, place and stead, in any and all capacities, to perform any of the
foregoing acts. Mortgagee may collect and receive all the Rents, issues, profits
and revenues from the Mortgaged Property including those past due as well as
those accruing thereafter, and, after deducting (i) all expenses of taking,
holding, managing and operating the Mortgaged Property (including compensation
for the services of all persons employed for such purposes), (ii) the costs of
all such maintenance, repairs, renewals, replacements, additions, betterments,
improvements, purchases and acquisitions, (iii) the costs of insurance, (iv)
such taxes, assessments and other similar charges as Mortgagee may at its option
pay, (v) other proper charges upon the Mortgaged Property or any part thereof
and (vi) the reasonable compensation, expenses and disbursements of the
attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the
monies and proceeds so received first to the payment of Mortgagee for the
payment in full of any indebtedness and satisfaction of the Obligations, and
second, if there is any surplus, to Mortgagor, subject to the entitlement of
others thereto under applicable law.
(d) Whenever, before any sale of the Mortgaged
Property under Section 2.6, all Obligations which are then due shall have been
paid and all Events of Default fully cured, Mortgagee will surrender possession
of the Mortgaged Property back to Mortgagor, its successors or assigns. The same
right of taking possession shall, however, arise again if any subsequent Event
of Default shall occur and be continuing.
SECTION 2.4. Right to Cure Mortgagor's Failure to
Perform. After the occurrence and during the continuance of an Event of Default,
Mortgagee may, at any time without notice, pay, perform or observe the term,
covenant or condition giving rise to such Event of Default, and all payments
made or costs or expenses actually incurred by Mortgagee in connection therewith
shall be secured hereby and shall be, without demand, immediately repaid by
Mortgagor to Mortgagee with interest thereon at the Default Rate until paid.
Mortgagee is hereby empowered to enter and to authorize others to enter upon the
Premises or the Improvements or any part thereof for the purpose of performing
or observing any such defaulted term, covenant or condition without having any
obligation to so perform or observe and without thereby becoming liable to
Mortgagor, to any person in possession holding under Mortgagor or to any other
person except for the gross negligence or willful misconduct of Mortgagee or any
such Person. If Mortgagor shall fail to keep in full force and effect, or if
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25
Mortgagee shall receive notice of an impending cancellation of, any insurance
required hereunder or under the Note Purchase Agreements then, upon and after
the earlier to occur of (i) the date immediately prior to any lapse,
cancellation or termination of such insurance or (ii) five days' notice to
Mortgagor, Mortgagee may, at its option, pay, procure, perform or observe the
same, and all payments made or costs or expenses actually incurred by Mortgagee
in connection therewith shall be secured hereby and shall be, without demand,
immediately repaid by Mortgagor to Mortgagee with interest thereon at the
Default Rate until paid and such amounts shall constitute a part of the
Obligations secured hereby. Nothing in this paragraph shall permit Mortgagee to
pay, procure or perform such insurance obligations earlier than the date
immediately prior to any lapse, cancellation or termination of such insurance.
SECTION 2.5. Right to a Receiver. If an Event of
Default shall occur and be continuing, Mortgagee, upon application to a court of
competent jurisdiction, shall be entitled as a matter of right to the
appointment of a receiver to take possession of and to operate the Mortgaged
Property and to collect and apply the Rents, if any. The receiver shall have all
of the rights and powers permitted under the laws of the state wherein the
Mortgaged Property is located. Mortgagor will pay to Mortgagee upon demand all
expenses including receiver's fees, attorney's fees and disbursements, costs and
agent's compensation actually incurred pursuant to the provisions of this
Section 2.5; and all such expenses shall be secured by this Mortgage and shall
be, upon demand, immediately repaid by Mortgagor to Mortgagee with interest
thereon at the Default Rate until paid.
SECTION 2.6. Foreclosure.
(a) The Mortgaged Property may be sold through
foreclosure subject to unpaid taxes and Permitted Liens, and after deducting all
costs, fees and expenses of Mortgagee including costs of evidence of title in
connection with the sale, Mortgagee or an officer that makes any sale shall
apply the proceeds of sale in the manner set forth in Section 2.8.
(b) Any foreclosure of less than the whole of the
Mortgaged Property shall not exhaust the power of foreclosure provided for
herein; and subsequent foreclosures may be made hereunder until the Obligations
have been satisfied, or the entirety of the Mortgaged Property has been
foreclosed.
(c) Mortgagor waives, to the extent not prohibited by
law, (1) the benefit of all laws now existing or that hereafter may be enacted
providing for any appraisement before sale of any portion of the Mortgaged
Property, (2) the benefit of all laws now existing or that may be hereafter
enacted in any way extending the time for the enforcement or the collection of
amounts due under this Mortgage or any of the Transaction documents or creating
or extending a period of redemption from any sale made in collecting
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26
said debt or any other amounts due Mortgagee, (3) any right to at any time
insist upon, plead, claim or take the benefit or advantage of any law now or
hereafter in force providing for any appraisement, valuation, stay, extension or
redemption, or sale of the Mortgaged Property as separate tracts, units or
estates or as a single parcel in the event of foreclosure, and (4) all rights of
redemption, valuation, appraisement, stay of execution, notice of election to
mature or declare due the whole of or each of the Obligations and marshalling in
the event of foreclosure of this Mortgage.
(d) If an Event of Default shall occur and be
continuing, Mortgagee may instead of, or in addition to, exercising the rights
described above and either with or without entry or taking possession as herein
permitted, proceed by a suit or suits in law or in equity or by any other
appropriate proceeding or remedy (1) to specifically enforce payment of some or
all of the terms of the Note Purchase Agreements, or the performance of any
term, covenant, condition or agreement of this Mortgage or any other right, or
(2) to pursue any other remedy available to it, all as Mortgagee shall determine
most effectual for such purposes.
(e) If Mortgagee elects one or more of the above
remedies, Mortgagor shall pay all of the costs and expenses of Mortgagee
incurred in pursuance of such remedies including without limiting the generality
thereof reasonable attorneys fees, all costs of collection, late payment
penalties, abstracts of title or title insurance, hazard insurance on the
Mortgaged Property, real property taxes on the Mortgaged Property which are paid
or incurred by Mortgagee, repairs, maintenance, and replacements of the
Mortgaged Property which are paid or incurred by Mortgagee, repairs, maintenance
and replacements of the Mortgaged Property which are advanced by the Mortgagee,
payments by Mortgagee to holders of Liens on the Mortgaged Property which are
then due and payable, and interest commencing with the date of the Event of
Default, calculated at the Default Rate, on the sum of the above costs and
expenses plus the unpaid principal balance of the Obligations and interest
unpaid prior to the date of Default, which shall become a part of the
Obligations secured hereby and collectible as such. In the event of a
foreclosure of this Mortgage, the abstracts of title or title insurance policies
and all policies of hazard insurance, in each case relating to the Mortgaged
Property, shall become the absolute property of Mortgagee.
(f) In the event the Mortgaged Property is sold under
foreclosure and the proceeds, together with the rents, issues and
profits collected by Mortgagee, are insufficient to pay the total
Obligations, Mortgagee shall be entitled to a deficiency judgment
against Mortgagor.
SECTION 2.7. Other Remedies.
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27
(a) If an Event of Default shall occur and be
continuing, Mortgagee may also exercise, to the extent not prohibited by law,
any or all of the remedies available to a secured party under the uniform
commercial code of the state wherein the Premises are located including without
limitation tothe extent not prohibited by applicable law, the following:
(i) either personally or by means of a court
appointed receiver, to take possession of all or any of the Personal Property
and exclude therefrom Mortgagor and all others claiming under Mortgagor, and
thereafter to hold, store, use, operate, manage, maintain and control, make
repairs, replacements, alterations, additions and improvements to and exercise
all rights and powers of Mortgagor with respect to the Personal Property or any
part thereof;
(ii) make such payments and do such acts as
Mortgagee may deem necessary to protect its security interest in the Personal
Property including paying, purchasing, contesting or compromising any
encumbrance, charge or Lien which is prior or superior to the security interest
granted hereunder, and, in exercising any such powers or authority, paying all
expenses incurred in connection therewith;
(iii) assemble the Personal Property or any portion
thereof at a place designated by Mortgagee and reasonably convenient to both
parties, to demand prompt delivery of the Personal Property to Mortgagee or an
agent or representative designated by it, and to enter upon any or all of the
Premises or Improvements to exercise Mortgagee's rights hereunder; or
(iv) sell or otherwise dispose of or purchase the
Personal Property at public sale, with or without having the Personal Property
at the place of sale, upon such terms and in such manner as Mortgagee may
determine, after Mortgagee shall have given Mortgagor at least ten days' prior
written notice of the time and place of any public sale or other intended
disposition of the Personal Property by mailing a copy to Mortgagor at the
address set forth in Section 4.2.
(b) In connection with a sale of the Mortgaged
Property or any Personal Property and the application of the proceeds of sale as
provided in Section 2.8 of this Mortgage, Mortgagee shall be entitled to enforce
payment of and to receive up to the principal amount of the Obligations, plus
all other charges, payments and costs due under this Mortgage.
SECTION 2.8. Application of Sale Proceeds and Rents.
After any foreclosure sale of all or any of the Mortgaged Property, Mortgagee
shall receive the proceeds of sale, no purchaser shall be required to see to the
application of the proceeds and Mortgagee shall apply the proceeds of the sale
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28
together with any Rents that may have been collected and any other sums which
then may be held by Mortgagee under this Mortgage as follows:
First: to the payment of the actual costs and expenses of such sale
including Mortgagee's reasonable attorneys' and agents' fees, and of any
judicial proceedings wherein the same may be made, and of all expenses,
liabilities and advances made or incurred by Mortgagee under this Mortgage,
together with interest at the Default Rate on all advances made by Mortgagee
including all taxes or assessments;
Second: to Mortgagee for the payment in full of indebtedness and
satisfaction of the Obligations in accordance with the Collateral Agency
Agreement; and
Third: to Mortgagor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
Mortgagee shall have absolute discretion as to the time of application of any
such proceeds, moneys or balances in accordance with this Mortgage. Upon any
foreclosure of the Mortgaged Property by Mortgagee, the receipt of Mortgagee or
of the officer making the sale shall be a sufficient discharge to the purchaser
or purchasers of the Mortgaged Property so sold and such purchaser or purchasers
shall not be obligated to see to the application of any part of the purchase
money paid over to Mortgagee or such officer or be answerable in any way for the
misapplication thereof.
SECTION 2.9. Waiver of Appraisement, Valuation, Stay,
Extension and Redemption Laws.
(a) Mortgagor will not object to any sale of the
Mortgaged Property in its entirety pursuant to Section 2.6, and for itself and
all who may claim under it, Mortgagor waives, to the extent that it lawfully
may, all right to have the Mortgaged Property marshalled or to have the
Mortgaged Property sold as separate estates, parcels, tracts or units in the
event of any foreclosure of this Mortgage.
(b) To the full extent permitted by the law of the
state wherein the Mortgaged Property is located or other applicable law, neither
Mortgagor nor anyone claiming through or under it shall or will set up, claim or
seek to take advantage of any appraisement, valuation, stay, extension,
homestead-exemption or redemption laws now or hereafter in force in order to
prevent or hinder the enforcement or foreclosure of this Mortgage, the absolute
sale of the Mortgaged Property or the final and absolute putting of the
purchasers into possession thereof immediately after any sale; and Mortgagor,
for itself and all who may at any time claim through or under it, hereby waives
to the full extent that it may lawfully do so, the benefit of all such laws and
any and all right to have the assets covered by the security interest
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29
created hereby marshalled upon any foreclosure of this Mortgage.
SECTION 2.10. Discontinuance of Proceedings. In the
event Mortgagee shall proceed to enforce any right, power or remedy under this
Mortgage by foreclosure, entry or otherwise, and such proceedings shall be
discontinued or abandoned for any reason, or shall be determined adversely to
Mortgagee, then and in every such case Mortgagor and Mortgagee shall be restored
to their former positions and rights hereunder, and all rights, powers and
remedies of Mortgagee shall continue as if no such proceeding had been taken.
SECTION 2.11. Suits to Protect the Mortgaged Property.
Mortgagee shall have power (a) to institute and maintain suits and proceedings
to prevent any impairment of the Mortgaged Property by any acts which may be
unlawful or in violation of this Mortgage or the Note Purchase Agreements, (b)
to preserve or protect its interest in the Mortgaged Property and in the Rents
arising therefrom and (c) to restrain the enforcement of or compliance with any
legislation 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 security or be prejudicial to the
interest of Mortgagee hereunder.
SECTION 2.12. Filing Proofs of Claim. In case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Mortgagor, Mortgagee shall, to the
extent permitted by law, be entitled to file such proofs of claim and other
documents as may be necessary or advisable in order to have the claims of
Mortgagee allowed in such proceedings for the Obligations secured by this
Mortgage at the date of the institution of such proceedings and for any interest
accrued, late charges and additional interest or other amounts due or which may
become due and payable hereunder after such date.
SECTION 2.13. Possession by Mortgagee. Notwith-
standing the appointment of any receiver, liquidator or trustee of Mortgagor,
any of its property or the Mortgaged Property, Mortgagee shall be entitled, to
the extent not prohibited by law, to remain in possession and control of all
parts of the Mortgaged Property now or hereafter granted under this Mortgage to
Mortgagee in accordance with the terms hereof and applicable law.
SECTION 2.14. Waiver.
(a) No delay or failure by Mortgagee to exercise any
right, power or remedy accruing upon any breach or Event of Default shall
exhaust or impair any such right, power or remedy or be construed to be a waiver
of any such breach or Event of Default or acquiescence therein; and every right,
power and remedy given by this Mortgage to Mortgagee may be exercised from time
to time and as often as may be deemed expedient by Mortgagee. No consent
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30
or waiver by Mortgagee to or of any breach or default by Mortgagor in the
performance of the Obligations shall be deemed or construed to be a consent or
waiver to or of any other breach or Event of Default in the performance of the
same or any other Obligations by Mortgagor hereunder. No failure on the part of
Mortgagee to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall constitute a
waiver by Mortgagee of its rights hereunder or impair any rights, powers or
remedies consequent on any future Event of Default by Mortgagor.
(b) Even if Mortgagee (1) grants some forbearance or
an extension of time for the payment of any sums secured hereby, (2) takes other
or additional security for the payment of any sums secured hereby, (3) waives or
does not exercise some right granted herein or under the Transaction documents,
(4) releases a part of the Mortgaged Property from this Mortgage, (5) agrees to
change some of the terms, covenants, conditions or agreements of any of the
Transaction documents, (6) consents to the filing of a map, plat or replat
affecting the Premises (7) consents to the granting of an easement or other
right affecting the Mortgaged Property or (8) makes or consents to an agreement
subordinating Mortgagee's Lien on the Mortgaged Property hereunder; no such act
or omission shall preclude Mortgagee from exercising any other right, power or
privilege herein granted or intended to be granted in the event of any breach or
Event of Default then made or of any subsequent default; nor, except as
otherwise expressly provided in an instrument executed by Mortgagee, shall this
Mortgage be altered thereby. In the event of the sale or transfer by operation
of law or otherwise of all or part of the Mortgaged Property, Mortgagee is
hereby authorized and empowered to deal with any vendee or transferee with
reference to the Mortgaged Property secured hereby, or with reference to any of
the terms, covenants, conditions or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any liabilities, obligations or undertakings.
SECTION 2.15. Remedies Cumulative. No right, power or
remedy conferred upon or reserved to Mortgagee by this Mortgage is intended to
be exclusive of any other right, power or remedy, and each and every such right,
power and remedy shall be cumulative and concurrent and in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or
in equity or by statute.
SECTION 2.16. Unavailability of Remedies. To the
extent the laws of the State in which the Premises are located limit (i) the
availability of the exercise of any of the remedies set forth herein, or (ii)
the enforcement of waivers and indemnities made by Mortgagor, such remedies,
waivers, or indemnities shall be exercisable or enforceable, any provisions in
this Mortgage to the contrary notwithstanding, if, and to the extent, permitted
by the laws in force at the time of the exercise
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31
of such remedies or the enforcement of such waivers or indemnities without
regard to the enforceability of such remedies, waivers or indemnities at the
time of the execution and delivery of this Mortgage.
Article III.
Casualty and Condemnation
SECTION 3.1. Property Casualty and Condemnation.
(a) Notwithstanding any other provision of this
Mortgage or the Transaction Documents, Mortgagee is authorized, at its option
(for the benefit of the Secured Parties), to collect, receive and hold in an
account pursuant to Section 3.2 to the extent payable to Mortgagor, all
insurance proceeds, damages, claims and rights of action and the right thereto
under any insurance policies with respect to any casualty or other insured
damage ("Casualty") to any portion of any Mortgaged Property (collectively,
"Insurance Proceeds"), unless the amount of the related Insurance Proceeds is
less than $10,000,000 in each instance and an Event of Default shall not have
occurred and be continuing. Mortgagor agrees to notify Mortgagee and the holders
of the Notes, in writing, promptly after Mortgagor obtains notice or knowledge
of any Casualty to the Mortgaged Property in an amount exceeding $1,000,000,
which notice shall set forth a description of such Casualty and Mortgagor's good
faith estimate of the amount of related damages and the time required to
complete the repairs or restoration of such Casualty. If Mortgagor shall receive
any Insurance Proceeds payable to Mortgagee pursuant to the terms hereof,
Mortgagor agrees, subject to the foregoing limitations, to endorse and transfer
such Insurance Proceeds it receives to Mortgagee. Mortgagor shall not adjust,
compromise or settle any claim for Insurance Proceeds without the prior written
consent of Mortgagee, which consent shall not be unreasonably withheld provided
that no Default or Event of Default has occurred and is then continuing; and
provided further, that, except during the existence of a Default or an Event of
Default, Mortgagee's consent shall not be required with respect to the
adjustment, compromising or settlement of any claim for Insurance Proceeds in an
amount less than $25,000,000.
(b) Mortgagor shall notify Mortgagee and the holders
of the Notes immediately upon obtaining knowledge of the institution of any
action or proceeding for the taking of any Mortgaged Property (except for any
immaterial taking with respect to the widening of existing roads or the taking
of any utility easement which does not adversely affect any existing or future
Improvements), or any part thereof or interest therein, for public or quasi-
public use under the power of eminent domain, by reason of any public
improvement or condemnation proceeding, or in any other manner (a
"Condemnation"). No settlement or compromise of any claim in connection with any
such action or proceeding shall be made without the consent of Mortgagee, which
consent shall not
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32
be unreasonably withheld. Mortgagee is authorized, at its option (for the
benefit of the Secured Parties), to collect, receive and hold in an account
pursuant to Section 3.2, all proceeds of any such Condemnation in excess of
$10,000,000 in each instance (in each case, the "Condemnation Proceeds").
Mortgagor agrees to execute such further assignments of any Condemnation
Proceeds so payable to Mortgagee as Mortgagee may reasonably require.
(c) In the event of any Condemnation of less than "all
or substantially all" of the Mortgaged Property (which determination shall be
made by Mortgagee in its reasonable discretion), Mortgagor shall, subject to the
conditions contained in subsection (f) below, restore the Mortgaged Property to
substantially its same condition immediately prior to such Condemnation subject
to such modifications as shall be required by Mortgagor in the exercise of its
prudent business judgment, provided there is no material adverse affect on the
fair market value of the Mortgaged Property before giving effect to such
Condemnation. In the event of a Condemnation of "all or substantially all" of
the Mortgaged Property (which determination shall be made by Mortgagee in its
reasonable discretion) Mortgagee shall, at the option of Mortgagor, either (i)
retain, as Mortgaged Property, the related Condemnation Proceeds in a separate
cash collateral account pursuant to Section 3.2 for the benefit of the Secured
Parties pursuant to the Note Purchase Agreements or (ii) allow Mortgagor to
construct and install substantially similar Improvements, Fixtures and Major
Units on other land owned by Mortgagor subject to the requirements of subsection
(f) below, and so long as Event of Default has occurred and is continuing,
provided (a) the replacement Mortgaged Property shall be of utility comparable
to that of the replaced Mortgaged Property, (b) the insufficiency of any
Condemnation Proceeds to defray the entire expense of the related location,
acquisition and replacement of such replacement Mortgaged Property shall in no
way relieve Mortgagor of its obligation to complete construction of any
replacement Mortgaged Property, (c) Mortgagor executes and delivers a mortgage
in the form of this Mortgage, or a supplement to this Mortgage, encumbering such
replacement Mortgaged Property and (d) Mortgagor otherwise puts Mortgagee in a
substantially similar position as under this Mortgage with respect to the
Mortgaged Property.
(d) In the event of any Casualty costing, in
Mortgagee's reasonable determination, less than $10,000,000 to
repair or restore, Mortgagor shall, subject to the conditions
contained in subsection (f) below, restore the Mortgaged Property
to substantially its same condition immediately prior to such
Casualty. In the event of any Casualty costing, in Mortgagee's
reasonable determination, $10,000,000 or more to repair or
restore, Mortgagor shall have the option to either:
(i) subject to the conditions contained in
subsection (f) below, and so long as no Default or Event of
Default has occurred and is continuing, restore the Mortgaged
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33
Property to substantially its same condition immediately
prior to such Casualty, provided that Mortgagor, pending such
reinvestment, promptly deposits such excess Insurance
Proceeds in a cash collateral account pursuant to Section 3.2
with Mortgagee for the benefit of the Secured Parties; or
(ii) direct Mortgagee to retain, as Mortgaged
Property, the related Casualty Proceeds in a separate cash collateral account
pursuant to Section 3.2 for the benefit of the Secured Parties.
(e) Mortgagor shall make any election contemplated by
subsections (c) or (d) above by notifying Mortgagee and the holders of the Notes
promptly after the later to occur of (A) five days after Mortgagor and its
insurance carrier or the condemning authority reach a final determination of the
amount of any Insurance or Condemnation Proceeds and (B) 30 days after the
occurrence of the Casualty or Condemnation. If Mortgagor shall be required or
shall elect to restore the Mortgaged Property, the insufficiency of any
Insurance Proceeds or Condemnation Proceeds to defray the entire expense of such
restoration shall in no way relieve Mortgagor of such obligation to so restore
if it is so required or once such election has been made and provided Mortgagee
shall make available to Mortgagor all net Insurance Proceeds in the possession
of Mortgagee. In the event Mortgagor shall be required to restore or shall
notify Mortgagee and the holders of the Notes of its election to restore,
Mortgagor shall diligently and continuously prosecute the restoration of the
Mortgaged Property to completion subject to the restrictions of subsection (f).
In the circumstance where Mortgagor shall be required to restore or shall so
elect to restore and no Event of Default has occurred and is continuing
Mortgagor shall not be required to comply with the requirements of subsection
(f) below in connection with such restoration (except as required by clause
(f)(iii)(A) and (B)), so long as the cost of such restoration shall be less than
$50,000,000. In the event of any Casualty or Condemnation, Mortgagor shall be
obligated to place the Mortgaged Property (or any remaining portion thereof, if
any,) in a safe condition that is otherwise in compliance with the requirements
of applicable Governmental Authorities and the provisions of this Mortgage.
(f) Except as otherwise specifically provided in this
Section 3.1, all Insurance Proceeds and all Condemnation Proceeds
recovered by Mortgagee (i) are to be applied to the restoration of the Mortgaged
Property (less the reasonable cost, if any, to Mortgagee of such recovery and of
paying out such proceeds including reasonable attorneys' fees, other charges and
disbursements and costs allocable to inspecting the Work (as defined below)) and
(ii) shall be applied by Mortgagee to the payment of the cost of restoring or
replacing the Mortgaged Property so damaged, destroyed or taken or of the
portion or portions of the Mortgaged Property not so taken (the "Work") and
(iii) shall be paid out from time to time to Mortgagor upon
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34
request by Mortgagor as and to the extent the Work (or the location and
acquisition of any replacement of any Mortgaged Property) progresses for the
payment thereof, but subject to each of the following conditions:
(A) Mortgagor must promptly commence the restoration process in
connection with the Mortgaged Property;
(B) the Work shall be in the charge of an architect or engineer and
before Mortgagor commences any Work, other than temporary work to protect
property or prevent interference with business, Mortgagee shall have
received the plans and specifications and the general contract for the Work
from Mortgagor; and plans and specifications shall provide for such Work
that, upon completion thereof, the improvements shall (x) be in compliance
with all requirements of applicable Governmental Authorities such that all
representations or warranties of Mortgagor relating to the compliance of
such Mortgaged Property with applicable laws, rules or regulations in this
Mortgage or the Transaction Documents will be correct in all respects and
(y) be of substantially equal value and general utility to the improvements
that were on such Mortgaged Property prior to the Casualty or Condemnation,
and in the case of a Condemnation, subject to the affect of such
Condemnation;
(C) each request for payment shall be made on seven days' prior notice
to Mortgagee and shall be accompanied by a certificate to be made by such
architect or engineer, stating (x) that all the Work completed has been done
in substantial compliance with the plans and specifications, (y) that the
sum requested is justly required to reimburse Mortgagor for payments by
Mortgagor to, or is justly due to, the contractor, subcontractors,
materialmen, laborers, engineers, architects or other persons rendering
services or materials for the Work (giving a brief description of such
services and materials) and that, when added to all sums previously paid out
by Mortgagee, does not exceed the value of the Work done to the date of such
certificate;
(D) each request shall be accompanied by waivers of
lien satisfactory to Mortgagee covering that part of the Work for which payment
or reimbursement is being requested and, if required by Mortgagee, by a search
prepared by a title company or licensed abstractor or by other evidence
satisfactory to Mortgagee, that there has not been filed with respect to such
Mortgaged Property any mechanics' or other Lien or instrument for the retention
of title in respect of any part of the Work not discharged of record or bonded
or insured against to the reasonable satisfaction of Mortgagee;
(E) no Event of Default shall have occurred and be
continuing;
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35
(F) the request for final payment after the Work has been
completed shall be accompanied by a copy of any
certificate or certificates required by law to render
occupancy of the improvements being rebuilt, repaired or
restored legal;
(G) after commencing the Work, Mortgagor shall continue to
perform the Work diligently and in good faith to
completion in accordance with the approved plans and
specifications; and
(H) if at any time whether before or after the commencement
of the Work, the Insurance Proceeds or the Condemnation
Proceeds, or the undisbursed balance thereof, shall not,
in the reasonable opinion of Mortgagee, be sufficient to
pay in full the balance of the costs which will be
incurred in connection with the Work, before any further
disbursement of such Insurance Proceeds or Condemnation
Proceeds shall be made, Mortgagor shall either deposit
such deficiency with Mortgagee, to be held by Mortgagee
in a separate cash collateral account pursuant to
Section 3.2 for the benefit of the Secured Parties or
provide to Mortgagee other evidence, reasonably
satisfactory to Mortgagee, of its financial ability to
pay for such deficiency. The deficiency so deposited
shall be disbursed for costs actually incurred in
connection with the Work on the same conditions set
forth above but prior to any further disbursement of
Insurance Proceeds or Condemnation Proceeds.
Upon completion of the Work and payment in full therefor, and
provided no Event of Default shall have occurred or be continuing, Mortgagee
will disburse to Mortgagor the amount of any Insurance Proceeds then or
thereafter in the hands of Mortgagee on account of the Casualty that
necessitated such Work, together with all undisbursed accrued interest thereon.
(g) Nothing in this Section 3.1 shall prevent
Mortgagee from applying at any time all or any part of the Insurance Proceeds or
Condemnation Proceeds to the curing of any Event of Default under this Mortgage
or any other Transaction Document.
SECTION 3.2. Casualty and Condemnation Cash
Collateral Account. For the purposes of this Article III, Mortgagee shall
deposit Insurance Proceeds and Condemnation Proceeds into a separate cash
collateral account and monies so deposited therein may be invested at the
direction of Mortgagee from time to time in Permitted Investments (as defined in
the Collateral Agency Agreement) so long as (i) arrangements reasonably
satisfactory to Mortgagee are made to ensure that Mortgagee will at all times
have a first and prior Lien on such Permitted Investments, (ii) Mortgagor shall
bear the risk of loss of any such Permitted Investments and (iii) no Event of
Default shall have occurred and be continuing.
<PAGE>
36
Article IV.
Miscellaneous
SECTION 4.1. Partial Invalidity. In the event any
one or more of the provisions contained in this Mortgage shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall, at the option of Mortgagee, not affect any
other provision of this Mortgage, and this Mortgage shall be construed as if
such invalid,illegal or unenforceable provision had never been contained
herein or therein.
SECTION 4.2. Notices. All notices to be sent
hereunder shall be delivered in the manner prescribed in Section
19 of the Note Purchase Agreements.
SECTION 4.3. Successors and Assigns. All of the
grants, covenants, terms, provisions and conditions herein shall
run with the Premises and the Improvements and shall apply to,
bind and inure to, the benefit of the permitted successors and
assigns of Mortgagor and the successors and assigns of Mortgagee.
SECTION 4.4. Counterparts. This Mortgage may be
executed in any number of counterparts and all such counterparts shall together
constitute but one and the same mortgage.
SECTION 4.5. Satisfaction and Cancellation.
(a) The conveyance to Mortgagee created and
consummated by this Mortgage shall be null and void and this Mortgage shall be
cancelled and surrendered when all the Obligations have been indefeasibly paid
in full in accordance with the terms of the Note Purchase Agreements and the
Notes.
(b) In connection with any termination or release
pursuant to paragraph (a), the Mortgage shall be marked "satisfied" by
Mortgagee, and this Mortgage may be canceled of record at the request and at the
expense of Mortgagor. Mortgagee shall execute any documents reasonably requested
by Mortgagor to accomplish the foregoing or to accomplish any release
contemplated by paragraph (a) or (b) and Mortgagor will pay all costs and
expenses including reasonable attorneys' fees and disbursements, incurred by
Mortgagee in connection with the preparation and execution of such documents.
SECTION 4.6. Definition of Terms Used in the Note
Purchase Agreements. All capitalized and other terms used but
not defined herein shall have their ascribed meanings as set forth in the Note
Purchase Agreements.
SECTION 4.7. Definition of Certain Terms Used Herein.
As used herein, the following terms shall have the following mean-
ings:
<PAGE>
37
"Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks are
required or permitted to close in New York City.
"Casualty" is defined in Section 3.1(a).
"Cold Mill" is defined in Granting Clause Fourth.
"Collateral Agency Agreement" is defined in preamble.
"Completion Date" is defined in Section 4.14.
"Condemnation" is defined in Section 3.1(b).
"Condemnation Proceeds" is defined in Section 3.1(b).
"Costs" is defined in Section 1.16(i).
"Default" shall mean any event or condition the
occurrence or existence of which would, with the giving of notice
or the lapse of time, or both, become an Event of Default.
"Environmental Laws" means (1) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C.A. Section 9601 et seq., (2) the Resource Conservation and Recovery Act,
as amended by the Hazardous and Solid Waste Amendment of 1984, 42 U.S.C.A.
Section 6901 et seq., (3) the Clean Air Act, 42 U.S.C.A. Section 7401 et seq.,
(4) the Clean Water Act of 1977, 33 U.S.C.A. Section 1251, (5) the Toxic
Substances Control Act, 15 U.S.C.A. 2601, (6) all other laws relating to air
pollution, water pollution, and/or the handling, discharge, existence, disposal
or recovery of on-site or off-site hazardous, toxic or dangerous waste,
substances or materials, and (7) the rules, regulations and ordinances of (A)
the city, county and state in which the Land is located or in which Mortgagor
has disposed of Hazardous Materials, (B) the Environmental Protection Agency and
(C) all other applicable federal, state, regional and local agencies and bureaus
as each of the foregoing may be amended from time to time.
"Event of Default" is defined in Section 2.1.
"Hazardous Materials" means any substance, material or
waste, which is (1) regulated under any Environmental Law, (2) defined as a
"hazardous waste", "hazardous substance", "extremely hazardous waste", or
"restricted hazardous waste" or other similar term or phrase under any
Environmental Law, (3) petroleum, (4) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C.A. 1251 (33 U.S.C.A.
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C.A.
1317), (5) defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, 42 U.S.C.A. 6901 (42 U.S.C.A. 6903), or
(6) defined as a "hazardous substance" pursuant
<PAGE>
38
to Section 101(14) of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C.A. 9601 (42 U.S.C.A.
9601).
"Hot Dip Line" is defined in the Granting Clause Fourth.
"Improvements" is defined in preamble.
"Indemnified Parties" is defined in Section 1.16(i).
"Insurance Proceeds" is defined in Section 3.1(a).
"Insurance Requirements" shall mean all terms of any
insurance policy required by this Mortgage, all requirements of
the issuer of any such policy, and all regulations and then
current standards applicable to or affecting the Mortgaged
Property or any use or condition thereof, which may, at any time,
be required by the Board of Fire Underwriters having jurisdiction
thereover, if any, having jurisdiction over the Mortgaged
Property, or such other Person exercising similar functions.
"IRPTL" is defined in Section 1.16(c).
"Land" is defined in preamble.
"Leases" is defined in Granting Clause Seventh.
"Legal Requirements" shall mean all federal, state,
county, municipal and other governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions (including without
limitation any of the foregoing relating to Hazardous Materials) affecting
either the Mortgaged Property or the construction, use, alteration or operation
thereof, whether now or hereafter enacted and in force including without
limitation any which may (i) require repairs, modifications or alterations in or
to the Mortgaged Property, (ii) in any way limit the use and enjoyment thereof,
and all permits, licenses and authorizations and regulations relating thereto,
(iii) all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Mortgagor, any time in force affecting
the Mortgaged Property, or (iv) pertain to requirements for equal opportunity,
anti-discrimination, disability accommodation, environmental protection, zoning
or land use.
"Major Units" is defined in the Granting Clause Fourth
"Material Adverse Effect" shall mean a material adverse
effect on (i) the value of the Mortgaged Property, (ii) Mortgagor's operations
at the Mortgaged Property, (iii) the ability of Mortgagor to perform its
obligations under the Note Purchase Agreements, the Notes or this Mortgage or
(iv) the validity or enforceability of the Note Purchase Agreements, the
<PAGE>
39
Notes or this Mortgage.
"Mortgage" is defined in preamble.
"Mortgage Default" is defined in Section 2.1.
"Mortgaged Property" is defined in preamble.
"Note Purchase Agreements" is defined in preamble.
"Note Purchasers" is defined in preamble.
"Notes" is defined in preamble.
"Obligations" is defined in the preamble.
"Permits, Plans and Warranties" is defined in Granting
Clause Sixth.
"Personal Property" is defined in Granting Clause Fifth.
"Premises" is defined in preamble.
"Proceeds" is defined in Granting Clause Eighth.
"Rents" is defined in Granting Clause Fifth.
"Secured Parties" shall mean (a) Mortgagee, (b) the
Note Purchasers and (c) the successors and assigns of each of the
foregoing.
"Specified Provisions" is defined in Section 4.14.
"Software" is defined in Granting Clause Ninth.
"Transaction Documents" shall mean the Note Purchase
Agreements, the Notes, this Mortgage and the Collateral Agency
Agreement.
"Work" is defined in Section 3.1(f).
SECTION 4.8. Definitions Generally. As used in this
Mortgage, the singular shall include the plural as the context requires and the
following words and phrases shall have the following meanings: (a) "including"
shall mean "including but not limited to"; (b) "provisions" shall mean
"provisions, terms, covenants and/or conditions"; (c) "obligation" shall mean
"obligation, duty, covenant and/or condition"; and (d) "any of the Mortgaged
Property" shall mean "the Mortgaged Property or any part thereof or interest
therein". Any act which Mortgagee is permitted to perform hereunder may be
performed at any time and from time to time by Mortgagee or any person or entity
designated by Mortgagee. Any act which is prohibited to Mortgagor hereunder
<PAGE>
40
is also prohibited to all lessees of any of the Mortgaged Property. Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under this Mortgage
is irrevocable, with power of substitution and coupled with an interest. Subject
to the applicable provisions hereof, Mortgagee has the right to refuse to grant
its consent, approval or acceptance or to indicate its satisfaction, in its sole
discretion, whenever such consent, approval, acceptance or satisfaction is
required hereunder.
SECTION 4.9. Right of Entry. Mortgagee and its
agents and employees shall have the right, subject to the rights of tenants
under existing and valid Leases, to enter and inspect, and/or to take any action
permitted hereunder with respect to, the Mortgaged Property or any part thereof
at all reasonable times, and, except in the event of an emergency, upon
reasonable or such other notice, if any, as may be expressly herein provided.
SECTION 4.10. No Merger. If Mortgagor's and
Mortgagee's estates including without limitation upon the delivery of a deed by
Mortgagor in lieu of a foreclosure sale, or upon a purchase of the Mortgaged
Property by Mortgagee in a foreclosure sale, become the same this Mortgage and
the Lien created hereby shall not be destroyed or terminated by the application
of the doctrine of merger and in such event Mortgagee shall continue to have and
enjoy all of the rights and privileges of Mortgagee as to the separate estates;
and, as a consequence thereof, upon the foreclosure of the Lien created by this
Mortgage any Leases or subleases then existing and created by Mortgagor shall
not be destroyed or terminated by application of the law of merger or as a
result of such foreclosure unless Mortgagee or any purchaser at any such
foreclosure sale shall so elect. No act by or on behalf of Mortgagee or any such
purchaser shall constitute a termination of any Lease or sublease unless
Mortgagee or such purchaser shall give written notice thereof to such Lessee or
sublessee.
SECTION 4.11. Tax Reduction Proceedings. After an
Event of Default, Mortgagor shall be deemed to have appointed Mortgagee as its
attorney-in-fact to seek a reduction or reductions in the assessed valuation of
the Mortgaged Property for real property tax purposes and to prosecute any
action or proceeding in connection therewith. This power, being coupled with an
interest, shall be irrevocable for so long as any part of the Obligations remain
unpaid and any Event of Default shall be continuing.
SECTION 4.12. Sole Discretion of Mortgagee. Wherever
pursuant to this Mortgage, Mortgagee exercises any right given to
it to approve or disapprove, or any arrangement or term is to be
satisfactory to Mortgagee, the decision of Mortgagee to approve or disapprove or
to decide that arrangements or terms are satisfactory or not satisfactory shall
be in the sole discretion of Mortgagee and shall be final and conclusive, except
as may be otherwise specifically provided herein.
<PAGE>
41
SECTION 4.13. No Joint Venture or Partnership.
Mortgagor and Mortgagee intend that the relationship created under this Mortgage
be solely that of mortgagor and mortgagee. Nothing therein is intended to create
a joint venture, partnership, tenancy-in-common, agency or joint tenancy
relationship between Mortgagor and Mortgagee, nor to grant to Mortgagee any
interest in the Mortgaged Property other than that of mortgagee; it being the
intent of the parties hereto that Mortgagee shall not share in any loss
whatsoever generated by the Mortgaged Property and that Mortgagee shall have no
control over the day-to-day management and operation of the Mortgaged Property.
SECTION 4.14. Completion of Construction. Anything
contained herein to the contrary notwithstanding, for the period commencing on
the date hereof and ending on the date (the "Completion Date") upon which the
conditions of Section 9.7(a) of the Note Purchase Agreements have been
fulfilled, Sections 1.1(b), 1.1(j), 1.4, 1.5, Article III (except to the extent
Article III applies to Condemnation), the last sentence of each of Sections
1.1(a), 1.1(d) and 1.9 and the second sentence of Section 1.1(k) (collectively,
the "Specified Provisions") shall have no force or effect. Upon the occurrence
of the Completion Date, all of the covenants and agreements set forth in the
Specified Provisions will become effective and all of the representations set
forth in the Specified Provisions will be deemed made as of the Completion Date.
Article V.
Particular Provisions
This Mortgage is subject to the following provisions
relating to the particular laws of the state wherein the Premises
are located:
SECTION 5.1. Applicable Law; Certain Particular
Provisions. This Mortgage shall be governed by and construed in accordance with
the internal law of the State of New York; provided that the provisions of this
Mortgage relating to the creation, perfection and enforcement of the Lien and
security interest created by this Mortgage in respect of the Mortgaged Property
and the exercise of each remedy provided hereby including the power of
foreclosure procedures set forth in this Mortgage and any other provisions which
are required by applicable law to be governed by and/or construed in accordance
with the internal laws of the state where the Mortgaged Property is located,
shall be governed by and construed in accordance with the internal law of the
State where the Mortgaged Property is located, and Mortgagor and Mortgagee will
submit to jurisdiction and the laying of venue for any suit on this Mortgage in
such State.
SECTION 5.2. Future Advances; Maximum Amount of
Indebtedness. This Mortgage is intended to secure additional advances that may
be made by the Note Purchasers to Mortgagor after the date hereof and all
modifications, extensions and renewals of any of the Transaction Documents.
Notwithstanding any provision set forth herein to the contrary, the maximum
amount of
<PAGE>
42
principal indebtedness secured by this Mortgage at execution, or which under any
contingency may become secured hereby at any time hereafter, is $500,000,000
(whether made as an obligation, made at the option of Mortgagee, made after a
reduction to a zero or other balance or made otherwise) including all interest
payable under the Notes and all amounts expended by Mortgagee after default by
Mortgagor (A) for the payment of taxes, charges or assessments which may be
imposed by Legal Requirements upon the Property; (B) to maintain the insurance
required under this Mortgage; (C) for any expenses incurred in maintaining the
Property and upholding the Lien of this Mortgage including but not limited to
the expense of any litigation to prosecute or defend the rights and Lien created
by this Mortgage, and (D) for any amount, cost or charge to which Mortgagee
becomes subrogated, upon payment, whether under recognized principles of law or
equity, or under express statutory authority.
<PAGE>
43
IN WITNESS WHEREOF, this Mortgage has been duly
authorized and has been executed under seal and delivered to
Mortgagee by Mortgagor on the date first above written.
AK STEEL CORPORATION
By__________________
Name:
Title:
Certificate of Acknowledgment
-----------------------------
STATE OF _________)
) SS:
COUNTY OF ________)
Before me, a Notary Public in and for said County and
State, personally appeared __________________________, the
_____________________________ of AK Steel Corporation, a Delaware
corporation, and acknowledged the execution of the foregoing
instrument as such officer acting for and on behalf of said
corporation, and who, having been duly sworn, stated that any
representations therein contained are true and correct.
Witness my hand and Notarial Seal this _______ day of
___________ , 1997.
- -------------------------
(signature)
---------------------------------
My Commission Expires: (printed name) Notary Public
- ------------------------------ Resident of
County
[SEAL]
This instrument was prepared by:
Harvey Fuchs, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
<PAGE>
Exhibit A
Legal Description
[Legal descriptions of building site of approximately 3 acres at
Mortgagor's property in Spencer County, Indiana including all
necessary beneficial easements (e.g. for adequate means of
vehicular and pedestrian access, common walls, subjacent support,
utilities, mechanical systems, etc.) to be provided by Mortgagor.]
0212599.04
<PAGE>
Exhibit B
Principal Processes
The New Facility will include capacity for the following
processes:
. Continuous cold mill. At the heart of the New Facility will
be a 60,000 horsepower continuous cold mill, designed to cold
reduce carbon steel hot bands. A laser welder will join
separate coils of hot and into a single strip, which will be
fed into a horizontal accumulator to allow the mill to
operate continuously as additional coils are welded to the
strip. The mill will also cold reduce stainless steel hot
bands and cold bands. Cold rolling of both carbon and
stainless steel will be subject to continuous variable crown
management to assure precise product gauge and shape.
. Hot dip galvanizing line. This coating line will be capable
of producing the premium grades of galvanized and
galvannealed steel desired by the automotive market. After
cleaning, a continuous strip of cold rolled carbon steel will
enter a radiant tube furnace, free of oxygen contamination,
where new heating control technology will permit instant
adjustments for changes in material size and grade, resulting
in higher yield and quality consistency throughout the final
coil. Nitrogen finishing coating knives will assure precise
coating weights. Material to be galvannealed will also pass
though an electrical induction furnace, providing the precise
heating necessary to control the alloy composition. The unit
will include a skin pass mill for shape control and an in-
line roll coater for organic and chemical coatings for
additional corrosion protection or paint pretreatment. The
exit portion of the unit will include a two-sided, in-line
inspection station to permit both vertical and horizontal
inspection.
<PAGE>
EXHIBIT 1.2(b)
to Note Purchase Agreement
COLLATERAL AGENCY AGREEMENT
This COLLATERAL AGENCY AGREEMENT (as amended, restated, supplemented
or otherwise modified from time to time, this "Agreement") dated as of December
---------
17, 1996, among AK STEEL CORPORATION, a Delaware corporation (the "Company"),
-------
the Purchasers referred to below, and NBD BANK, N.A., a national banking
association acting in its capacity as collateral agent for the benefit of the
Holders referred to below (in such capacity, together with its successors and
assigns in such capacity, the "Collateral Agent"). The Company has entered into
----------------
several Note Purchase Agreements dated as of December 17, 1996 (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"Note Purchase Agreements") with the Purchasers named therein (the
------------------------
"Purchasers"), providing for the issue and sale by the Company of its Senior
----------
Secured Notes, Series A-E, due 2004 in an aggregate principal amount of up to
$250,000,000 (the "Notes").
-----
To secure its obligations under the Note Purchase Agreements and the
Notes, the Company is required to execute and deliver the Original Mortgage
referred to in the Note Purchase Agreements and from time to time to supplement
and amend the Original Mortgage and otherwise comply with the requirements of
the Note Purchase Agreements. The purpose of this Agreement is, among other
things, for the Purchasers to appoint NBD Bank, N.A. as collateral agent for the
ratable benefit of the Purchasers and the holders from time to time of the Notes
(collectively with the Purchasers, the "Holders"), to establish certain accounts
-------
and to provide for the enforcement by the Collateral Agent, for the ratable
benefit of the Holders, of the rights of such Holders with respect to the
Collateral (as defined below).
Accordingly, the parties hereto agree as follows:
(S)1. Defined Terms. Capitalized terms used but not defined in this
-------------
Agreement shall have the meanings specified or ascribed thereto in the Mortgage
or the Note Purchase Agreements, as applicable. The following terms shall have
the following meanings:
"Insurance Proceeds" has the meaning specified in the Mortgage.
------------------
"Collateral" means the Mortgaged Property as defined in the Mortgage.
----------
"Collateral Account" has the meaning specified in Section 6.1.
------------------
"Condemnation Proceeds" has the meaning specified in
---------------------
COLLATERAL AGENCY AGREEMENT
<PAGE>
-2-
the Mortgage.
"Mortgage" means the Original Mortgage as supplemented or amended from
--------
time to time as contemplated thereby and by the Note Purchase Agreements.
"Permitted Investments" has the meaning specified in the Note Purchase
---------------------
Agreements.
(S)2. Appointment. The Purchasers hereby designate and appoint NBD
-----------
Bank, N.A., as Collateral Agent to act as specified herein and in the Mortgage.
Each Purchaser (and any subsequent Holder by acceptance of a Note) hereby
irrevocably authorizes the Collateral Agent to take such action on its behalf
under the provisions of the Mortgage and any other instruments and agreements
referred to herein or therein and to exercise all powers set forth herein and
therein, for the benefit of the Holders to the extent set forth in the Mortgage,
including without limitation the right to foreclose or otherwise realize upon
the Collateral and to initiate, prosecute and defend any and all legal
proceedings against the Company or against any other party to the Mortgage and
to perform such duties hereunder and thereunder as are specifically delegated to
or permitted or required of the Collateral Agent by the terms hereof and thereof
and such other powers as are reasonably incidental thereto.
The Collateral Agent accepts its appointment as collateral agent and
agrees to execute its duties and obligations hereby created upon the terms and
conditions set forth herein and in the Mortgage.
(S)3. Duties, Powers And Rights Of Collateral Agent.
---------------------------------------------
(S)3.1 Specific Duties Of The Collateral Agent. The Collateral
---------------------------------------
Agent shall:
(a) upon the receipt by it of written instructions of the Majority
Holders, execute and deliver on behalf of the Holders such documents or
instruments as described in the written instruction of the Majority Holders
as shall be necessary or appropriate from time to time to maintain the
perfection of any lien in, to or upon the Collateral or any portion
thereof, which liens have been, are or will be granted pursuant to the
Mortgage;
(b) accept, on behalf of the Holders, any part of the Collateral
delivered to it, including without limitation any certificated securities,
licenses, instruments and documents, and accept, on behalf of the Holders,
any new Collateral given as security for the obligations secured by the
COLLATERAL AGENCY AGREEMENT
<PAGE>
-3-
Mortgage, which Collateral may be delivered for safekeeping to third-party
custodians and, upon the receipt of written instructions of the Majority
Holders, execute and deliver, on behalf of the Holders, such documents or
instruments evidencing the creation of any lien with respect thereto and
perfecting such lien as shall be set forth in such instructions;
(c) release the Collateral or any portion thereof from any liens
thereon which were created pursuant to the Mortgage if such release is in
compliance with the terms of the Mortgage or the Note Purchase Agreements
or approved by the Majority Holders;
(d) furnish the Holders, promptly upon receipt thereof, duplicates of
all reports, notices, requests, demands, certificates and other documents
received by the Collateral Agent under this Agreement, the Mortgage or any
instrument or document entered into pursuant thereto unless any such
document shall state thereon that it has previously been furnished directly
to the Holders;
(e) upon receipt by it of written instructions from the Majority
Holders, take such action as set forth in the instructions to protect and
preserve the Collateral and realize on and foreclose upon the Collateral,
including without limitation exercising any powers or any of the remedies
described in the Mortgage;
(f) provide notice required by the Mortgage or by law to the Company
or any other party entitled thereto, in order to take any actions required
or authorized to be taken under this Agreement or the Mortgage; and
(g) take, or refrain from taking, such other actions (but only such
actions that are set forth in this Agreement) as the Majority Holders shall
from time to time direct by written instruction to the Collateral Agent.
(S)3.2. Duties Limited. (a) Except as expressly provided herein,
--------------
in the Mortgage or in written instructions of the Majority Holders, the
Collateral Agent shall not have any duty or obligation, express or implied, to:
(i) manage, control, use, maintain, sell, dispose of, purchase,
bid for or otherwise deal with the Collateral or any portion thereof, or to
otherwise take or refrain from taking any action under, or in connection
with this Agreement or the Mortgage, except to the extent required by law;
COLLATERAL AGENCY AGREEMENT
<PAGE>
-4-
(ii) take any action which relates to, materially affects or
impairs the amounts which the Holders may recover from disposition of the
Collateral, including without limitation any election or waiver of remedies
available under the Mortgage or with respect to the Collateral or the
manner of foreclosure upon the same; any determination of the order and
timing of foreclosure upon any portion of the Collateral or of the amount
of any credit bid to be entered at any public or private, judicial or
nonjudicial sale of the Collateral; the pursuit of any remedies against the
Company following the completion of foreclosure upon the Collateral; the
compromise or settlement of any claims against the Company including the
conduct of any negotiations relating to the same or with a view toward the
termination of any pending foreclosure proceedings;
(iii) obtain or maintain insurance on the Collateral or any
other insurance;
(iv) pay or discharge any tax, assessment or other governmental
charge or any lien or encumbrance of any kind owing with respect to, or
assessed or levied against, any part of the Collateral;
(v) advance any moneys related to the Collateral or for the
benefit of the Holders for any purpose;
(vi) take any action or omit to take any action not expressly
provided for in the Mortgage and documents related thereto and executed in
connection therewith; or
(vii) take any action or omit to take any action to perfect or
insure priority for the security interest granted by the Mortgage unless
instructed in writing by the Majority Holders.
(b) In addition to and not in limitation of the provisions of Section
3.2(a), under no circumstances shall the Collateral Agent have any duty or
obligation to take any actions hereunder, even if instructed to do so by the
Majority Holders, if the Collateral Agent determines, in its sole and absolute
discretion, that such actions would subject it to liability or expense for which
satisfactory indemnity has not been provided hereunder or otherwise.
(S)3.3. Written Instructions. In the event that the Collateral
--------------------
Agent receives written instructions from the Majority
COLLATERAL AGENCY AGREEMENT
<PAGE>
-5-
Holders which the Collateral Agent determines, in its sole and absolute
discretion, to be ambiguous, inconsistent, in conflict with this Agreement or
the Mortgage or otherwise insufficient to direct the actions of the Collateral
Agent, then the Collateral Agent shall have no obligation whatsoever to take or
refrain from taking any action pursuant to such written instructions, but shall
instead do one or more of the following:
(a) seek additional written instructions satisfactory to it from the
Majority Holders; or
(b) resign as Collateral Agent in accordance with this Agreement; or
(c) at the expense of the Holders, which fees and expenses shall be
paid in advance, commence an action in a court of appropriate jurisdiction
requiring the Holders to interplead and settle among themselves their
rights in and to the Collateral and any proceeds thereof then held by the
Collateral Agent.
(S)3.4. Reliance. In acting with respect to this Agreement and the
--------
Mortgage, the Collateral Agent shall be entitled to:
(a) rely on any communication believed by it to be genuine and to
have been made, sent or signed by the person, firm or institution by whom
it purports to have been made, sent or signed;
(b) rely as to any matters of fact which might reasonably be expected
to be within the knowledge of the Holders or the Company upon a certificate
signed by or on behalf of any such party;
(c) rely on the representations made by the Holders in their
respective instructions regarding their respective authority to provide the
instructions; and
(d) rely on the advice or services of any persons, firms or
professionals employed by it and rely upon the opinions and statements of
any professional advisor so employed.
(S)3.5. No Responsibility. The Collateral Agent does not assume any
-----------------
responsibility for:
(a) any failure or delay in performance or breach by the Company, or
by any Holder of any obligations under this Agreement, the Mortgage or the
Note Purchase Agreements; or
COLLATERAL AGENCY AGREEMENT
<PAGE>
-6-
(b) the truth or accuracy of any representation or warranty or
statement given or made in connection with this Agreement, the Mortgage or
the Note Purchase Agreements; or
(c) the legality, validity, effectiveness, adequacy or enforceability
of the Mortgage or the liens on the Collateral; or
(d) the validity, enforceability or sufficiency of any agreement or
instrument or any depreciation or diminution in the value of any Collateral
or the income thereon.
In the absence of negligence or willful misconduct, the Collateral
Agent shall not be liable for any action taken, suffered or omitted or for any
error of judgment made by it in good faith in the performance of its duties
under this Agreement or the Mortgage.
(S)3.6. Reliance By Collateral Agent. In the absence of negligence
----------------------------
or willful misconduct, the Collateral Agent may rely upon any certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond or
paper or document reasonably believed by it to be genuine and to have been
signed or presented by the proper party or parties. The Collateral Agent may
consult with independent counsel reasonably satisfactory to the Majority
Holders, and a written opinion of such counsel shall constitute full and
complete protection in respect of any action taken, suffered or omitted by it
under this Agreement in good faith and in accordance with such opinion of
counsel. The Collateral Agent may execute any of its powers hereunder or
perform any duties hereunder either directly or through agents or attorneys and
the Collateral Agent shall not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with due care by it hereunder.
(S)4. Moneys to be Held in Trust. All moneys received by the
--------------------------
Collateral Agent hereunder and under the Mortgage, including but not limited to
moneys in the Collateral Account, shall be held by the Collateral Agent in trust
and applied for the purposes of this Agreement and the Mortgage, but need not be
segregated from other funds of the Collateral Agent except as required herein,
by the Mortgage or by law.
(S)5. Application of Sale Proceeds and Rents. All moneys
--------------------------------------
collected by the Collateral Agent upon any sale of the Collateral, together with
any other moneys received by the Collateral Agent under this Agreement, shall be
applied as follows:
(a) first, to the payment of the actual costs and
COLLATERAL AGENCY AGREEMENT
<PAGE>
-7-
expenses of such sale, including compensation to the Collateral Agent's
attorneys and agents, and of any judicial proceedings wherein the same may
be made, and of all expenses, liabilities and advances made or incurred by
Collateral Agent under the Mortgage, together with interest on all advances
made by the Collateral Agent, including all taxes or assessments and the
cost of removing any Permitted Lien;
(b) second, to the Collateral Agent for the payment in full of
indebtedness and satisfaction of the obligations secured by the Mortgage in
accordance with this Agreement; and
(c) third, to the Company, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
(S)6. Collateral Account.
------------------
(S)6.1. Establishment of Collateral Account. The Collateral Agent
-----------------------------------
hereby establishes a segregated trust account entitled the "Casualty and
Condemnation Cash Collateral Account" (the "Collateral Account") in the name of
------------------
the Collateral Agent, for the ratable benefit of the Holders, into which the
Company will deposit (or cause to be deposited) immediately upon receipt, all
(A) Insurance Proceeds and (B) Condemnation Proceeds pursuant to Section 3.1 of
the Mortgage. Except as otherwise expressly provided herein, the Collateral
Account shall be under the exclusive dominion and control of the Collateral
Agent for the ratable benefit of the Holders. Each Holder hereby irrevocably
directs and authorizes the Collateral Agent to deposit and withdraw funds from
the Collateral Account in accordance with the terms and conditions of this
Agreement. The Company shall have no right of withdrawal in respect of the
Collateral Account.
(S)6.2. Application of Collateral Account Before an Event of
----------------------------------------------------
Default. Amounts received by the Collateral Agent in respect of the Collateral
Account shall be applied by the Collateral Agent pursuant to the Mortgage.
(S)6.3. Application of Collateral Account Following an Event of
-------------------------------------------------------
Default. Amounts on deposit in the Collateral Account, and all other
- -------
Condemnation Proceeds and Insurance Proceeds, shall be applied in accordance
with the Mortgage.
(S)6.4. No Investment in the Notes. Neither the Collateral Agent
--------------------------
nor any of its Controlled Affiliates shall hold any of the Notes for its own
account.
COLLATERAL AGENCY AGREEMENT
<PAGE>
-8-
(S)7. Investment.
----------
(S)7.1. Permitted Investments. Moneys held by the Collateral Agent
---------------------
in the Collateral Account maintained under this Agreement shall be invested and
reinvested in any Permitted Investment, or any combination thereof, so long as
(i) arrangements reasonably satisfactory to the Collateral Agent are made to
ensure that the Collateral Agent will at all times have a first and prior Lien
on such Permitted Investments, (ii) the Company shall bear the risk of loss of
any such Permitted Investments and (iii) no Event of Default shall have occurred
and be continuing. Each Permitted Investment made with moneys from the
Collateral Account shall be held in such Collateral Account and shall be a part
thereof.
(S)7.2. Books of Account; Statements. The Collateral Agent
----------------------------
shall maintain books of account on a cash basis and record therein all deposits
into and transfers to and from the Collateral Account and all Permitted
Investments effected by the Collateral Agent as set forth in this Section 7.
The Collateral Agent shall make such books of account available during normal
business hours for inspection and audit by the Company and the Holders and their
respective representatives.
Not later than 15 days after the end of each calendar month, the
Collateral Agent shall deliver to the Company and each Holder, upon written
request therefor, a statement setting forth the transactions into and out of the
Collateral Account during such calendar month.
(S)8. Compensation; Indemnification. The Collateral Agent shall be
-----------------------------
entitled to receive from the Company such reasonable compensation for its
services as shall be agreed from time to time between the Company and the
Collateral Agent and payment or reimbursement of its reasonable expenses and
disbursements (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ)
hereunder. In addition, the Collateral Agent shall be indemnified by the
Company for, and held harmless by it against, any and all damages, losses,
liability, costs, charges, expenses and judgments incurred without gross
negligence, fraud, deceit, bad faith or willful misconduct on its or its
officers', directors', employees' or agents' part, arising out of or in
connection with the acceptance or administration of the trust hereunder,
including the costs and expenses (including reasonable costs and expenses of its
attorneys and agents) of defending itself against any claim of liability in the
premises, and shall be entitled to be furnished with reasonable security or
indemnity prior to undertaking any remedial action hereunder (other than the
giving of notice).
COLLATERAL AGENCY AGREEMENT
<PAGE>
-9-
(S)9. Resignation or Removal. The Collateral Agent may resign on not
----------------------
less than 60 days' written notice to the Company and the Holders, but such
resignation shall not take effect until a successor has been appointed and
accepted its duties in accordance with Section 10. If no successor Collateral
Agent shall have been appointed and have accepted appointment within 60 days
after the giving of such notice of resignation, the resigning Collateral Agent
may petition any court of competent jurisdiction for the appointment of a
successor Collateral Agent, and such court may thereupon, after such notice, if
any, as it may deem proper, appoint a successor Collateral Agent. The
Collateral Agent may be removed at any time, with or without cause, by written
notice from the Majority Holders delivered to the Collateral Agent and the
Company, but such removal shall not take effect until a successor has been
appointed and accepted its duties in accordance with Section 10.
(S)10. Successor Collateral Agent. Any corporation or association
--------------------------
which succeeds to the corporate trust business of the Collateral Agent as a
whole or substantially as a whole, whether by sale, merger, consolidation or
otherwise, shall thereby become vested with all the property, rights and powers
of the Collateral Agent hereunder and shall be deemed to have assumed all of the
obligations of the Collateral Agent hereunder, without any further act or
conveyance. In the event of the resignation or removal of the Collateral Agent
or a vacancy from any other cause, a successor may be appointed by the Majority
Holders after consultation with the Company, provided that the consent of the
Company is not required. Any successor Collateral Agent under this Section 10
shall be a bank or trust company organized under the laws of the United States
or of one of the states thereof, having a combined capital, surplus and
undivided profits of not less than $500,000,000. Any such successor Collateral
Agent shall become vested with all the property rights and powers of the
Collateral Agent hereunder, without any further act or conveyance. Any
predecessor Collateral Agent shall from time to time execute, deliver and record
such instruments as the Collateral Agent may reasonably require to confirm any
succession hereunder.
(S)11. Notices. All notices shall be given as set forth in the Note
-------
Purchase Agreements or the Mortgage.
(S)12. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in one jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
COLLATERAL AGENCY AGREEMENT
<PAGE>
-10-
(S)13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL
-------------
BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(S)14. Amendments; Waivers. Anything in Section 17 of the Note
-------------------
Purchase Agreements to the contrary notwithstanding, any term of this Agreement
may be modified, amended or supplemented and the observance of any term hereof
may be waived only by an instrument in writing signed by the Company, the
Collateral Agent and the Majority Holders.
(S)15. Termination of Agreement. This Agreement shall terminate when
------------------------
the Notes and all other obligations secured by the Mortgage have been
indefeasibly satisfied and paid in full.
(S)16. Captions. The captions and headings in this Agreement are for
--------
convenience of reference only and shall in no way define or limit the provisions
hereof.
(S)17. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
COLLATERAL AGENCY AGREEMENT
<PAGE>
-11-
IN WITNESS WHEREOF, each of the undersigned has caused this Collateral
Agency Agreement to be executed by its duly authorized officer as of the date
first written above.
Company: AK STEEL CORPORATION
By _________________________________________
Name:
Title:
Collateral
Agent:
By _________________________________________
Name:
Title:
Purchasers: TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA
By _________________________________________
Name:
Title:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By _________________________________________
Name:
Title:
CM LIFE INSURANCE COMPANY
COLLATERAL AGENCY AGREEMENT
<PAGE>
-12-
By _________________________________________
Name:
Title:
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
LIFE INSURANCE COMPANY OF GEORGIA
By _________________________________________
Name:
Title:
SOUTHLAND LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
SECURITY LIFE OF DENIVER INSURANCE COMPANY
By _________________________________________
Name:
Title:
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
THE FRANKLIN LIFE INSURANCE COMPANY
COLLATERAL AGENCY AGREEMENT
<PAGE>
-13-
By _________________________________________
Name:
Title:
ALLSTATE LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
By _________________________________________
Name:
Title:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
LIFE INSURANCE COMPANY OF NORTH AMERICA
By _________________________________________
Name:
Title:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
SIGNATURE 1A (CAYMAN), LTD.
By: John Hancock Mutual Life Insurance
Company, Portfolio Advisor
COLLATERAL AGENCY AGREEMENT
<PAGE>
-14-
By _________________________________________
Name:
Title:
COLLATERAL AGENCY AGREEMENT
<PAGE>
-15-
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By _________________________________________
Name:
Title:
By _________________________________________
Name:
Title:
COLLATERAL AGENCY AGREEMENT
<PAGE>
EXHIBIT 1.3
to Note Purchase Agreement
GUARANTEE AGREEMENT
GUARANTEE AGREEMENT dated as of _____________, ____ made by
________________________, a _________________ corporation (the "GUARANTOR"), in
favor of the holders from time to time of the Notes referred to below
(collectively the "OBLIGEES").
WHEREAS, AK Steel Corporation, a Delaware corporation (the "COMPANY"),
and AK Steel Holding Corporation, a Delaware corporation, have entered into
several Note Purchase Agreements dated as of December 17, 1996 (as amended or
otherwise modified from time to time, collectively the "NOTE AGREEMENTS" and
terms defined therein and not otherwise defined herein are being used herein as
so defined) with the institutional purchasers listed in Schedule A thereto,
pursuant to which the Company proposes to issue and sell to such purchasers up
to $250,000,000 aggregate principal amount of its Senior Secured Notes due 2004
(the "NOTES"); and
WHEREAS, it is a requirement of the Note Agreements that the Guarantor
shall execute and deliver this Guarantee Agreement;
NOW, THEREFORE, in consideration of the premises the Guarantor hereby
agrees as follows:
SECTION 1. Guarantee. The Guarantor unconditionally and irrevocably
---------
guarantees, as primary obligor and not merely as surety,
A. the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of the Company arising under
the Notes and the Note Agreements, including all extensions, modifications,
substitutions, amendments and renewals thereof, whether for principal,
interest (including without limitation interest on any overdue principal,
premium and interest at the rate specified in the Notes and interest
accruing or becoming owing both prior to and subsequent to the commencement
of any proceeding against or with respect to the Company under any chapter
of the Bankruptcy Code of 1978, 11 U.S.C. (S)101 et seq.), any successor
-- ---
statute thereto or any similar state law, Make-Whole Amount, fees,
expenses, indemnification or otherwise, and
B. the due and punctual performance and observance by the Company of
all covenants, agreements and conditions on its part to be performed and
observed under the Notes and the Note Agreements;
(all such obligations are called the "GUARANTEED OBLIGATIONS"); provided that
the aggregate liability of the Guarantor hereunder
<PAGE>
in respect of the Guaranteed Obligations shall not exceed at any time the lesser
of (1) the amount of the Guaranteed Obligations and (2) the maximum amount for
which the Guarantor is liable under this Guarantee Agreement without such
liability being deemed a fraudulent transfer under applicable Debtor Relief Laws
(as hereinafter defined), as determined by a court of competent jurisdiction. As
used herein, the term "DEBTOR RELIEF LAWS" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar debtor relief laws affecting the rights of creditors
generally from time to time in effect.
The Guarantor also agrees to pay, in addition to the amount stated
above, any and all reasonable expenses (including reasonable counsel fees and
expenses) incurred by any Obligee in enforcing any rights under this Guarantee
Agreement or in connection with any amendment of this Guarantee Agreement.
Without limiting the generality of the foregoing, this Guarantee
Agreement guarantees, to the extent provided herein, the payment of all amounts
which constitute part of the Guaranteed Obligations and would be owed by any
other Person to any Obligee but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such Person.
SECTION 2. Guarantee Absolute. The obligations of the Guarantor
------------------
under Section 1 of this Guarantee Agreement constitute a present and continuing
guaranty of payment and not of collectability and the Guarantor guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms of
the Notes and the Note Agreements, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Obligee with respect thereto. The obligations of the
Guarantor under this Guarantee Agreement are independent of the Guaranteed
Obligations, and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce this Guarantee Agreement, irrespective of
whether any action is brought against the Company or any other Person liable for
the Guaranteed Obligations or whether the Company or any other such Person is
joined in any such action or actions. The liability of the Guarantor under this
Guarantee Agreement shall be primary, absolute, irrevocable, and unconditional
irrespective of:
A. any lack of validity or enforceability of any Guaranteed
Obligation, any Note, the Note Agreements or any agreement or instrument
relating there to;
B. any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Note, the Note
Agreements or
-2-
<PAGE>
this Guarantee Agreement;
C. any taking, exchange, release or non-perfection of any collateral,
or any taking, release or amendment or waiver of or consent to departure by
the Guarantor or other Person liable, or any other guarantee, for all or
any of the Guaranteed Obligations;
D. any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral or any other assets of the Company or any
other Subsidiary;
E. any change, restructuring or termination of the corporate structure
or existence of the Company or any other Subsidiary; or
F. any other circumstance (including without limitation any statute of
limitations) that might otherwise constitute a defense, offset or
counterclaim available to, or a discharge of, the Company or the Guarantor.
This Guarantee Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned by any
Obligee, or any other Person upon the insolvency, bankruptcy or reorganization
of the Company or otherwise, all as though such payment had not been made.
SECTION 3. Waivers. The Guarantor hereby irrevocably waives, to the
-------
extent permitted by applicable law:
A. promptness, diligence, presentment, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and this
Guarantee Agreement;
B. any requirement that any Obligee or any other Person protect,
secure, perfect or insure any Lien or any property subject thereto or
exhaust any right or take any action against the Company or any other
Person or any collateral;
C. any defense, offset or counterclaim arising by reason of any claim
or defense based upon any action by any Obligee;
D. any duty on the part of any Obligee to disclose to the Guarantor
any matter, fact or thing relating to the business, operation or condition
of any Person and its assets now known or hereafter known by such Obligee;
and
E. any rights by which it might be entitled to require suit on an
accrued right of action in respect of any of the Guaranteed Obligations or
require suit against the Company
-3-
<PAGE>
or the Guarantor or any other Person.
SECTION 4. Waiver of Subrogation and Contribution. The Guarantor
--------------------------------------
shall not assert, enforce, or otherwise exercise (A) any right of subrogation to
any of the rights, remedies, powers, privileges or liens of any Obligee or any
other beneficiary against the Company or any other obligor on the Guaranteed
Obligations or any collateral or other security, or (B) any right of recourse,
reimbursement, contribution, indemnification, or similar right against the
Company, and the Guarantor hereby waives any and all of the foregoing rights,
remedies, powers, privileges and the benefit of, and any right to participate
in, any collateral or other security given to any Obligee or any other
beneficiary to secure payment of the Guaranteed Obligations, until such time as
the Guaranteed Obligations have been paid in full.
SECTION 5. Representations and Warranties. The Guarantor hereby
------------------------------
represents and warrants as follows:
A. The Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation. The
execution, delivery and performance of this Guarantee Agreement have been
duly authorized by all necessary action on the part of the Guarantor.
B. The execution, delivery and performance by the Guarantor of this
Guarantee Agreement will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in
respect of any property of the Guarantor or any Subsidiary of the Guarantor
under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, corporate charter or by-laws, or any other material
agreement or instrument to which the Guarantor or any Subsidiary of the
Guarantor is bound or by which the Guarantor or any Subsidiary of the
Guarantor or any of their respective properties may be bound or affected,
(ii) conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Guarantor or any
Subsidiary of the Guarantor or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to the
Guarantor or any Subsidiary of the Guarantor.
C. The Guarantor and the Company are members of the same consolidated
group of companies and are engaged in related businesses and the Guarantor
will derive substantial direct and indirect benefit from the execution and
delivery of this Guarantee Agreement.
-4-
<PAGE>
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Guarantee Agreement and no consent to any departure by the Guarantor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Required Holders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided that no amendment, waiver or consent shall, unless in writing
and signed by all Obligees, (i) limit the liability of or release the Guarantor
hereunder, (ii) postpone any date fixed for, or change the amount of, any
payment hereunder or (iii) change the percentage of Notes the holders of which
are, or the number of Obligees, required to take any action hereunder.
SECTION 7. Addresses for Notices. All notices and other
---------------------
communications provided for hereunder shall be in writing and (A) by telecopy if
the sender on the same day sends a confirming copy of such notice by a
recognized overnight delivery service (charges prepaid), or (B) by registered or
certified mail with return receipt requested (postage prepaid), or (C) by a
recognized overnight delivery service (with charges prepaid). Such notice if
sent to the Guarantor shall be addressed to it at the address of the Guarantor
provided below its name on the signature page of this Guarantee Agreement or at
such other address as the Guarantor may hereafter designate by notice to each
holder of Notes, or if sent to any holder of Notes, shall be addressed to it as
set forth in the Note Agreements. Any notice or other communication herein
provided to be given to the holders of all outstanding Notes shall be deemed to
have been duly given if sent as aforesaid to each of the registered holders of
the Notes at the time outstanding at the address for such purpose of such holder
as it appears on the Note register maintained by the Company in accordance with
the provisions of Section 13.1 of the Note Agreements. Notices under this
Section 7 will be deemed given only when actually received.
SECTION 8. No Waiver; Remedies. No failure on the part of any
-------------------
Obligee to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9. Continuing Guarantee. This Guarantee Agreement is a
--------------------
continuing guarantee of payment and performance and shall (A) remain in full
force and effect until payment in full of the Guaranteed Obligations and all
other amounts payable under this Guarantee Agreement, (B) be binding upon the
Guarantor, its successors and assigns and (C) inure to the benefit of and be
enforceable by the Obligees and their successors, transferees and assigns.
-5-
<PAGE>
SECTION 10. Jurisdiction and Process; Waiver of Jury Trial. The
----------------------------------------------
Guarantor irrevocably submits to the non-exclusive in personam jurisdiction of
-- --------
any New York State or federal court sitting in the Borough of Manhattan, The
City of New York, over any suit, action or proceeding arising out of or relating
to this Guarantee Agreement. To the fullest extent permitted by applicable law,
the Guarantor irrevocably waives and agrees not to assert, by way of motion, as
a defense or otherwise, any claim that it is not subject to the in personam
-- --------
jurisdiction of any such court, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding brought in any
such court and any claim that any such suit, action or proceeding brought in any
such court has been brought in an inconvenient forum.
The Guarantor consents to process being served in any suit, action or
proceeding of the nature referred to in this Section by mailing a copy thereof
by registered or certified mail, postage prepaid, return receipt requested, to
the Guarantor at its address specified in Section 7 or at such other address of
which you shall then have been notified pursuant to said Section. The Guarantor
agrees that such service upon receipt (i) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
(ii) shall, to the fullest extent permitted by applicable law, be taken and held
to be valid personal service upon and personal delivery to the Guarantor.
Notices hereunder shall be conclusively presumed received as evidenced by a
delivery receipt furnished by the United States Postal Service or any recognized
courier or overnight delivery service.
Nothing in this Section 10 shall affect the right of any holder of a
Note to serve process in any manner permitted by law, or limit any right that
the holders of any of the Notes may have to bring proceedings against the
Guarantor in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
THE GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH
RESPECT TO THIS GUARANTEE AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION
HEREWITH.
SECTION 11. Governing Law. This Guarantee Agreement shall be
-------------
construed and enforced in accordance with, and the rights of the Guarantor and
the Obligees shall be governed by, the laws of the State of New York excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
-6-
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement
to be duly executed and delivered as of the date first above written.
[GUARANTOR]
By________________________
Title:
Address:
Attention:
Telephone:
Telecopy:
-7-
<PAGE>
EXHIBIT 4.1(b)(i) and (ii)
to Note Purchase Agreement
OPINIONS OF SPECIAL COUNSEL FOR THE OBLIGORS
The following opinions are to be provided by special and internal
counsel for the Obligors (allocated between such counsel as appropriate),
subject to customary assumptions, limitations and qualifications. All
capitalized terms used herein without definition shall have the meanings
ascribed thereto in the Note Purchase Agreements.
1. Each Obligor is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has all requisite power and
authority to own or hold under lease the property it purports to own or hold
under lease, to carry on its business as now being conducted and to execute and
deliver the Note Purchase Agreements and to perform the provisions thereof on
its part to be performed. Each Obligor is duly qualified to transact business as
a foreign corporation in each other jurisdiction in which such qualification is
required, except where the failure to be so qualified would not have a material
adverse effect on the Obligors and the Subsidiaries taken as a whole.
2. The Note Purchase Agreements have been duly authorized, executed
and delivered by the Obligors and constitute legal, valid and binding agreements
of the Obligors, enforceable against the Obligors in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
3. The Mortgage has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity), and
except that certain remedial provisions of the Mortgage are or may be
unenforceable in whole or in part under the laws of the State of New York, but
the inclusion of those provisions does not affect the validity of the Mortgage,
and the Mortgage contains adequate provisions for the practical realization of
the rights and benefits afforded thereby. No
<PAGE>
opinion is expressed as to the perfection or priority of any liens granted
pursuant to the Mortgage.
4. The Notes being purchased by you today have been duly authorized,
executed and delivered by the Company and constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity). Said Notes are entitled to the benefits and
security afforded by the Mortgage in accordance with their respective terms and
the terms of the Mortgage, except that no opinion is expressed as to the
perfection or priority of any liens granted pursuant to the Mortgage.
5. No consent, approval or authorization of, or declaration,
registration or filing with, any New York, Delaware corporate or federal
Governmental Authority is required to be obtained or made as a condition to the
validity of the execution and delivery by the Obligors of the Note Purchase
Agreements or by the Company of the Notes or for the performance by the Obligors
of their respective obligations thereunder.
6. Assuming the accuracy of the representations and warranties of the
Obligors set forth in Section 5.13 of the Note Purchase Agreements and the
accuracy of the representations of the Purchasers of the Notes set forth in
Section 6.1 of the Note Purchase Agreements, it was not necessary in connection
with the offering, sale and delivery of said Notes or the Parent Guarantee,
under the circumstances contemplated by the Note Purchase Agreements, to
register said Notes or the Parent Guarantee under the Securities Act or to
qualify an indenture in respect of the Notes under the Trust Indenture Act of
1939, as amended.
7. The execution, delivery and performance by Holding of the Note
Purchase Agreements and by the Company of the Note Purchase Agreements, the
Mortgage, the Collateral Agency Agreement and the Notes will not conflict with,
constitute a default under, or violate or result in the creation of a lien under
(i) any of the provisions of the certificate of incorporation or by-laws of the
Company or Holding, as the case may be, (ii) any of the terms, conditions or
provisions of any document, agreement or other instrument to which the Company
or Holding, as the case may be, is a party or by which it is bound, (iii) any
New York, Delaware corporate or federal law or regulation (other than federal
and state securities or blue sky laws, as to which we express no opinion in this
paragraph), or (iv) any judgment, writ, injunction, decree, order or ruling of
-2-
<PAGE>
any court or governmental authority binding on the Company or Holding, as the
case may be, of which such counsel is aware.
8. Neither Holding nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, or the Federal Power Act, as amended.
9. None of the transactions contemplated by the Note Purchase
Agreements (including without limitation the use of the proceeds from the sale
of the Notes) will violate or result in a violation of Section 7 of the Exchange
Act, or any regulations issued pursuant thereto, including without limitation
Regulations G, T and X of the Board of Governors of the Federal Reserve System
(12 CFR, Part 207, Part 220 and Part 224, respectively).
10. To such counsel's knowledge, there is no litigation, proceeding or
governmental investigation pending or overtly threatened, against or affecting
either Obligor or any property of the Obligors that (i) draws into question the
validity of the Note Purchase Agreements, the Mortgage, the Collateral Agency
Agreement or the Notes or (ii) if adversely determined would have a material
adverse effect on the business, assets or financial condition of Holding, the
Company and the Subsidiaries taken as a whole.
* * * * *
The opinion shall state that it is given solely for the benefit of the
purchasers at the Closing, and for the benefit of the institutional investor
holders from time to time of the Notes purchased by such purchasers at the
Closing.
-3-
<PAGE>
EXHIBIT 4.1(b)(iii)
to Note Purchase Agreement
[Opinion of WF&G]
June __, 1997
Re: AK Steel Corporation
Senior Secured Notes, Series A-E, due 2004
To the several Purchasers listed
in Schedule A to the Note Purchase Agreements
referred to below
Ladies and Gentlemen:
We have acted as your special counsel in connection with the proposed
issuance by AK Steel Corporation (the "Company") of $250,000,000 aggregate
principal amount of its Senior Secured Notes, Series A-E due 2004 (the "Notes"),
and the purchases by you pursuant to the several Note Purchase Agreements made
by you with the Company and AK Steel Holdings Corporation ("Holding") dated as
of December 17, 1996 (the "Note Purchase Agreements") of Notes in said series
and aggregate principal amount. All capitalized terms used herein without
definition shall have the meanings ascribed thereto in the Note Purchase
Agreements.
We have examined originals or copies authenticated to our satisfaction
of all such corporate records of the Company and Holding, agreements and other
instruments, certificates of public officials and of officers and
representatives of the Company and Holding, and such other documents, as we have
deemed necessary in connection with the opinions hereinafter expressed. In such
examination we have assumed the genuineness of all signatures, the authenticity
of documents submitted to us as originals and the conformity with the authentic
originals of all documents submitted to us as copies. As to questions of fact
material to such opinions we have, when relevant facts were not independently
established, relied upon the representations set forth in the Note Purchase
Agreements and the documents referred to therein and upon certifications by
officers and representatives of the Company and Holding.
In addition, we attended the Closing held today at our office at which
you purchased and made payment for Notes
<PAGE>
-2-
in the series and aggregate principal amounts to be purchased by you at the
First Closing, all in accordance with the Note Purchase Agreements.
Based upon the foregoing, and having regard to legal considerations
that we deem relevant, we render you our opinion pursuant to section 4.1(b) of
the Note Purchase Agreements as follows:
1. Each of the Company and Holding is a corporation validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power to execute and deliver the Note Purchase Agreements and, in the
case of the Company, the Notes and the Mortgage, and to perform their respective
obligations thereunder.
2. The Note Purchase Agreements, the Mortgage and the Notes being
purchased by you today have been duly authorized, executed and delivered by the
Company and constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms and
said Notes are entitled to the benefits and security afforded by the Mortgage in
accordance with their terms and the terms of the Mortgage.
3. The Note Purchase Agreements have been duly authorized, executed
and delivered by Holding, and constitute legal, valid and binding obligations of
Holding, enforceable against Holding in accordance with their terms.
4. No consent, approval or authorization of, or registration, filing
or declaration with, any New York or federal Governmental Authority is required
for the validity of the execution and delivery or performance by Holding of the
Note Purchase Agreements or by the Company of the Note Purchase Agreements, said
Notes or the Mortgage, except for filings of the Mortgage and of financing
statements in respect of security interests created by the Mortgage.
5. It was not necessary in connection with the issuance, sale and
delivery of said Notes to register said Notes under the Securities Act of 1933,
as amended, or to qualify an indenture in respect of the Notes under the Trust
Indenture Act of 1939, as amended, under the circumstances contemplated by the
Note Purchase Agreements.
6. The opinions dated today of Weil Gotshal & Manges LLP, special
counsel for the Company, and John G. Hritz, General Counsel of the Company and
Holding, delivered to you pursuant to section 4.1(b) of the Note Purchase
Agreements, are satisfactory to us in form and scope with respect to the matters
covered thereby and in our opinion you are justified in relying thereon.
The opinions set forth above are subject to the exception that (a) the
enforceability of any instrument may be limited by bankruptcy, insolvency or
other similar laws
<PAGE>
-3-
affecting the enforcement of creditors' rights generally, and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or law), (b) in the case of the enforceability of the
Mortgage, certain of the remedies or procedures contained therein may be further
limited or rendered unenforceable by other applicable laws (but such other laws
do not, in our opinion, make the remedies or procedures afforded by such
instruments inadequate for the practical realization of the benefits intended to
be provided thereby) and (c) the enforceability of indemnity provisions may be
subject to limitations based on public policy considerations.
We express no opinion as to section 23.3 of the Note Purchase
Agreements or analogous provisions of other documents insofar as said section or
other provisions relate to (a) the subject matter jurisdiction of the United
States District Court for the Southern District of New York to adjudicate any
controversy relating to the Note Purchase Agreements, the Notes, the Collateral
Agency Agreement or the Mortgage, (b) the waiver of inconvenient forum with
respect to proceedings in such United States District Court or (c) the waiver of
a right to jury trial.
We are members of the bar of the State of New York and do not herein
intend to express any opinion as to any matters governed by any laws other than
federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware. In rendering the opinions as
to the matters specified above we have, insofar as such matters are governed by
the laws of the State of Indiana, relied upon the aforementioned opinions of
Bingham, Summers, Welsh & Spilman, and our opinions as to such matters are
subject to the same exceptions and qualifications as are contained therein.
We have made no examination of and express no opinion with respect to
any matter referred to herein concerning the title to the Mortgaged Property,
the accuracy of any description of the Mortgaged Property, or the existence of
any liens, charges, security interests or other encumbrances thereon, the filing
or recording of the Mortgage or the filing of financing statements.
This opinion is given solely for your benefit and for the benefit of
the institutional investor holders from time to time of the Notes purchased by
you today in connection with the closing held today of the transactions
contemplated by the Note Purchase Agreements and may not be relied upon by any
other person for any purpose without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT 4.1(b)(4)
to Note Purchase Agreement
OPINIONS OF SPECIAL LOCAL COUNSEL
The following opinions are to be provided by special local counsel for
the Purchasers, subject to customary assumptions, limitations and
qualifications. All capitalized terms used herein without definition shall have
the meanings ascribed thereto in the Note Purchase Agreements.
1. The Mortgage has been duly authorized, executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity), and
except that certain remedial provisions of the Mortgage are or may be
unenforceable in whole or in part under the laws of the State of Indiana, but
the inclusion of those provisions does not affect the validity of the Mortgage,
and the Mortgage contains adequate provisions for the practical realization of
the rights and benefits afforded thereby. No opinion is expressed as to the
perfection or priority of any liens granted pursuant to the Mortgage.
2. The Notes being purchased by you today are entitled to the benefits
and security afforded by the Mortgage in accordance with their respective terms
and the terms of the Mortgage, except that no opinion is expressed as to the
perfection or priority of any liens granted pursuant to the Mortgage.
3. The Mortgage is sufficient in form to create a valid lien on the
Mortgaged Property (as defined in the Mortgage) in accordance with the terms and
conditions thereof. Subject to the terms and conditions of the Mortgage, the
obligations of the Company under Notes issued at the Second Closing and the
Third Closing, as contemplated in the Note Purchase Agreements, shall have the
same priority as the obligations of the Company under the Notes issued at the
First Closing.
4. The Mortgage, and financing statements executed under the Uniform
Commercial Code in respect of the liens and security interests purported to be
created by the Mortgage, have been
<PAGE>
recorded or filed, as the case may be, in all places specified in Annex 1
hereto, being all places required by law to make effective and perfect the
respective liens and security interests purported to be created by the Mortgage,
and, except for such recordings or filings (and the timely filing of
continuation statements in respect of such financing statements and additional
filings that would be necessitated by a change in name, location, identity or
organizational structure of the Company or location of the Mortgaged Property),
no filing, recording, or registration is necessary or advisable to maintain such
liens and security interests. All taxes or fees required to be paid in
connection with the recordings and filings specified in Annex 1 hereto have been
duly paid.
5. Except for the filings described in paragraph 4 above, no consent,
approval, or authorization of, or registration, filing, or declaration with, any
Indiana Governmental Authority is required for the validity of the execution and
delivery by the Company of the Notes or the Mortgage or for the Company's
performance thereunder.
6. The execution, delivery and performance by the Company of the
Mortgage and the Notes will not conflict with, constitute a default under, or
violate or result in the creation of a lien under any Indiana law or regulation
(other than the lien created by the Mortgage).
* * * * *
The opinion shall state that is given solely for the benefit of the
purchasers at the Closing, and for the benefit of the institutional investor
holders from time to time of the Notes purchased by the purchasers at such
Closing.
-2-
<PAGE>
[WF&G LETTERHEAD]
EXHIBIT 4.3(b)(2)
to Note Purchase Agreement
__________________, 1997
Re: AK Steel Corporation
Senior Secured Notes, Series A-E, due 2004
To the several Purchasers listed in Schedule A to the below-mentioned Note
Purchase Agreements purchasing Notes today
Ladies and Gentlemen:
We have acted as your special counsel in connection with the proposed
issuance by AK Steel Corporation (the "Company") of $250,000,000 aggregate
principal amount of its Senior Secured Notes, Series A-E, due 2004 (the "Notes")
and the purchases by you pursuant to the several Note Purchase Agreements made
by you with the Company and AK Steel Holding Corporation ("Holding") under date
of December 17, 1996 (the "Note Purchase Agreements") of Notes in said series
and aggregate principal amounts. All capitalized terms used herein without
definition shall have the meanings ascribed thereto in the Note Purchase
Agreements.
We have examined originals or copies authenticated to our satisfaction
of all such corporate records of the Company and Holding, agreements and other
instruments, certificates of public officials and of officers and
representatives of the Company and Holding, and such other documents, as we have
deemed necessary in connection with the opinions hereinafter expressed. In such
examination we have assumed the genuineness of all signatures, the authenticity
of documents submitted to us as originals and the conformity with the authentic
originals of all documents submitted to us as copies. As to questions of fact
material to such opinions we have, when relevant facts were not independently
established, relied upon the representations set forth in the Note Purchase
Agreements and the documents referred to therein and upon certifications by
officers and representatives of the Company and Holding.
In addition, we attended the Closing held today at our office at which
you purchased and made payment for Notes in the series and respective aggregate
principal amounts to be purchased by you at such Closing, all in accordance with
the Note Purchase Agreements.
Based upon the foregoing, and having regard to
<PAGE>
legal considerations that we deem relevant, we render you our opinion pursuant
to Section 4.3(b) of the Note Purchase Agreements as follows:
1. The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware and has the corporate power to execute
and deliver the Notes and to perform the provisions thereof.
2. The Notes being purchased by you today have been duly authorized,
executed and delivered by the Company and constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms and said Notes are entitled to the benefits and security
afforded by the Mortgage in accordance with their terms and the terms of the
Mortgage.
3. It was not necessary in connection with the offering, sale and
delivery of said Notes, under the circumstances contemplated by the Note
Purchase Agreements, to register said Notes under the Securities Act of 1933, as
amended, or to qualify an indenture in respect of the Notes under the Trust
Indenture Act of 1939, as amended.
4. No consent, approval or authorization of, or registration, filing
or declaration with any New York or federal Governmental Authority is required
for the validity of the execution and delivery or for the performance by the
Company of said Notes.
5. The opinions dated today of Weil Gotshal & Manges LLP, special
counsel for the Company and Holding and [______________], special Indiana
counsel for the Company and Holding, delivered to you pursuant to Section 4.3(b)
of the Note Purchase Agreements, are satisfactory to us in form and scope with
respect to the matters covered thereby and in our opinion you are justified in
relying thereon.
The opinions above are subject to the exception that the
enforceability of any instrument may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights generally, and
by general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or law).
We are members of the bar of the State of New York and do not herein
intend to express any opinion as to any matters governed by any laws other than
federal laws of the United States, the laws of the State of New York and the
General Corporation Law of the State of Delaware.
We have made no examination of and express no opinion with respect to
any matter referred to herein
<PAGE>
concerning the title to the Mortgaged Property, the accuracy of any description
of the Mortgaged Property, or the existence of any liens, charges, security
interests or other encumbrances thereon, the filing or recording of the Mortgage
or the filing of financing statements.
This opinion is given solely for your benefit and for the benefit of
the institutional investor holders from time to time of the Notes purchased by
you today in connection with the purchase of such Notes today and may not be
relied upon by any other person for any purpose without our prior written
consent.
Very truly yours,
<PAGE>
EXHIBIT 10.4
EXECUTIVE OFFICER SEVERANCE AGREEMENT
(AS AMENDED AND RESTATED TO REFLECT CHANGES
ADOPTED BY THE BOARD ON NOVEMBER 21, 1996)
------------------------------------------
CONFIDENTIAL
------------
_______________, 19___
_________________________
_________________________
_________________________
Dear _______________:
Reference is made to the agreement between us, ________________, 19___ (the
"Agreement"), setting forth the benefits to be provided to you in the event of
the termination of your employment upon the circumstances therein specified.
Upon your execution of a counterpart of this letter, the Agreement shall be
deemed amended and, as so amended, is restated in its entirety to read as
hereinafter set forth.
AK Steel Corporation ("AKS"), since its formation, has established itself as a
strong competitor in the carbon flat rolled steel industry. Continuity of the
management of AKS is a critical factor to the continued growth and success of
AKS. The Board of Directors ("Board") of AK Steel Holding Corporation
("Holding"), of which AKS is a wholly-owned subsidiary, believes it is in the
best interest of Holding and AKS to reinforce and encourage the continued
attention and dedication of key members of management to their assigned duties.
In consideration of the mutual promises contained herein, it is hereby agreed
that Holding shall cause AKS to provide and AKS shall provide to you, and you
shall receive from AKS, the benefits set forth in this Agreement if your
employment by AKS (including, for the purposes hereof, its subsidiaries and
Affiliates, as hereinafter defined) is terminated during the term of this
Agreement as provided herein.
1. Purpose
-------
This Agreement establishes certain basic terms and conditions relating to
your employment with AKS, and special arrangements relating to the
termination of your employment with AKS for any reason other than: (i) your
voluntary retirement; (ii) your becoming totally and permanently disabled
under the AKS long-term disability plan or policy; or (iii) your death. This
Agreement supersedes all prior agreements with AKS or any predecessor
business, as well as all other AKS severance policies
<PAGE>
and practices, except to the extent incorporated or restated herein.
Notwithstanding the foregoing, neither the termination of your employment
nor anything contained in this Agreement shall have any affect upon your
rights under (i) any tax-qualified "pension benefit plan", as such term is
defined in the Employee Retirement Income Security Act of 1974, as amended
(ERISA), (ii) any "welfare benefit plan" as defined in ERISA, including by
way of illustration and not limitation, any medical, surgical or
hospitalization benefit coverage or long-term disability benefit coverage,
or (iii) any non-qualified deferred compensation arrangement, including by
way of illustration and not limitation, any non-qualified pension plan or
deferred compensation plan.
2. Employment
----------
During the term of this Agreement:
(a) you will be employed by AKS (including for this purpose any direct or
indirect subsidiary or Affiliate of AKS to which you may be transferred)
in your present position or in a position that is at least comparable to
your present position in compensation, responsibility and stature and
for which you are suited by education and background;
(b) you will continue to be eligible to participate in any employee benefit
plan of AKS in accordance with its terms; and
(c) you will be entitled to the same treatment under any generally
applicable employment policy or practice as any other key member of
management of AKS whose position in the AKS organization is at a level
of responsibility comparable to yours.
Those plans, policies and practices that generally apply to other key
members of management of AKS will be referred to in this Agreement as your
"Employment Benefits." Your Employment Benefits may be modified from time to
time after the date hereof without violation of this Agreement if the
changes apply generally to other key members of management of AKS.
3. Term of Agreement
-----------------
This Agreement shall be deemed effective as of ______________, 19____ (the
"Effective Date") and shall continue in effect through the later of: (i) the
fifth anniversary of the Effective Date or (ii) the completion of full
payment of all benefits promised hereunder. This Agreement shall be
automatically renewed annually from and after the fifth anniversary of the
Effective Date unless written notice of non-renewal is given by you or by
AKS at least ninety (90) days prior to the expiration
2
<PAGE>
of the term, including any extension thereof.
4. Termination of Employment
-------------------------
Your employment may be terminated in accordance with any of the following
paragraphs. The date upon which the termination of your employment becomes
effective is hereinafter referred to as the "Date of Termination". The
period between the date of notice of termination and the Date of Termination
is referred to as the "Notice Period".
(a) Involuntary Termination Without Cause
-------------------------------------
AKS may terminate your employment without Cause (as defined in Section
4(b) below), but only upon written notice given to you by AKS not less
than thirty (30) days prior to the Date of Termination. During the
Notice Period, you shall continue to receive your full salary and
Employment Benefits. From and after the Date of Termination, pursuant to
this Section 4(a), you shall be entitled to those benefits provided
under Section 5.
(b) Involuntary Termination for Cause
---------------------------------
AKS may terminate your employment for Cause, but only upon written
notice, specifying the facts or circumstances constituting such Cause,
which notice may be given on or at any time prior to the Date of
Termination. For the purposes of this Section 4(b), "Cause" means a
willful engaging in gross misconduct materially and demonstrably
injurious to AKS. "Willful" means an act or omission in bad faith and
without reasonable belief that such act or omission was in or not
opposed to the best interests of AKS. From and after your Date of
Termination, pursuant to this Section 4 (b), you shall only be entitled
to those benefits provided under Section 8.
(c) Voluntary Termination Without Good Reason
-----------------------------------------
You may voluntarily terminate your employment without Good Reason (as
defined in Section 4 (d) below), but only upon written notice given to
AKS by you not less than thirty (30) days prior to the Date of
Termination. During the Notice Period, you shall continue to receive
your full salary and Employment Benefits, provided you satisfactorily
perform your duties during the Notice Period (unless relieved of those
duties by AKS). From and after the Date of Termination, pursuant to this
Section 4 (c), you shall only be entitled to those benefits provided
under Section 8.
3
<PAGE>
(d) Voluntary Termination for Good Reason
-------------------------------------
You may voluntarily terminate your employment for Good Reason (as herein
defined), but only upon written notice, specifying the facts or
circumstances constituting such Good Reason, given to AKS by you at
least thirty (30) days prior to the Date of Termination and not more
than sixty (60) days following the occurrence of the circumstances
constituting such Good Reason. For the purposes of this Section 4(d),
"Good Reason" shall mean the occurrence, without your express written
consent, of any of the following circumstances (unless, in the case of
clauses (i), (v), (vi), (vii) or (viii) below, such circumstances are
fully corrected prior to the Date of Termination specified in the notice
of termination):
(i) the assignment to you of any duties inconsistent with your
position within AKS or a significant adverse alteration in the
nature or status of your responsibilities or the conditions of
your employment;
(ii) a reduction by AKS in your annual base salary provided, however,
that no such reduction shall reduce your benefits under Section 5
if you have given timely notice pursuant to this Section 4(d);
(iii) a requirement by AKS that you be based anywhere other than the
principal executive offices of AKS except for required travel on
AKS business to an extent substantially consistent with your
customary business travel obligations;
(iv) the failure of AKS to pay to you any portion of your compensation
within seven (7) days of the date such compensation is due;
(v) the failure of AKS, at any time within 24 months following the
occurrence of a Change In Control (as defined in Section 7(b)
hereof), to continue in effect any compensation plan in which you
participated immediately prior to such Change In Control, which
plan is material to your total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure of
AKS to continue your participation in such compensation plan (or
in such substitute or alternative plan) on a basis not materially
less favorable to you, both in terms of the amount of benefits
provided and the level of your participation relative to other
participants, than that existing immediately prior to such Change
In Control;
(vi) any material reduction, except to the extent permitted by Section
2
4
<PAGE>
hereof, in your Employment Benefits;
(vii) the failure of AKS to obtain a satisfactory agreement from any
successor corporation to assume and agree to perform this
Agreement, as contemplated in Section 15 hereof;
(viii) any purported termination of your employment by AKS that is not
effected in compliance with the provisions of Section 4(a) or 4(b)
hereof, as the case may be;
(ix) notice of non-renewal is given by AKS pursuant to Section 3 of
this Agreement.
If you give notice of termination for Good Reason, then, during the Notice
Period (which shall not exceed 60 days), you shall continue to receive your full
base salary and Employment Benefits as in effect prior to the occurrence of the
circumstances constituting such Good Reason, subject to the right of AKS to make
changes to your Employment Benefits to the extent permitted by Section 2. From
and after the Date of Termination, pursuant to this Section 4 (d), you shall be
entitled to those benefits provided under Section 5.
5. Special Severance Benefits
--------------------------
(a) If your employment with AKS is involuntarily terminated by AKS without
Cause in accordance with Section 4(a) or you voluntarily terminate your
employment for Good Reason in accordance with Section 4(d), then you
shall receive the following benefits:
(i) Your base salary shall be continued in effect for a period
(hereafter, the "Severance Pay Period") of (1) 36 months from the
Date of Termination, if the notice of your termination is given
within 24 months after the occurrence of a Change In Control (as
defined in Section 7(b) below) or (2) 24 months from your Date of
Termination, if the notice of your termination is given at any time
other than within 24 months after the occurrence of a Change In
Control. The aggregate base salary payable in accordance with this
Section 5(a)(i) shall be paid to you in a single, undiscounted, lump
sum payment within ten (10) days following the Date of Termination
unless you have requested, in writing, at any time prior to your
Date of Termination to receive payments of your base salary in
regular monthly payments throughout the Severance Pay Period.
5
<PAGE>
(ii)(1) Within ten (10) days following the Date of Termination, you will
receive a lump-sum payment equal in amount to the result
obtained by application of the following formula: P = (x) times
(y) times (z), where:
P = the lump-sum payment;
(x) = twelve times your monthly base salary;
(y) = the fraction obtained by dividing your annual incentive
compensation which was paid or is payable to you for the
immediately preceding calendar year by your actual base
salary for such year; and
(z) = 3.0 (if the notice of your termination is given within
24 months after the occurrence of a Change In Control,
as defined in Section 7(b) hereof) or 2.0 (if the notice
of your termination is given at any time other than
within 24 months after the occurrence of a Change in
Control).
(2) Within ten (10) days following the date that payment is made to
active employees of AKS, you shall receive a pro-rata payment of
the annual incentive payment you would have received for the
year in which your Date of Termination occurs. Such payment
shall be (A) pro-rated based upon your Date of Termination and
(B) otherwise calculated as an employee in good standing at your
level of participation in effect prior to the Date of
Termination and assuming 100 percent completion of any
individual performance factors.
(iii) Notwithstanding any provision to the contrary in the AK Steel
Holding Corporation 1994 Stock Incentive Plan as amended or any
other similar plan of AKS or Holding (each, a "Plan"), or under the
terms of any grant, award agreement or form for exercising any right
under the Plan, you shall have the right:
(1) to exercise any stock option awarded to you under the Plan
without regard to any waiting period required by the Plan or
award agreement (but subject to a minimum six month holding
period from the date of award and any restrictions
6
<PAGE>
imposed by law) from the first day of your Notice Period until
the first to occur of the third anniversary of your Date of
Termination or the date the award expires by its terms, and
(2) to the absolute ownership of any shares of stock granted to you
under the Plan, free of any restriction on your right to
transfer or otherwise dispose of the shares (but subject to a
minimum six month holding period from the date of grant and any
restrictions imposed by law), regardless of whether entitlement
to the shares is contingent or absolute by the terms of the
grant; and the Board shall take such action within the Notice
Period as is necessary or appropriate to eliminate any
restriction on your ownership of, or your right to sell or
assign, any such shares; and further provided that if the Board
should fail or refuse to take such action, AKS shall pay you, in
exchange for such shares, no later than ten (10) days after the
Date of Termination, an amount in cash equal to the greatest
aggregate market value of the shares during the Notice Period.
You agree, for a period of six (6) months after your Termination
Date, to continue to comply with all AKS and Holding policies and
directives related to trading in Holding stock which were in effect
prior to your notice of termination. If your compliance with such
policies and directives precludes you from exercising any stock
options or selling any shares of stock described in paragraphs (1)
and (2) above for a period of more than sixty (60) days from the
first day of your Notice Period, then AKS will pay you in cash the
difference between the average share price during the Notice Period
and, if less, the actual share price received by you at the time of
sale provided you have completed such sale within sixty (60) days
from your first opportunity to do so. The average sale price during
the Notice Period will be determined by averaging the highest share
price and the lowest share price during the Notice Period. Any such
differential payment will be paid to you within thirty (30) days
after you provide written notice to AKS requesting such payment.
Such notice is to be directed to the attention of the Secretary of
AKS and contain the relevant stock transaction dates and actual
share price information.
(iv) During the Severance Pay Period your Employment Benefits shall be
continued, subject to the right of AKS to make any changes to your
Employment Benefits permitted in accordance with Section 2;
provided, however, that you shall not:
7
<PAGE>
(1) accumulate vacation pay for periods after the Date of
Termination;
(2) first qualify for sickness and accident plan benefits by reason
of an accident occurring or a sickness first manifesting itself
after the Date of Termination;
(3) be eligible to continue to make contributions to any Internal
Revenue Code (S) 401(k) plan maintained by AKS or qualify for a
share of any employer contribution made to any tax-qualified
defined contribution plan; or
(4) be eligible to accumulate service for pension plan purposes; and
provided, further, that if, during the Severance Pay Period, you are (and
for so long as you remain) employed by any other employer, the obligations
of AKS to continue to provide you with life, disability and medical,
hospital and other health insurance benefits shall be limited solely to
those benefits necessary to assure that, together with the corresponding
benefits provided to you by your new employer, you receive total benefits
comparable to those to which you were entitled at the Date of Termination.
(v) You shall qualify for full COBRA health benefit continuation
coverage upon the expiration of the Severance Pay Period.
(vi) You shall be entitled, at no cost to you, to full executive
outplacement assistance with an agency selected by AKS.
(b) If your employment with AKS is involuntarily terminated by AKS without
Cause in accordance with Section 4(a), or if at any time after a Change
in Control you voluntarily terminate your employment with AKS (or any
Affiliate, any successor of AKS, or any entity which as a result of the
completion of the transactions causing a Change in Control becomes
affiliated with AKS) for Good Reason (as defined in Section 4(d)),
within ten (10) days following the Date of Termination you will receive,
in addition to any benefits you may be entitled to under Section 5(a)
above, a lump sum payment in an amount equal to the benefit you would be
entitled to under the AK Steel Corporation Executive Minimum and
Supplemental Retirement Plan as amended (the "EMSRP") determined as if
(i) your Vesting Date (as defined under the EMSRP) had occurred prior to
the Date of Termination (if it has not already occurred as of the Date
of Termination) and (ii) you had attained age 60 prior to the Date of
Termination (if you have not already
8
<PAGE>
attained age 60 as of the Date of Termination). The amount of any such
additional benefit shall be calculated as of the Date of Termination in
accordance with the benefit formula under the EMSRP (as if you had
attained age 60, or your actual age if greater), and the payment of such
benefit shall be in lieu of any payment under the EMSRP.
(c) Voluntary termination of your employment with AKS for Good Reason under
Section 4(d) shall not be considered a voluntary termination under the
AK Steel Deferred Compensation Plan (the "DCP"). Accordingly, if you
terminate your employment with AKS for Good Reason under Section 4(d),
you will be fully vested in the interest credited to your account under
the DCP and will be paid your entire account at such time as provided
under the DCP.
(d) You shall not be required to mitigate the amount of any payment provided
for in this Section 5 by seeking other employment or otherwise, nor
shall the amount of any payment or benefits provided for in this Section
5 be reduced by any compensation or benefits earned by you as the result
of employment by another employer (except as expressly provided in
Section 5(a)(iv) above) or by retirement benefits, or be offset against
any amount claimed to be owed by you to AKS or any of its Affiliates or
successors.
(e) For purposes of calculating any amount due under this Agreement the
effect of any deferral of income shall be disregarded and all sums due
shall be calculated as if no such deferral had been made.
6. Certain Tax Matters
-------------------
(a) If any of the payments provided to you pursuant to Section 5 hereof
(the "Contract Payments") or any other portion of the Total Payments
(as defined below) becomes subject at any time to the tax (the "Excise
Tax") imposed by section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), AKS shall pay to you at the time specified in
section 6(b) below, an additional amount (the "Gross-Up Payment") such
that the net amount retained by you, after deduction of the Excise Tax
on any Contract Payments and/or other Total Payments, any federal and
state and local income tax and Excise Tax upon the payment(s) provided
for by this paragraph, and any interest, penalties or additions to tax
payable by you with respect thereto, shall be equal to the present
value of the Contract Payments and such other Total Payments. For
purposes of determining whether any of the foregoing payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) any
other payments or benefits received or to be received by you in
connection with a Change In Control or the termination of your
employment
9
<PAGE>
(whether such payments are Contract Payments or are payable pursuant to
the terms of any other plan, arrangement or agreement with AKS, Holding or any
of their respective Affiliates or successors, any person whose actions result in
a Change In Control or any corporation which, as a result of the completion of
the transactions causing a Change In Control, will become affiliated with AKS or
Holding within the meaning of section 1504 of the Code (such other payments,
together with the Contract Payments, the "Total Payments")) shall be treated as
"parachute payments" within the meaning of section 28OG(b)(2) of the Code, and
all "excess parachute payments" within the meaning of section 28OG(b)(1) shall
be treated as subject to the Excise Tax, except to the extent that, in the
opinion of tax counsel selected by AKS' independent auditors and acceptable to
you ("Tax Counsel"), the Total Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments are otherwise not subject
to the Excise Tax, (ii) the amount of the Total Payments that shall be treated
as subject to the Excise Tax shall be equal to the lesser of (1) the total
amount of the Total Payments or (2) the amount of excess parachute payments
within the meaning of sections 28OG(b)(1) (after applying clause (i) hereof),
and (iii) the value of any noncash benefits or any deferred payment or benefit
shall be determined by AKS' independent auditors in accordance with the
principles of sections 28OG(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment(s), you shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
applicable to individuals in the calendar year in which the Gross-Up Payment(s)
is (are) to be made and state and local income taxes at the highest marginal
rates of taxation applicable to individuals as are in effect in the state and
locality of your residence in the calendar year in which the Gross-Up Payment(s)
is (are) to be made, net of the maximum reduction in federal income taxes that
could be obtained from deduction of such state and local taxes. In the event
that the Excise Tax is subsequently determined to be less than the amount taken
into account hereunder, you shall repay to AKS at the time that the amount of
such reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by you if such repayment results in
a federal and state and local income tax deduction), plus interest on the amount
of such repayment at the applicable federal rate (as defined in section 1274(d)
of the Code). In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), AKS shall make an additional gross-up payment in respect of such
excess (plus any interest payable with respect to such excess) at the time that
the amount of such excess is finally determined.
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<PAGE>
(b) The Gross-up Payment(s) provided for in section 6(a) above shall be
made not later than the tenth day following the Date of Termination or,
with respect to any portion of the Excise Tax not determined on or
before such date to be due, upon the imposition of such portion of the
Excise Tax; provided, however, that if the amounts of such payments
cannot be finally determined on or before such date, AKS shall pay to
you on such day an estimate, as determined in good faith by AKS, of the
minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date
of Termination. In the event that the amount of the estimated payments
exceeds the amount subsequently finally determined to have been due,
such excess shall constitute a loan by the Corporation to you, payable
on the tenth day after demand by the Corporation (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code).
(c) In the event of any change in, or further interpretation of, sections
28OG or 4999 of the Code and the regulations promulgated thereunder,
you shall be entitled, by written notice to AKS, to request an opinion
of Tax Counsel regarding the application of such change to any of the
foregoing, and AKS shall use its best efforts to cause such opinion to
be rendered as promptly as practicable. All fees and expenses of Tax
Counsel incurred in connection with this Agreement shall be borne by
AKS.
7. Definitions
-----------
For purposes of this Agreement the following terms shall have the following
meanings:
(a) "Affiliate" of any specified person means (i) any other person which,
---------
directly or indirectly, is in control of, is controlled by or is under
common control with such specified person or (ii) any other person who
is a director of officer (1) of such specified person, (2) of any
subsidiary of such specified person or (3) of any person described in
clause (i) above. For purposes of this definition, control of a person
means the power, direct or indirect, to direct or cause the direction
of the management and policies of such person whether by contract or
otherwise and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
(b) "Change In Control" means the occurrence of any of the following
-----------------
events:
(i) any "Person" (as such term is used in Sections 13(d) and 14(d) of
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
11
<PAGE>
is or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a Person shall be deemed
to have "beneficial ownership" of all shares that any such Person
has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the
Voting Equity Interests of Holding; provided, however, that a
-------- -------
Person shall not be deemed the "beneficial owner" of shares
tendered pursuant to a tender or exchange offer made by that
Person or any Affiliate of that Person until the tendered shares
are accepted for purchase or exchange;
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (together with any
new directors whose election by such Board, or whose nomination
for election by the shareholders of Holding, as the case may be,
was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such period
or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Board then in office; or
(iii) Holding fails to own 100% of the outstanding stock of AKS;
provided, however, that it shall not be deemed a Change in Control
-------- -------
if Holding merges into AKS except that, in such case, AKS shall be
substituted for Holding for purposes of this definition of "Change
in Control" and this clause (iii) shall not longer be applicable.
(c) "Voting Equity Interests" of a corporation means all classes of stock
-----------------------
then outstanding and normally entitled to vote in the election of
directors or other governing body of such corporation.
8. Benefits Upon Voluntary Termination or Termination for Cause
------------------------------------------------------------
Upon your Date of Termination for Cause in accordance with Section 4(b) or
your Date of Termination without Good Reason in accordance with Section
4(c), all benefits under this Agreement will be void, but, you nevertheless
shall be eligible for any benefits provided in accordance with the plans and
practices of AKS which are applicable to employees generally.
9. Arbitration
-----------
Any dispute under this Agreement (except for disputes arising under Sections
10 and 12 below) shall be submitted to binding arbitration subject to the
rules of the American Arbitration Association. Except as hereinafter
provided, AKS and you
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<PAGE>
shall each bear your own attorney's fees and shall share equally the cost of
arbitration. However, if you prevail in a challenge by you to AKS' assertion
of the existence of Cause for termination or in a challenge by AKS to your
assertion of the existence of Good Reason for termination, you shall be
reimbursed by AKS for all reasonable costs or expenses incurred by you in
such challenge, including reasonable attorney's fees.
10. Confidentiality
---------------
You will not disclose to any person or use for the benefit of yourself or
any other person any confidential or proprietary information of AKS without
the prior written consent of an elected officer of AKS. Upon your
termination of employment, you will return to AKS all written or
electronically stored memoranda, notes, plans, records, reports or other
documents of any kind or description (including all copies in any form
whatsoever) relating to the business of AKS.
11. Conflicts of Interest
---------------------
You agree for so long as you are employed by AKS to avoid dealings and
situations which would create the potential for a conflict of interest with
AKS. In this regard, you agree to comply with the AKS policy regarding
conflicts of interest.
12. Covenant Not to Compete
-----------------------
During the term of this Agreement, and for a period of one year following
your Date of Termination for any reason other than for Cause pursuant to
Section 4 (b) you agree not to be employed by, or serve as director of or
consultant or advisor to, any business engaged directly or indirectly in
the melting, hot rolling, cold rolling, or coating of carbon or stainless,
flat rolled steel, or that is reasonably likely to engage in such business
during the one-year period following your termination of employment;
provided however, if a Change in Control occurs, the foregoing restriction
-------- -------
applicable to the one year period following your Date of Termination shall
lapse and be null and void.
13. Notice
------
Notices required or permitted under this Agreement shall be in writing and
shall be deemed to have been given when personally delivered or mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed to the intended recipient at its or his address first above
written. Notices to AKS shall be marked for the attention of the Chief
Executive Officer of AKS.
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<PAGE>
14. Modification; Waiver
--------------------
No provision of this Agreement may be waived, modified or discharged except
pursuant to a written instrument signed by you and the Chairman of the
Board or the Chief Executive Officer of AKS.
15. Successors; Binding Agreement
-----------------------------
(a) AKS and Holding will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of AKS to expressly
assume and agree to perform this Agreement in the same manner and to
the same extent that AKS would be required to perform it if no such
succession had taken place. Failure of AKS or Holding to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement.
(b) This Agreement shall inure to the benefit of and be enforceable by you
and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should
die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee, or, if there is no such devisee,
legatee or designee, to your estate.
16. Validity; Counterparts
----------------------
This Agreement shall be governed by and construed under the law of the
State of Delaware. The validity or unenforceability of any provision hereof
shall not affect the validity or enforceability of any other provision
hereof. This Agreement may be
14
<PAGE>
executed in one or more counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and the same
instrument.
Sincerely,
AK STEEL HOLDING CORPORATION
By:_______________________________
T. C. Graham
Accepted and agreed to this _____ day
__________________, 19___.
___________________________________
AK STEEL CORPORATION
By:________________________________
T. C. Graham
15
<PAGE>
EXHIBIT 10.6
AK STEEL HOLDING CORPORATION
1994 STOCK INCENTIVE PLAN
(AS AMENDED THROUGH NOVEMBER 21, 1996)
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. AK Steel Holding Corporation, a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "AK Steel Holding Corporation
1994 Stock Incentive Plan" (hereinafter referred to as the "Plan"), as set forth
in this document. The Plan permits the grant of Nonqualified Stock Options and
awards of Restricted Stock to directors, executive officers and key employees of
the Company.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success and
enhance the value of the Company by linking the personal interests of
Participants to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to enhance the Company's ability to motivate, attract, and retain the
services of Participants upon whose judgment, interest, and special effort the
successful conduct of its operation is largely dependent.
1.3 DURATION OF THE PLAN. The Plan shall remain in effect until all Shares
subject to it shall have been purchased or acquired or are no longer available
for Awards according to the Plan's provisions, subject to the right of the Board
to terminate the Plan at any time pursuant to Article 10 herein. In no event may
an Award be granted under the Plan on or after December 31, 2003. Termination of
the Plan shall not affect the rights of any person under an outstanding Award
Agreement unless otherwise specifically provided in such Award Agreement.
ARTICLE 2. DEFINITIONS. Whenever used in the Plan, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Award" means either or both of an Option Award or a Restricted Stock
Award.
(b) "Award Agreement" means either or both of an Option Award Agreement or
a Restricted Stock Award Agreement. A Participant is bound by the terms of an
Award Agreement and this Plan by reason of accepting the benefits of the
Award.
(c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 of the General Rules and Regulations under the Exchange Act.
(d) "Beneficiary" means the person or persons named by a Participant to
succeed to the Participant's rights under any then unexpired Award Agreements.
Each such designation shall: (i) revoke all prior designations by the same
Participant; (ii) be in a form acceptable to the Committee; and (iii) be
effective only when delivered to the Committee by the Participant in writing
and during the Participant's lifetime. No beneficiary shall be entitled to any
notice of any change in a designation of beneficiary. In the absence of any
such designation, the Participant's estate shall be the beneficiary.
(e) "Board" means the Board of Directors of the Company.
<PAGE>
(f) "Cause" means a willful engaging in gross misconduct materially and
demonstrably injurious to the Company or any subsidiary or affiliate thereof,
including AK Steel Corporation. "Willful" means an act or omission in bad
faith and without reasonable belief that such act or omission was in or not
opposed to the best interests of the Company or any subsidiary or affiliate
thereof, including AK Steel Corporation. "Cause" shall be determined in good
faith by the Committee.
(g) "Change in Control" shall be deemed to have occurred if:
(i) any person (other than a trustee or other fiduciary holding
securities under an employee benefit plan in which employees of the Company
participate) becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing forty percent (40%) or more of the
combined voting power of the Company's then outstanding voting securities;
or
(ii) during any period of two (2) consecutive years individuals who at
the beginning of such period constitute the Board, including for this
purpose any new Director of the Company (other than a Director designated
by a person who has entered into an agreement with the Company to effect a
transaction described in clauses (i) or (iii) of this Subsection (g)) whose
election by the Board or nomination for election by the shareholders of the
Company was approved by a vote of a least two-thirds (/2//3) of the
Directors then still in office who either were Directors at the beginning
of the period or whose election or nomination for election was previously
so approved, cease for any reason to constitute a majority of the Board; or
(iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation (other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the combined voting power
of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation) or the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(i) "Committee" means the committee, as specified in Article 3, appointed
by the Board to administer the Plan.
(j) "Company" means AK Steel Holding Corporation, a Delaware corporation,
or any successor thereto, as provided in Article 13 herein.
(k) "Director" means any individual who is a member of the Board and who is
not an Employee.
(l) "Disability" means a physical or mental condition which, in the
judgment of the Committee, renders a Director unable to serve or an Employee
unable to perform the duties of his position with the Company or, in the case
of an Employee, the duties of another available position with the Company for
which the Employee is suited by education, background and training. Any
Employee found to be qualified for disability benefits under AK Steel Holding
Corporation's long term disability plan or by the Federal Social Security
Administration will be considered to be disabled under this Plan, but
qualification for such benefits shall not be required as evidence of
disability hereunder.
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(m) "Employee" means any common law employee of the Company or any
subsidiary or affiliate thereof, including AK Steel Corporation. A Director is
not an Employee solely by reason of his position as a Director and, unless
otherwise employed by the Company, shall not be considered to be an Employee
under this Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
(o) "Fair Market Value" shall mean:
(i) if the Shares are traded on an established United States national
stock exchange or in the United States over-the-counter market with prices
reported on the NASDAQ, the average of the highest and lowest sales prices
for Shares on the relevant date (or, if there were no sales of Shares on
such date, the weighted average of the mean between the highest and lowest
sale prices for Shares on the nearest preceding trading day on which there
were sales of Shares); and
(ii) if the Shares are not traded as described in clause (i), the fair
market value of such Shares on the relevant date, as determined in good
faith by the Board.
(p) "Insider" shall mean an Employee who is, on the relevant date, an
executive officer or ten percent (10%) Beneficial Owner of the Company, as
defined under Section 16 of the Exchange Act, or a Director.
(q) "Nonqualified Stock Option" or "Option" means an option to purchase
Shares from the Company at a price established in an Option Award Agreement.
No incentive stock option within the meaning of Code Section 422 may be
granted under this Plan.
(r) "Option Award" means, individually or collectively, a grant under this
Plan of a Nonqualified Stock Option.
(s) "Option Award Agreement" means an agreement setting forth the terms and
provisions applicable to an Option Award granted to a Participant under this
Plan.
(t) "Option Price" means the price at which a Share may be purchased by a
Participant under the terms of an Option Award Agreement.
(u) "Par Value" shall mean the designated par value of one Share.
(v) "Participant" means any Director or Employee who possesses an unexpired
Award granted under the Plan.
(w) "Restricted Stock" means Shares granted to a Participant subject to
certain restrictions on the Participant's right to sell, transfer, assign,
pledge, encumber or otherwise alienate or hypothecate the Shares except in
accordance with the terms of this Plan.
(x) "Restricted Stock Award" means, individually or collectively, a grant
under this Plan of Shares of Restricted Stock.
A-3
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(y) "Restricted Stock Award Agreement" means an agreement setting forth the
terms and provisions applicable to a Restricted Stock Award of Shares under
this Plan.
(z) "Retirement" shall mean termination of employment with the Company and
any affiliate of the Company with eligibility to immediately commence to
receive a pension under the Company's non-contributory defined benefit pension
plan as in effect on the Employee's termination date. For a Participant who is
not participating in such plan, Retirement shall mean any termination of
employment with the Company which would have entitled such Participant to be
eligible to immediately commence to receive a pension under the Company's non-
contributory defined benefit pension plan had the Participant been a
participant.
(aa) "Shares" means the shares of voting common stock of the Company.
(bb) "Window Period" means the period beginning on the third business day
following the date of public release of the Company's quarterly sales and
earnings information, and ending on the twelfth business day following such
date.
ARTICLE 3. ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board, or by any other Committee appointed by the Board
consisting of not less than two (2) Directors. The members of the Committee
shall be appointed from time-to-time by, and shall serve at the sole discretion
of, the Board. The Committee shall be comprised solely of Directors who (a) are
eligible to administer the Plan pursuant to Rule 16b-3(c)(2) under the Exchange
Act and, (b) from and after May 15, 1996, shall be "outside directors" within
the meaning of Section 162(m) of the Code.
The Committee may employ such legal or other counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion or computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company. No member or former member of the Board
or the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option Award or Restricted Stock Award
granted hereunder.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power, subject
to the provisions of this Plan, except as limited by law or by the Articles of
Incorporation or Bylaws of the Company: (i) to determine the size and types of
Awards (except as to Awards to Directors which shall be limited to the size and
shall be subject to the conditions expressly permitted by this Plan); (ii) to
determine the terms and conditions of each Award Agreement in a manner
consistent with the Plan; (iii) to construe and interpret the Plan and any
agreement or instrument entered into under the Plan; (iv) to establish, amend,
or waive rules and regulations for the Plan's administration; and, (v) subject
to the provisions of Article 10 herein, to amend the terms and conditions of any
outstanding Award Agreement to the extent such terms and conditions are within
the discretion of the Committee as provided in the Plan. Further, the Committee
shall make all other determinations which may be necessary or advisable for the
administration of the Plan. The Committee may delegate its authority hereunder
to the extent permitted by law. In no event shall a Director who is a
Participant vote in any matter related solely to such Director's Award under
this Plan.
3.3 DECISIONS BINDING. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders or resolutions of
the Board shall be final, conclusive and binding on all persons,
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including the Company, its shareholders, Directors, Employees, Participants, and
their estates, beneficiaries or assignees. In all cases, Awards to Directors
shall be subject to the same terms, conditions and interpretations applicable
generally to Awards to non-Director Participants.
3.4 ARBITRATION. Each Participant who is granted an Award hereunder agrees as
a condition of the Award to submit to binding arbitration any dispute regarding
the Plan or any Award made under the Plan, including by way of illustration and
not limitation, any decision of the Committee or any action of the Company
respecting the Plan. Such arbitration shall be held in accordance with the rules
of the American Arbitration Association before an arbitrator selected by the
Company and acceptable to the Participant. If the Participant objects to the
Company's arbitrator, and the Company does not appoint an arbitrator acceptable
to the Participant, then the Company and the Participant shall each select an
arbitrator and those two arbitrators shall collectively appoint a third
arbitrator who shall alone hear and resolve the dispute. The Company and the
Participant shall share equally the cost of arbitration. No Company agreement of
indemnity, whether under the Articles of Incorporation, the bylaws or otherwise,
and no insurance purchased by the Company shall apply to pay or reimburse any
Participant's costs of arbitration.
ARTICLE 4. SHARES SUBJECT TO GRANT UNDER THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in this Section and in
Section 4.3, an aggregate of 3,900,000 Shares shall be available for the grant
of Option Awards and Restricted Stock Awards under the Plan (hereinafter called
the "Share Pool"); provided, however, that no Employee may be granted Awards
under the Plan during the period from May 15, 1996 through December 31, 1996 or
in any calendar year thereafter with respect to more than 300,000 Shares. The
Committee, in its sole discretion, shall determine the appropriate division of
the Share Pool as between Option Awards and Restricted Stock Awards. Shares
issued upon exercise of any Award may be either authorized and previously
unissued Shares or reacquired Shares.
The following rules will apply for purposes of the determination of the number
of Shares available for grant under the Plan:
(a) the grant of an Award to an Employee shall reduce the Shares available
in the Share Pool for grant under the Plan by the number of Shares subject to
the Award; and
(b) to the extent that an Option is settled in cash rather than by the
delivery of Shares, the Share Pool shall be reduced by the number of Shares
represented by the cash settlement of the Option (subject to the limitation
set forth in Section 4.2 herein).
4.2 LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires or lapses for any reason, any Shares then subject to such
Award again shall be available for grant under the Plan and shall return to the
Share Pool.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, an appropriate adjustment shall
be made in the number and class of Shares which may be delivered under the Plan,
and in the number and class of and/or price of Shares subject to any then
unexercised and outstanding Awards, as determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights. The number of Shares subject to any Award shall always be
a whole number.
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4.4 RIGHTS AS A SHAREHOLDER. No person shall have any rights as a shareholder
with respect to Shares subject to an Option Award until the date the Company
receives full payment of the Option price, including any sum due for withholding
pursuant to Section 6.6. A person who has Restricted Shares shall have the
rights of an owner of Shares, except to the extent those rights are expressly
limited by then applicable restrictions on transfer contained in this Plan and
the Restricted Stock Award Agreement.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY OF DIRECTORS. A Director who is not employed by the Company
shall become a Participant upon becoming a Director and receiving an Award in
accordance with the terms of this Plan.
5.2 ELIGIBILITY OF EMPLOYEES. An Employee shall become a Participant upon
recommendation by the Chairman of the Board and approval by the Committee and
upon receipt of an Award in accordance with the terms of this Plan.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS.
(a) Options may be granted to an eligible Employee at any time and from
time to time as shall be determined by and in the sole discretion of the
Committee.
(b) Options with respect to five thousand (5,000) Shares shall be granted
to each Director who is not employed by the Company on the date of his or her
election to the Board, subject to the following terms and conditions:
(i) the option price described in Section 6.3 shall be the Fair Market
Value of the Shares on the date of grant;
(ii) the Options shall be exercisable in accordance with Section 6.4
until the tenth anniversary of the date of grant;
(iii) the restriction on the right to exercise the Options in accordance
with Section 6.5(a) shall lapse on the first anniversary of the date of the
Option Award;
(iv) for the purposes of this Plan, death shall be treated as death
while employed under Section 6.8(a)(i); Disability or Retirement from the
Board shall be subject to the provisions of Sections 6.8(b) and (c);
failure to be reelected shall be an involuntary termination subject to the
terms of Section 6.8(d)(i); and resignation or failure to stand for
reelection shall be deemed to be a voluntary termination subject to the
terms of Section 6.8(e); and
(v) the limited right of transferability shall be granted in accordance
with Section 6.7.
Except as above modified or interpreted, the provisions of this Section 6
shall apply to Directors in the same manner it applies to others.
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6.2 OPTION AWARD AGREEMENT. Each Option shall be granted pursuant to a written
Option Award Agreement, signed by the appropriate member of the Committee or its
designee, and specifying the terms and conditions applicable to the Options
granted including: the Option Price; the period during which the Option may be
exercised; the number of Shares to which the Option pertains; the conditions
under which the Option is exercisable; and such other provisions as the
Committee may from time to time determine. The Option Agreement also shall
specify that the Option is intended to be a Nonqualified Stock Option whose
grant is intended not to fall under the provisions of Code Section 422.
6.3 OPTION PRICE. The Option Price for each Share subject to purchase shall be
determined by the Committee and stated in the Option Award Agreement but in no
event shall be less than the Fair Market Value of the Shares on the date of
grant of the Award.
6.4 DURATION OF OPTIONS. Each Option shall be exercisable for such period as
the Committee shall determine at the time of grant. No Option shall be
exercisable later than the tenth (10th) anniversary of the date of its grant.
6.5 EXERCISE OF OPTIONS.
(a) Options granted under the Plan shall be exercisable at such times and
be subject to such restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or for each
Participant. No Option shall be exercisable prior to six (6) months following
the date of its grant. The Committee may provide, by rule or regulation or in
any Option Award Agreement, that the exercisability of an Option may be
accelerated or extended under various circumstances to a date not later than
the latest expiration date permitted in accordance with Section 6.4.
(b) Each Option shall be exercisable only by delivery to the Committee in
care of the Secretary of the Company of a written notice of exercise in such
form as the Committee may require. A notice of exercise shall: specify the
number of shares to be purchased, shall be signed by the Participant or holder
of the Option and shall be dated the date the signature is affixed.
6.6 PAYMENT. A written notice of exercise shall be accompanied by full payment
for the Shares to be purchased. Subject to the provisions of Article 11, payment
shall include any income or employment taxes required to be withheld by the
Company from the employee's compensation with respect to the Shares so
purchased.
(a) The Option Price upon exercise of any Option shall be payable to the
Company in full either: (i) in cash or its equivalent, or (ii) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time
of exercise equal to the total Option Price (provided that the Shares so
tendered shall have been held by the Participant for at least six (6) months
prior to such tender), in proper form for transfer and accompanied by all
requisite stock transfer tax stamps or cash in lieu thereof, or (iii) by a
combination of (i) and (ii).
(b) The Committee also may allow cashless exercises as permitted under
Federal Reserve Board Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
(c) As soon as practicable after receipt of a written notice of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased.
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6.7 RESTRICTIONS ON TRANSFERABILITY. Except to the extent permitted under this
Section 6.7, no Option granted under the Plan may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, all Options granted to a Participant
under the Plan shall be exercisable during his or her lifetime only by such
Participant. Notwithstanding the foregoing, the right to purchase Shares subject
to an Option Award may be transferred, in whole or in part, by a Participant
during a Participant's lifetime, to a Participant's spouse, child or grandchild,
or to the trustee of a testamentary or other grantor trust established primarily
for the benefit of a Participant's spouse, child or grandchild; provided that:
(i) A transfer shall only be effective upon receipt by the Secretary of the
Company, on behalf of the Committee, of written notice of transfer in such
form as the Committee may require;
(ii) A notice of transfer shall: (A) identify the name, address and
relationship of the transferee to the Participant; (B) identify the Option
Award which is the subject of the transfer, the number of Shares transferred
and the consideration paid, if any, for the transfer; (C) in the case of a
transfer to a trustee, include evidence satisfactory to the Committee that
under the terms of the trust the transfer is for the exclusive benefit of a
Participant's spouse, child or grandchild; and (D) include a copy of the
authorized signature of each person who will have the right to exercise the
option to purchase and all information relevant to the rights transferred; and
(iii) A transferee may not transfer any rights. Upon the transferee's
death, all rights shall revert to the Participant.
The Committee may impose such additional restrictions on transferability as it
may deem advisable, including, without limitation, restrictions under applicable
Federal securities laws, under the requirements of any stock exchange or market
upon which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT. Except as hereinafter provided, Options granted
under the Plan may not be exercised by any person, including a transferee of any
rights under an Option Award, unless the Participant is then in the employ of
the Company and unless the Participant has remained continuously so employed
since the date of grant of the Option. Unless otherwise provided by the
Committee and subject to the duration established in accordance with Section
6.4, Options shall be exercisable in the following circumstances:
(a) in the case of a Participant's death
(i) while employed by the Company, by the Beneficiary or representative
during a period of 3 years following the date of the Participant's death;
and in such a case may be exercised even before expiration of the 6-month
or longer period established in accordance with Section 6.5(a); or
(ii) after his Retirement, but before the third anniversary of his
Retirement, by the Beneficiary or representative on or before the third
anniversary of his Retirement;
(b) in the case of the Participant's Disability, by the Participant or by
the Participant's appointed representative during a period of 3 years
following the date of the Participant's last day worked;
(c) in the case of the Participant's Retirement, by the Participant during
a period of 3 years following the date of the Participant's last day worked;
(d) in the case of a Participant's involuntary termination of employment:
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(i) for reasons other than Cause, by the Participant during a period of
3 years following the date of the Participant's last day worked; or
(ii) for Cause, by the Participant on or before his last day worked
whether or not the Committee has made its final determination that there is
Cause for termination as of that last day worked; and
(e) in the case of a Participant's voluntary termination of employment, his
last day worked.
ARTICLE 7. RESTRICTED STOCK.
7.1 RESTRICTED STOCK AWARDS. Restricted Stock Awards may be made at any time
while the Plan is in effect. Such Awards may be made to any Director or Employee
whether or not prior Restricted Stock Awards have been made to said person.
7.2 NOTICE. The Committee shall promptly provide each Participant with written
notice setting forth the number of Shares covered by the Restricted Stock Award
and such other terms and conditions relevant thereto, including the purchase
price, if any, to be paid for the Shares by the Recipient of the Award, as may
be considered appropriate by the Compensation Committee.
7.3 RESTRICTIONS ON TRANSFER. The purpose of these restrictions is to provide
an incentive to each Participant to continue to provide services to the Company
and to perform his or her assigned tasks and responsibilities in a manner
consistent with the best interests of the Company and its stockholders. The
Shares awarded pursuant to the Plan shall be subject to the following
restrictions:
(a) Stock certificates evidencing shares shall be issued in the sole name
of the Participant (but may be held by the Company until the restrictions
shall have lapsed in accordance herewith) and shall bear a legend which, in
part, shall provide that:
"The shares of common stock evidenced by this certificate are subject to
the terms and restrictions of the AK Steel Holding Corporation 1994 Stock
Incentive Plan. These shares are subject to forfeiture or cancellation
under the terms of said Plan. These shares may not be sold, transferred,
assigned, pledged, encumbered or otherwise alienated or hypothecated except
pursuant to the provisions of said Plan, a copy of which Plan is available
from the Secretary of the Company upon request."
(b) No Restricted Stock may be sold, transferred, assigned, pledged,
encumbered or otherwise alienated or hypothecated unless, until and then only
to the extent that said restrictions shall have lapsed in accordance with
Section 7.4.
7.4 LAPSE OF RESTRICTIONS. The restrictions set forth in Section 7.3 will
lapse only if, on the date restrictions are to lapse in accordance with this
Section 7.4, the Participant has been continuously employed by the Company or
has been a Director from the time of the Restricted Stock Award to such date of
lapse. If the lapse schedule would result in the lapse of restrictions in a
fractional share interest, the number of shares will be rounded down to the next
lowest number of full shares for each of the first two lapse dates, with the
balance to relate to the final lapse date. Unless otherwise provided by the
Board:
(a) with respect to a Restricted Stock Award to an Employee, the
restrictions set forth in Section 7.3 shall lapse with respect to twenty-five
percent (25%) of the Shares subject thereto on the second anniversary
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of the date of the Award; and with respect to an additional twenty-five
percent (25%) of the Shares subject thereto on each of the third, fourth and
fifth anniversaries of the date of the Award; and
(b) with respect to a Restricted Stock Award to a Director, the
restrictions set forth in Section 7.3 shall lapse upon completion of the full
term for which the Director was elected to serve on the Board.
7.5 VESTING AND FORFEITURE. Upon the lapse of the restrictions set forth in
Section 7.3 with respect to Shares covered by a Restricted Stock Award,
ownership of the Shares with respect to which the restrictions have lapsed shall
vest in the holder of the Award. In the event of termination of an Employee's
employment, or in the event a Director fails to complete his or her full term on
the Board, all Shares then still subject to the restrictions described in
Section 7.3 shall be forfeited by the Participant and returned to the Company
for cancellation, except as follows:
(a) Restrictions with respect to Shares covered by an outstanding
Restricted Stock Award held by a Director shall lapse upon the date of his or
her mandatory retirement by reason of age. In the case of an Employee's
retirement, the Committee may in its sole discretion elect to waive all or any
portion of the restrictions remaining in respect of a Restricted Stock Award
held by that employee. Any outstanding restrictions shall lapse in case of
death or Disability of the holder of a Restricted Stock Award. Evidence of
Disability will be entitlement to disability income benefits under the Federal
Social Security Act; and
(b) The Committee may at any time in its sole discretion accelerate or
waive all or any portion of restrictions remaining in respect of the Shares
covered by an outstanding Restricted Stock Award (to the extent not waived
pursuant to paragraph (a) above). This authority may be exercised for any or
all Participants; provided that the waiver in any particular case shall not
bind the Committee in any other similar case, it being the intention of the
Company to grant the Committee the broadest possible discretion to act or to
refuse to act in this regard. Any such action taken on behalf of a Director
shall require the unanimous consent of all Directors (excluding the Director
for whose benefit the action is taken) then in office.
7.6 RIGHTS AS STOCKHOLDER. Upon issuance of the stock certificates evidencing
the Restricted Stock Award and subject to the restrictions set forth in Section
7.3 hereof, the Participant shall have all the rights of a stockholder of the
Company with respect to the Shares of Restricted Stock represented by that
Restricted Stock Award, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto.
7.7 AWARDS TO DIRECTORS. The Board may, during any calendar year, determine by
majority vote to pay all or a portion of a Director's fees to be earned in such
calendar year by means of an Award of Restricted Stock; provided that at least
fifty (50%) of the Director's fees shall be paid in the form of a Restricted
Stock Award, such Award to be made effective as of December 31 to Directors then
serving. Any Director who leaves the Board during the year shall be paid in cash
for services rendered.
ARTICLE 8. RIGHTS OF EMPLOYEES.
8.1 EMPLOYMENT. Nothing in the Plan shall: (i) interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time; (ii) confer upon any Participant any right to continue in the employ of
the Company or its subsidiaries; or (iii) be evidence of any agreement or
understanding, express or implied, that the Company will employ any Participant
in any particular position at a particular rate of compensation or for any
particular period of time.
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8.2 PARTICIPATION. Nothing in this Plan shall be construed to give any person
any right to be granted any Award other than at the sole discretion of the
Committee or as giving any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan. No Participant shall have the right
to be selected to receive an Award under this Plan, or, having been so selected,
to be selected to receive a future Award.
ARTICLE 9. CHANGE IN CONTROL.
Upon the occurrence of a Change in Control, unless otherwise specifically
prohibited by the terms of Section 9 herein:
(a) any and all outstanding Options previously granted hereunder, if not
then exercisable, shall become immediately exercisable and any restrictions on
the transfer of Shares of Restricted Stock shall lapse and expire effective as
of the date of the Change in Control;
(b) subject to Article 10 herein, the Committee shall have the authority to
make any modifications to any Option Award determined by the Committee to be
appropriate before the effective date of the Change in Control; and
(c) if the Shares are no longer traded over a national public securities
exchange following a Change in Control:
(i) Participants holding Options shall have the right to require the
Company to make a cash payment to them in exchange for their Options. Such
cash payment shall be contingent upon the Participant's surrendering the
Option. The amount of the cash payment shall be determined by adding the
total "spread" on all outstanding Options. For this purpose, the total
"spread" shall equal the difference between: (1) the higher of (i) the
highest price per Share paid or offered in any transaction related to a
Change in Control of the Company; or (ii) the highest Fair Market Value per
Share at any time during the ninety (90) calendar day period preceding a
Change in Control; and (2) the Option Price applicable to each Share held
under Option; and
(ii) Participants holding Shares of Restricted Stock shall have the
right to require the Company to make a cash payment to them in exchange for
their Restricted Stock. Such cash payment shall be contingent upon the
Participant's surrendering the Restricted Stock. The amount of the cash
payment shall be not less than the higher of (i) the highest price per
Share paid or offered in any transaction related to a Change in Control of
the Company; or (ii) the highest Fair Market Value per Share at any time
during the ninety (90) calendar day period preceding a Change in Control.
ARTICLE 10. AMENDMENT, MODIFICATION, AND TERMINATION.
10.1 AMENDMENT, MODIFICATION, AND TERMINATION. The Board may at any time and
from time to time, alter, amend, suspend or terminate this Plan in whole or in
part; provided, that no amendment that (i) requires shareholder approval in
order for this Plan to continue to comply with Rule 16b-3 under the Exchange
Act, including any successor to such Rule, or (ii) would modify the provisions
of Section 3.1 or the first paragraph of Section 4.1 of this Plan, shall be
effective unless such amendment shall be approved by the requisite vote of
shareholders of the Company entitled to vote thereon.
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10.2 OPTION AWARDS PREVIOUSLY GRANTED. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan without the written consent of the Participant
holding such Award. If consent is not given, the Award shall continue in force
in accordance with its terms without modification.
ARTICLE 11. WITHHOLDING.
11.1 TAX WITHHOLDING. The Company shall have the power and the right to deduct
or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes, (including the
Participant's FICA obligation, if any) required by law to be withheld with
respect to any taxable event arising or as a result of this Plan. Failure to
cooperate with the Company in paying any such withholding shall cause the
cancellation of the Shares subject to the taxable transaction without liability
for such cancellation.
11.2 SHARE WITHHOLDING. With respect to withholding required upon the exercise
of Options or the vesting of Shares under a Restricted Stock Award, Participants
may elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold Shares having a
Fair Market Value on the date the tax is to be determined equal to the minimum
statutory total tax which could be imposed on the transaction. All elections
shall be irrevocable, made in writing, signed by the Participant.
In addition to the foregoing requirements, an Insider may elect Share
withholding only if
(a) written notice of such election is given at least six (6) months prior
to the date (i) at which the Option is exercised (in the case of an election
made with respect to an Option) or (ii) at which Shares covered by a
Restricted Stock Award cease to be subject to restrictions (in the case of an
election made with respect to a Restricted Stock Award); or
(b) in the case of an election made with respect to an Option, such
election is made in connection with the exercise of the Option during a Window
Period; or
(c) in the case of an election made with respect to a Restricted Stock
Award, such election is made during a Window Period.
ARTICLE 12. INDEMNIFICATION. The Company shall indemnify and hold harmless
each member of the Committee, or of the Board, against and from any loss, cost,
liability or expense, including reasonable attorney's fees and costs of suit,
that may be imposed upon or reasonably incurred by the member in connection with
or resulting from any claim, action, suit, or proceeding to which the member may
be a party defendant or in which the member may be involved as a defendant by
reason of any action taken or any failure to act under the Plan and against and
from any and all amounts paid in Settlement thereof or paid in satisfaction of
any judgment in any such action, suit, or proceeding against the member,
provided that the member shall give the Company an opportunity, at its own
expense, to handle and defend the same before the member undertakes to handle
and defend it or agrees to any settlement of the claim. The foregoing right of
indemnification shall be in addition to, and not exclusive of, any other rights
of indemnification to which the member may be entitled under the Company's
Articles of Incorporation or Bylaws, as a matter of law, or otherwise. This
right shall not extend to any action by a Director as a claimant of rights under
the Plan, whether on the Director's behalf or on behalf of a class of persons
which would include the Director, unless filed in the form of a declaratory
judgment seeking relief for the Company or the Plan.
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ARTICLE 13. SUCCESSORS. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
ARTICLE 14. LISTING OF SHARES AND RELATED MATTERS. If at any time the
Committee shall determine that the listing, registration or qualification of the
Shares subject to any Award on any securities exchange or under any applicable
law, or the consent or approval of any governmental regulatory authority, is
necessary or desirable as a condition of, or in connection with, the granting of
an Option or the issuance of Shares thereunder or the granting of a Restricted
Stock Award, no Option that is the subject of such Award may be exercised in
whole or in part and no certificates may be issued or reissued in respect of any
Restricted Stock that is the subject of such Award unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
ARTICLE 15. LEGAL CONSTRUCTION.
15.1 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
15.2 SEVERABILITY. If any provision of the Plan shall be held by a court of
competent jurisdiction to be illegal, invalid or unenforceable for any reason,
the illegality, invalidity or unenforceability shall not affect the remaining
parts of the Plan, and the Plan shall be construed and enforced as if the
illegal, invalid or unenforceable provision had not been included. Unless
otherwise specifically provided in a final order by a court of competent
jurisdiction, no such judicial determination shall deprive a Participant of the
economic advantage, if any, of unexpired Options under any Option Award
Agreement or of Shares of Restricted Stock then subject to restrictions under
the terms of the Plan or the Restricted Stock Award Agreement. If any such
judicial determination does or would have an adverse impact then the Company
shall assure the Participant of the right to receive cash in an amount equal to
the value of any Award under the Plan prior to the determination of its
invalidity in the same manner as if such Award was lawful and the benefit
granted thereunder could be enjoyed in accordance with the terms of the Award.
15.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
15.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-13
or its successors under the Exchange Act. To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee. The
obligations of the Company to issue or transfer Restricted Shares awarded
pursuant to the Plan or Option Shares upon exercise of an Option shall be
subject to: compliance with all applicable governmental rules and regulations,
and administrative action; the effectiveness of a registration statement under
the Securities Act of 1933, as amended, if deemed necessary or appropriate by
the Company; and the condition that listing requirements (or authority for
listing upon official notice of issuance) for each stock exchange on which
outstanding shares of the same class may then be listed shall have been
satisfied.
15.5 GOVERNING LAW. To the extent not preempted by Federal law, the Plan and
all agreements hereunder shall be construed in accordance with and governed by
the laws of the State of Delaware.
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Exhibit 10.11(a)
================================================================================
AMENDMENT NO. 1
dated as of November 17, 1995
to PURCHASE AND SERVICING AGREEMENT
dated as of December 1, 1994
among
AK STEEL CORPORATION,
as Originator and Servicer,
AK STEEL RECEIVABLES INC.,
as Transferor
The Purchasers Party Hereto
and
PNC BANK, OHIO, NATIONAL ASSOCIATION,
as L/C Issuing Bank, as lender under Swing Line Advances,
and as Agent for the Purchasers
================================================================================
<PAGE>
This AMENDMENT NO. 1 TO PURCHASE AND SERVICING AGREEMENT (the
"Amendment"), dated as of November 17, 1995, is made among AK STEEL CORPORATION
("AK Steel"), as Originator and Servicer, AK STEEL RECEIVABLES INC. ("AKR"), as
Transferor, the Purchasers party hereto, and PNC BANK, OHIO, NATIONAL
ASSOCIATION ("PNC"), as L/C Issuing Bank, as lender under Swing Line Advances,
and Agent for the Purchasers (the "Agent").
BACKGROUND
A. AK Steel, AKR, the Purchasers party thereto, PNC and the Agent
(the "Parties") have entered into the Purchase and Servicing Agreement dated as
of December 1, 1994 (the "Purchase and Servicing Agreement"), pursuant to which
AKR agreed to sell, and the Purchasers agreed to purchase, Undivided Fractional
Interests in certain Transferor Receivables and related Transferor Assets
originated by AK Steel;
B. The Parties wish to amend the Purchase and Servicing Agreement
in order to extend the Amortization Date as provided below.
NOW, THEREFORE, the Parties hereby agree as to the following:
SECTION 1. Definitions. Except as otherwise defined herein,
-----------
capitalized terms shall have the meaning set forth in the Purchase and Servicing
Agreement.
SECTION 2. Certain Amendments.
------------------
(a) Section 1.01 of the Purchase and Servicing Agreement is
------------
amended to change the definition of "Amortization Date" to read in full
as follows:
""Amortization Date" shall mean December 1, 2000, or, if earlier, the
-----------------
date specified as the Amortization Date pursuant to Section 10.01
-------------
following the occurrence of an Early Amortization Event or by the
Transferor pursuant to Section 15.01."
-------------
(b) Section 17.01(a) of the Purchase and Servicing Agreement is
----------------
amended to change clause (ii) of the proviso thereto to read as follows:
-------
"(ii) change the definition of or the manner of calculating the
Purchased Interest or the Undivided Fractional Interests or any
Purchaser's interest therein or such
<PAGE>
Purchaser's Commitment, or extend the scheduled Amortization Date beyond
December 1, 2000, in each case without the consent of each affected
Purchaser."
SECTION 3. Representations and Warranties. Each of AK Steel
------------------------------
and AKR represents and warrants to the Agent and each Purchaser that:
(a) the execution and delivery by it of this Amendment, and the
performance of its obligations under the Purchase and Servicing
Agreement as modified by this Amendment, are within its corporate
powers, have been duly authorized by all necessary corporate action,
have received all necessary governmental and other consents and
approvals, and do not and will not contravene or conflict with or
violate any Requirements of Law applicable to AK Steel or the Transferor
or their respective property or conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, any indenture,
contract, agreement, mortgage deed of trust or other instrument to which
AK Steel or the Transferor is a party or by which either of them or
their properties are bound,
(b) this Amendment has been duly executed and delivered by it, and
the Purchase and Servicing Agreement, as amended hereby, is its legal,
valid and binding obligation, enforceable against it in accordance with
its terms,
(c) the representations and warranties made by it in the Transaction
Documents are true and correct as of the date hereof as though made on
the date hereof, except to the extent that they specifically relate to
an earlier date, and
(d) after giving effect to this Amendment, no Early Amortization
Event or Potential Early Amortization Event shall exist.
SECTION 4. Effectiveness. This Agreement will become effective
-------------
on the date when the Agent shall have received the following:
(a) Counterparts of this Amendment executed by each Party;
(b) Certified resolutions of the Board of Directors of each of AK
Steel and AKR authorizing execution, delivery and performance of this
Amendment; and
2
<PAGE>
(c) An opinion of Randall F. Preheim, counsel to AK Steel, in the
form set forth in Exhibit A hereto.
SECTION 5. Miscellaneous. (a) THIS AMENDMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF OHIO.
(b) This Amendment may be executed in any number of counterparts
and by the different Parties in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which
together shall constitute one and the same agreement.
(c) Any reference to the Purchase and Servicing Agreement
contained in any notice, request, certificate or other document executed
concurrently herewith or after the date hereof shall be deemed to be a
reference to the Purchase and Servicing Agreement as amended hereby.
Except as expressly modified hereby, the Transaction Documents hereby
are ratified and confirmed by AK Steel and AKR, and remain in full force
and effect.
IN WITNESS WHEREOF, the Parties have caused their duly
authorized officers to execute this Amendment as of the day and year first above
written.
AK STEEL CORPORATION,
as Originator and Servicer
By: /s/ James L. Wainscott
---------------------------------------------
Name: James L. Wainscott
--------------------------------
Title: Vice President and Treasurer
--------------------------------
AK STEEL RECEIVABLES INC.,
as Transferor
By: /s/ Richard E. Newsted
---------------------------------------------
Name: Richard E. Newsted
--------------------------------
Title: Senior Vice President and CFO
--------------------------------
3
<PAGE>
PNC BANK, OHIO, NATIONAL ASSOCIATION
as L/C Issuing Ban, as lender under Swing Line
Advances, and as Agent for the Purchasers
By: /s/ John T. Taylor
---------------------------------------------
Name: John T. Taylor
--------------------------------
Title: Senior Vice President
--------------------------------
NBD BANK, N.A., as a Purchaser
By: /s/ Patrick D. Lease
---------------------------------------------
Name: Patrick D. Lease
--------------------------------
Title: Vice President
--------------------------------
COMERICA BANK, as a Purchaser
By: /s/ Dan M. Roman
---------------------------------------------
Name: Dan M. Roman
--------------------------------
Title: Vice President
--------------------------------
SOCIETY NATIONAL BANK, as a Purchaser
By: /s/ Wayne K. Guessford
---------------------------------------------
Name: Wayne K. Guessford
--------------------------------
Title: Vice President
--------------------------------
4
<PAGE>
THE FIFTH THIRD BANK, as a Purchaser
By: /s/ Andrew K. Havek
---------------------------------------------
Name: Andrew K. Havek
--------------------------------
Title: Vice President
--------------------------------
STAR BANK, NATIONAL ASSOCIATION, as a Purchaser
By: /s/ Thomas D. Gibbons
---------------------------------------------
Name: Thomas D. Gibbons
--------------------------------
Title: Vice President
--------------------------------
5
<PAGE>
Exhibit A
---------
November 17, 1995
To the Persons Listed
on the Attached Schedule I
Gentlemen and Ladies:
I am Vice President, General Counsel and Secretary to AK Steel Corporation, a
Delaware corporation ("AK Steel"), and Secretary to and counsel for AK Steel
Receivables Inc., a Delaware corporation ("AKR") (together, the "Companies" and
each individually, a "Company"). As such, I am generally familiar with the
affairs, records, documents and obligations of the Companies. I am also familiar
with the documents listed on Schedule II hereto, each dated December 1, 1994
unless otherwise noted, and any other documents executed and delivered in
connection therewith (the "Transaction Documents"). Except as otherwise herein
defined, terms used herein are as defined in the Purchase and Servicing
Agreement, as amended by the Amendment. This opinion is rendered pursuant to
Section 4(c) of the Amendment.
In connection with this opinion, I have examined copies of the Transaction
Documents. In addition, I have examined the originals, or photostatic or
certified copies, of such records of the Companies, certificates of public
officials and such other agreements, instruments and documents as I have deemed
relevant and necessary as the basis for the opinions set forth below. In such
examination, I have assumed the genuineness of all signatures (other than
signatures of individuals signing on behalf of the Companies), the authenticity
of all documents submitted to me as originals, the conformity to original
documents of all documents submitted to me as certified or photostatic copies
and the authenticity of the originals of such copies and have relied, as to
matters of fact, upon certificates of public officials and statements delivered
or made to me by representatives of the Companies.
I have also assumed, in giving the opinions expressed herein,
(I) That the parties to the Amendment, other than the Companies,
have full power, authority and legal right under their
respective articles of incorporation or certificates of
incorporation, as applicable, their respective instruments of
governance and organization, and the laws of the respective
jurisdictions in which they were incorporated or otherwise
organized to execute and deliver and to perform and observe the
provisions of such Amendment; and
<PAGE>
(II) The accuracy and completeness of all records of the Companies
that I have examined.
Based upon my examination as described above and subject to the assumptions and
qualifications stated, I am of the opinion that:
1. The execution, delivery and performance by each Company of, and
the consummation by each Company of the Transactions
contemplated by, the Amendment do not and will not (a) violate
the Certificate of Incorporation or other organizational
documents of such company, (b) violate any law, rule or
regulation applicable to such Company, (c) violate any order,
writ, injunction or decree known to me after due inquiry of any
Governmental Authority applicable to such Company, or (d) result
in a breach of, constitute a default under, require any consent
under, or result in the acceleration or required prepayment on
any indebtedness pursuant to the terms of, any agreement or
instrument known to me after due inquiry to which such Company
is a party or by which it is bound or to which it is subject
(except for consents that have already been obtained), or (e)
except as contemplated by the Transaction Documents, result in
the creation or imposition of any Lien upon any property of such
Company pursuant to the terms of any such agreement or
instrument.
2. There is no pending or, to the best of my knowledge, threatened
action, suit, proceeding or claim before any Governmental
Authority, or any order, judgment or award by any Governmental
Authority against either of the Companies (i) asserting the
illegality, invalidity or unenforceability, or seeking any
determination or ruling that would affect the legality, binding
effect, validity or enforceability of any of the Transaction
Documents, (ii) seeking to prevent the consummation of any of
the transactions contemplated by the Transaction Documents, or
(iii) seeking any determination or ruling that is reasonably
likely materially and adversely to affect the financial
condition or results of operations of either of the Companies or
the performance of the Receivables.
3. The Amendment has been duly authorized, executed and delivered
by each of AK Steel and AKR, and the Purchase and Servicing
Agreement, as amended by the Amendment, is the legal, valid and
binding obligation of AK Steel and AKR, enforceable against such
AK Steel and AKR in accordance with its terms, except as such
enforceability against either such company may be (a) limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance, equity of redemption and similar laws
affecting the enforceability or creditors' rights generally; (b)
subject to the qualification that certain remedial provisions
therein may be unenforceable in whole or in part under
Exhibit A-2
<PAGE>
laws, rules, regulations, court decisions, constitutional
requirements or public policy (but in my opinion the inclusion
of such provisions does not affect the validity of the Purchase
and Servicing Agreement, as amended by the Amendment, and the
Purchase and Servicing Agreement, as so amended, contains
adequate remedies for the practical realization of the benefits
intended to be conferred thereby); and (c) subject to general
principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law). Such
principles of equity are of general application and in applying
such principles of court among other things, might decline to
enforce or order performance of a covenant in any of such
documents or might decline to allow the holder of the security-
interests provided for therein to accelerate the indebtedness
secured thereby for the purpose of enforcing the security
interest granted pursuant to the Purchase and Servicing
Agreement, as amended by the Amendment, or to realize upon any
security for payment of such indebtedness. Such principles
applied by a court might also limit the enforceability of
covenants relating to indemnity obligations, specific
performance and injunctive relief and include a requirement that
the Agent and the Purchasers act with reasonableness and good
faith and might be applied, among other situations, to any
provisions of the Purchase and Servicing Agreement, as amended
by the Amendment, purporting to authorize conclusive
determinations by the Agent or any Purchaser. In addition, to
the extent that any of the laws referenced in clause 3(a) affect
the enforceability of the Purchase and Servicing Agreement, as
amended by this Amendment, the grant, creation and perfection of
the ownership or security interests created thereunder could be
adversely affected.
The aforesaid opinions are limited to the federal laws of the United States of
America, the laws of the State of Ohio and the General Corporate Law of the
State of Delaware.
The opinions rendered herein may be relied upon by you and by any of your
successors, assigns and participants that are permitted under the Purchase and
Servicing Agreement, provided that such reliance is based on the laws, facts and
circumstances that exist as of the date of this opinion. Except for such
permitted successors, assigns and participants, the opinions expressed herein
are solely for the benefit of each of you, and may not be used, circulated,
quoted, relied upon or otherwise referred to in any manner by any other Person
or for any other purpose without my prior written consent.
Sincerely,
Randall F. Preheim
Exhibit A-3
<PAGE>
Schedule I
to Opinion Letter
PNC Bank, Ohio, National Association
as Agent, as L/C Issuing Bank and
as Lender under Swing Line Advances
National Corporate Banking
201 East Fifth Street
P.O. Box 1198
Cincinnati, Ohio 45201-1198
NBD Bank, N.A.
Midwest Banking Division
611 Woodward
Detroit, Michigan 48226
Comerica Bank
500 Woodward Avenue, MC 3279
Detroit, Michigan 48226
Society National Bank
Corporate Banking
525 Vine Street
Cincinnati, Ohio 45202
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45236
Star Bank, National Association
Star Bank Center
425 Walnut Street, 8th Floor
Cincinnati, Ohio 45202
<PAGE>
Schedule II
AK STEEL REVOLVING TRADE
RECEIVABLES PURCHASE FACILITY
Document List
-------------
1. Purchase and Servicing Agreement (the "PSA"), dated as of December 1,
1994, among AK Steel Receivables Inc. ("AKR") as Transferor, AK Steel
Corporation ("AK Steel") as Servicer and Originator, the Purchasers
party thereto, and PNC Bank, Ohio, N.A. as Agent ("Agent")
1A. Amendment No. 1 to PSA dated as of November 17, 1995 (the "Amendment")
2. Swing Note dated as of December 1, 1994, in the principal amount of
$10,000,000
3. Receivables Purchase Agreement, dated as of December 1, 1994, between AK
Steel as Seller, and AKR as Purchaser
4. Subordinated Note from AKR to AK Steel, dated as of December 1, 1994
5. Collection Account Letter:
(a) NBD Bank, N.A.
(b) The Fifth Third Bank
(c) First National Bank of Chicago
6. Concentration Account Letter
<PAGE>
EXHIBIT 10.11(b)
===============================================================================
CONSENT, AMENDMENT AND ASSUMPTION AGREEMENT
DATED AS OF DECEMBER 31, 1996
TO
--
PURCHASE AND SERVICING AGREEMENT
DATED AS OF DECEMBER 1, 1994
AMONG
AK STEEL CORPORATION,
AS ORIGINATOR AND SERVICER,
AK STEEL RECEIVABLES INC.,
AS TRANSFEROR
THE PURCHASERS PARTY THERETO
AND
PNC BANK, OHIO, NATIONAL ASSOCIATION,
AS L/C ISSUING BANK, AS LENDER UNDER SWING LINE ADVANCES,
AND AS AGENT FOR THE PURCHASERS
AND TO
------
RECEIVABLES PURCHASE AGREEMENT
DATED AS OF DECEMBER 1, 1994
BETWEEN
AK STEEL CORPORATION
AND
AK STEEL CORPORATION, INC.
================================================================================
<PAGE>
This CONSENT, AMENDMENT and ASSUMPTION AGREEMENT (the "Amendment"),
---------
dated as of December 31, 1996, is made among AK STEEL CORPORATION ("AK Steel"),
--------
as Originator and Servicer, AK STEEL RECEIVABLES INC. ("AKR"), as the original
---
Buyer and the original Transferor, AK ACQUISITION RECEIVABLES LTD., an Ohio
limited liability corporation, the name of which will be changed to AK Steel
Receivables Ltd. ("AK LTD"), AKSR INVESTMENTS, INC., an Ohio corporation, which
------
is the managing member of AK Ltd. (the "Managing Member"), the Purchasers party
---------------
hereto, and PNC BANK, OHIO, NATIONAL ASSOCIATION ("PNC"), as L/C Issuing Bank,
---
as lender under Swing Line Advances, and Agent for the Purchasers (the "Agent").
-----
BACKGROUND
A. AK Steel and AKR have entered into a Receivables Purchase Agreement
dated as of December 1, 1994 (as heretofore amended, the "Receivables Purchase
--------------------
Agreement") pursuant to which AK Steel agreed to sell, and AKR agreed to
- ---------
purchase, certain Transferor Receivables and related Transferor Assets
originated by AK Steel.
B. AK Steel, AKR, the Purchasers party thereto, PNC and the Agent have
entered into the Purchase and Servicing Agreement dated as of December 1, 1994
(as heretofore amended, the "Purchase and Service Agreement"), pursuant to which
------------------------------
AKR agreed to sell, and the Purchasers agreed to purchase, Undivided Fractional
Interests in such Transferor Receivables and related Transferor Assets;
C. AK LTD. and AKR have entered into an Agreement and Plan of Merger,
dated as of December 27, 1996, a copy of which is attached hereto as Schedule I
(the "Merger Agreement"), pursuant to which AK Ltd. and AKR will merge (the
----------------
"Merger"), with AK Ltd. being the surviving entity from such Merger.
- -------
D. The parties hereto wish to amend the Receivables Purchase Agreement and
the Purchase and Servicing Agreement as provided below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. Definitions. Except as otherwise defined herein, capitalized
-----------
terms shall have the meanings set forth in the Receivables Purchase Agreement
and the Purchase and Servicing Agreement.
SECTION 2. Consent. Each of AK Steel, AKR, AK Ltd., the Managing Member,
-------
PNC Bank, Ohio, National Association (in all its capacities set forth on the
signature pages hereto) and each Purchaser consents to:
<PAGE>
(a) the consummation of the Merger of AKR with and into AK Ltd., with
AK Ltd. being the surviving entity, pursuant to the Merger Agreement; and
(b) the assumption by AK Ltd. of all the rights and obligations of AKR
under the Receivables Purchase Agreement, the Purchase and Servicing
Agreement and the other Transaction Documents.
SECTION 3. Assumption by AK Ltd. of All Rights and Obligations of AKR.
----------------------------------------------------------
(a) Effective upon the consummation of the Merger, AK Ltd. hereby assumes all
rights and obligations of AKR under the Receivables Purchase Agreement, the
Purchase and Servicing Agreement and all other Transaction Documents, and agrees
to be bound by the Transaction Documents and to perform all obligations of AKR
under the Transaction Documents as if all references to AKR in the Transaction
Documents, whether in the capacity of "Transferor", "Buyer", or otherwise, were
references to AK Ltd. in such respective capacity.
(b) Without limiting the foregoing:
(i) AK Steel hereby agrees from and after the effective time of the
Merger, to sell, assign and transfer to AK Ltd., and AK Ltd. agrees to
purchase and accept from AK Steel, during the Effective Period (without
recourse except as specifically provided in the Receivables Purchase
Agreement) and on the terms and conditions of the Receivables Purchase
Agreement as amended hereby, all right, title and interest of AK Steel in,
to and under
(A) all Receivables created from time to time until termination
of the Effective Period; and
(B) a corresponding interest in all of the Related Assets.
(ii) AK Ltd. hereby sells, transfers, assigns, sets over and
otherwise conveys the Transferred Assets to the Purchasers, without
recourse except as expressly provided in the Purchase and Servicing
Agreement, and on the terms and conditions set forth in the Purchase and
Servicing Agreement as amended hereby.
(iii) To secure the prompt and complete payment when due of the
interest, fees, indemnities, Swing Line Advances, Letter of Credit
reimbursement obligations, expenses and all other Obligations and amounts
owed under the Purchase and Servicing Agreement or in connection herewith,
AK Ltd. hereby assigns and pledges to the Agent, on behalf of the Purchaser
Parties, as their interests may appear, and on the terms and conditions set
forth in Section 18 of the Purchase and Servicing Agreement a security
interest in and Lien on all of AK Ltd.'s right, title and interest in and
to the Collateral, whether now owned or existing or hereafter arising or
acquired and wheresoever located.
2
<PAGE>
SECTION 4. Certain Amendments.
------------------
SECTION 4.1 Amendments to Receivables Purchase Agreement.
--------------------------------------------
(A) Section 4.5(a) of the Receivables Purchase Agreement is amended to read
in full as follows:
"(a) Legal Existence. The Buyer is a limited liability company duly
---------------
organized and validly existing in the State of Ohio incorporation and is
duly qualified to transact business in each jurisdiction in which failure
to so qualify would have a material adverse effect on the Buyer's ability
to perform its obligations under this Agreement and the Transaction
Documents to which it is a party."
(B) Section 4.5(b) of the Receivables Purchase Agreement is amended to add
the words "and other" after the word "corporate".
(C) Section 4.6(a) of the Receivables Purchase Agreement is amended to read
in full as follows:
"(a) Legal Status. Preserve its legal status and franchises and pay
------------
all taxes and annual fees in connection therewith."
SECTION 4.2 Amendments to Article IX of Purchase and Servicing Agreement.
------------------------------------------------------------
(A) Section 1.01 of the Purchase and Servicing Agreement is amended to
change clause (iii) of the definition of Change of Control to read in full as
follows:
"(iii)(A) Holding fails to own 100% of the stock of AK Steel or (B)
AK Steel fails to own 100% of the stock of each of the Managing Member and
AKS Investments, Inc. free and clear of any Lien except for a Lien in favor
of a lender that has executed and delivered an intercreditor agreement as
required by Section 11.04(r); or (C) either of Managing Member or AKS
----------------
Investments, Inc. ceases to be a Member of Transferor, or Managing Member
and AKS Investments, Inc. cease to be the only members and Interest Holders
(as defined in the Operating Agreement of AK Ltd.) of Transferor, provided,
--------
however, that it shall not be deemed a Change in Control if Holding merges
-------
into AK Steel except that, in such case, AK Steel shall be substituted for
Holding for purposes of this definition of "Change in Control" and clause
(iii)(A) shall no longer be applicable."
(B) Section 9.01 of the Purchase and Servicing Agreement is amended to
insert the words "and the Managing Member each" after the word "Transferor" in
the preamble thereof.
(C) Sections 9.01(a) and 9.01(b) of the Purchase and Servicing Agreement
are amended to read in full as follows:
3
<PAGE>
"(a) Organization and Good Standing. The Transferor is a limited
------------------------------
liability company and the Managing Member is a corporation, in each case
duly organized, validly existing and in good standing under the laws of the
State of Ohio, and each of them has full corporate or other power and
authority to own its properties and conduct its business as presently owned
or conducted, and to execute, deliver and perform its obligations under the
Transaction Documents to which it is a party.
(b) Due Qualification. The Transferor is duly qualified to do
-----------------
business and is in good standing as a limited liability company or foreign
limited liability company, and the Managing Member is duly qualified to do
business and is in good standing as a corporation or foreign corporation,
as applicable, and each of the Transferor and the Managing Member has
obtained all necessary licenses and approvals, in each jurisdiction in
which failure to so qualify or to obtain such licenses and approvals would
have a material adverse effect on the Transferor's or Managing Member's
ability to perform its obligations hereunder or under the Receivables
Purchase Agreement."
(D) Section 9.01(c) of the Purchase and Servicing Agreement is amended to
insert the words "and the Managing Member" after the word "Transferor" wherever
it appears therein, and to insert the words "or other" after the word
"corporate" therein.
(E) Section 9.01 of the Purchase and Servicing Agreement is further amended
to add the following subsection (p) after Section 9.01(o):
"(p) Each of the warranties set forth in this Section 9.01 (other
than Section 9.01(a), (b) and (c)) are true and correct with respect to the
----------------------------
Managing Member as if the words "Managing Member" and "Managing Member's"
were substituted for the words "Transferor" and "Transferor's",
respectively, therein."
(F) Section 9.02 of the Purchase and Servicing Agreement is amended to
insert the words "and the Managing Member" after the word "Transferor" in the
title and the preamble of said Section 9.02.
------------
(G) Section 9.03 of the Purchase and Servicing Agreement is amended to
change the title and preamble thereof to read as follows:
"Section 9.03 Negative Covenants of the Transferor and Managing
-------------------------------------------------
Member. The Transferor and the Managing Member each hereby jointly and
------
severally covenants that, until this Agreement has been terminated pursuant
to Section 15.01:"
-------------
(H) Section 9.03(b) of the Purchasing and Servicing Agreement is amended to
read in full as follows:
4
<PAGE>
"(b) Preservation of Existence. The Managing Member and Transferor
-------------------------
each will preserve and maintain its existence, rights, franchises and
privileges, as a corporation or limited liability company as the case may
be, and qualify and remain qualified in good standing as a foreign
corporation or limited liability company as the case may be, in each
jurisdiction where the failure to maintain such qualification would
materially and adversely affect (i) the interests of the Purchaser Parties
in the Transferred Assets, (ii) the collectibility of the Transferor
Receivables or (iii) the ability of the Transferor to perform its
obligations hereunder or under the Receivables Purchase Agreement."
(I) Section 9.03(e) of the Purchase and Servicing Agreement is amended to
change the words "Transferor" and "Transferor's", wherever they appear, to
"Managing Member" and "Managing Member's", respectively.
(J) Section 9.03(j) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(j) Litigation, etc. The Transferor and Managing Member shall
---------------
notify the Agent immediately if it becomes aware of (i) any previously
undisclosed litigation, investigation or proceeding against the Transferor,
the Managing Member, the Originator or the Servicer, or otherwise affecting
the Originator's, the Managing Member's or the Transferor's property or its
interest therein (but only, in the case of the Originator or the Servicer,
if such litigation, investigation or proceeding is reasonably likely to
have a material adverse effect on the Originator or the Servicer) and (ii)
any material adverse development in previously disclosed litigation."
(K) Section 9.04 of the Purchase and Servicing Agreement is amended to
change the title and preamble thereof to read as follows:
"Section 9.04 Negative Covenants of the Transferor and Managing
-------------------------------------------------
Member. The Transferor and the Managing Member each hereby jointly and
severally covenants that, until this Agreement has been terminated pursuant
to Section 15.01:"
-------------
(L) Section 9.04(e) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(e) Investments. The Transferor and the Managing Member will not
-----------
make or suffer to exist any loans or advances to, or extend any credit to,
or make any investments (by way of transfer of property, contributions to
capital, purchase of stock or securities or evidences of indebtedness,
acquisition of the business or assets, partnership or joint venture, or
otherwise) in, any Affiliate or any other Person except for (1) in the case
of Transferor, purchases of Transferor Receivables pursuant to the terms of
the Receivables Purchase Agreement and investments in Eligible Investments
in accordance with the terms of this Agreement and (2) in the case of the
Managing Member, its membership in the Transferor."
5
<PAGE>
(M) Section 9.04(g) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(g) Change in Name. The Managing Member and the Transferor will not
--------------
(i) make any change to its respective corporate or limited liability
company name or principal place of business or use any tradenames,
fictitious names, assumed names or "doing business as" names or (ii) change
its jurisdiction of organization."
(N) Section 9.04(i) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(i) Organization. The Managing Member will not amend its
------------
certificate of incorporation or bylaws, and the Transferor will not amend
its articles of organization or its operating agreement."
(O) Section 9.04(j) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(j) Maintenance of Separate Existence. The Transferor and the
---------------------------------
Managing Member each will not (i) fail to do all things necessary or
appropriate to maintain Managing Member's existence as a corporation, and
Transferor's existence as a limited liability company, separate and apart
from each other and from AK Steel and any Affiliate of AK Steel or of the
Managing Member or Transferor, including conducting business correspondence
in its own name, holding regular meetings of, or obtaining regular written
consents from, as the case may be, its members, shareholders and Board of
Directors and maintaining appropriate books and records; (ii) suffer any
limitation on the authority of its own members, directors and officers to
conduct its business and affairs in accordance with their independent
business judgment, or authorize or suffer any Person other than its own
members, directors and officers to act on its behalf with respect to
matters (other than matters customarily delegated to others under powers of
attorney) for which a limited liability company's or corporation's own
members, directors and officers would customarily be responsible; (iii)
fail to (A) maintain or cause to be maintained by its agent under its own
control physical possession of all its books and records, (B) maintain
capitalization adequate for the conduct of its business, (C) account for
and mange its liabilities separately from those of any other Person,
including payment of all payroll and other administrative expenses and
taxes from its own assets, (D) segregate and identify separately all of its
assets from those of any other Person, and (E) maintain offices through
which its business is conducted separate from those of AK Steel and any
Affiliates of AK Steel or of the Managing Member and Transferor (provided
that, to the extent that the Managing Member and Transferor and any of
their Affiliates have offices in the same location, there shall be a fair
and appropriate allocation of overhead costs and expenses among them, and
each such entity shall bear its fair share of such expenses); or (iv)
commingle its funds with those of AK Steel or any affiliate of AK Steel or
of the Transferor or Managing Member, or use its funds for other than the
Transferor's or Managing Member's (as the case may be) uses."
6
<PAGE>
(P) Section 9.04(k) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(k) Ownership Merger. Neither the Managing Member nor the
----------------
Transferor will (i) sell any membership interest or any shares of any class
of its stock or any interest therein to any Person (other than in the case
of the Managing Member, to AK Steel, and in the case of Transferor, to
Managing Member and to AKS Investments, Inc., an Ohio corporation so long
as AKS Investments, Inc. shall remain a wholly owned subsidiary of AK
Steel), or enter into any transaction of merger or consolidation or convey
or otherwise dispose of any substantial portion of its assets (except as
contemplated herein), or purchase or redeem any membership interest or any
shares of its stock; or (ii) terminate, liquidate or dissolve itself (or
suffer any termination, liquidation or dissolution); or (iii) permit the
pledge of its membership interest or any capital stock (provided that AK
Steel may pledge the Subordinated Note (as such term is defined in the
Receivables Purchase Agreement) of the Transferor or the stock of the
Managing Member in connection with a financing, but only if subject to an
intercreditor agreement as contemplated by Section 11.04(r), or (iv)
----------------
acquire or permit any of its shares of capital stock to be acquired by any
Person other than AK Steel."
(Q) Section 9.04(l) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(l) Restricted Payments. The Transferor will not purchase or redeem
-------------------
any membership or other equity interests of the Transferor, declare or pay
any dividends or other payments thereon, make any distribution to members
or set aside any funds for any such purpose, or prepay, purchase or redeem
any subordinated indebtedness (including any amounts outstanding on the
Subordinated Note) if, after giving effect to such purchase, redemption,
declaration, payment, distribution, allocation or prepayment (i) the
Tangible Net Worth of the Transferor would be less than $20,000,000 or (ii)
any Early Amortization Event or Potential Early Amortization Event shall
have occurred and be continuing."
(R) Section 9.04 of the Purchase and Servicing Agreement is further amended
to add the following new clause (p) at the end of Section 9.04:
"(p) The Managing Member will perform all the covenants set forth in
Section 9.04(a), (b), (c), (d), (f), (h), (1), and (o) as if all references
to the Transferor contained in such sections were references to the
Managing Member.
SECTION 4.3 Amendments to Article X of Purchasing and Servicing Agreement.
-------------------------------------------------------------
(A) Sections 10.01(a), (b), (c) and (d), of the Purchase and Servicing
Agreement are amended the insert the words ", the Managing Member" after the
word "Transferor" wherever it appears.
7
<PAGE>
(B) Section 10.01(l) and (o) of the Purchase and Servicing Agreement are
amended to insert the words "or the Managing Member" after the words
"Transferor" wherever it appears.
(C) Section 10.01(n) of the Purchase and Servicing Agreement is amended to
read in full as follows:
"(n) any Change of Control shall occur with respect to AK Steel,
Holding, AKS Investments, Inc., the Managing Member or the Transferor; or"
SECTION 4.4 Other Amendments to Purchase and Servicing Agreement.
----------------------------------------------------
(A) Section 11.04(r) of the Purchase and Servicing Agreement is amended to
change the word "Transferor" in the second paragraph thereof to "Managing
Member" and to insert in subsection (ii) thereof, in front of the word
"Transferor", the words "Managing Member or the".
(B) The title of Article XIV of the Purchase and Servicing Agreement, and
Section 14.01 thereof, are each hereby amended to insert the words "and the
Managing Member" after the word "Transferor".
(C) Section 15.01 of the Purchase and Servicing Agreement is amended to
insert the words ", the Managing Member" after the word "Transferor" in the
first line thereof.
(D) Section 17.05 of the Purchase and Servicing Agreement is amended to
change the words "in the case of the Transferor, to AK Steel Receivables Inc."
in clause (i) thereof to read "in the case of the Transferor, to AK Steel
Receivables Ltd., and to add after the words "National Corporate Banking" the
words "and (iv), in the case of the Managing Member, to AKSR Investments, Inc.,
703 Curtis Street, Middletown, Ohio 45053, Attention: Treasurer,"
(E) Section 17.07 of the Purchase and Servicing Agreement is hereby amended
to insert the words "or the Managing Member" after the word "Transferor".
SECTION 5. Representations and Warranties. Each of AK Steel, AKR, AK Ltd.
------------------------------
and the Managing Member represents and warrants to the Agent and each Purchaser
that:
(a) the execution and delivery by it of this Amendment, and the
performance of its obligations under the Receivables Purchase Agreement and
the Purchase and Servicing Agreement, as modified by this Amendment, are
within its corporate powers or its power as a limited liability company as
the case may be, have been duly authorized by all necessary corporate and
other action, have received all necessary governmental and other consents
and approvals, and do not and will not contravene or conflict with or
violate any Requirements of Law applicable to AK Steel, AKR, AK Ltd., the
Managing Member or their respective property or conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time or both) a default under, any indenture,
contract, agreement,
8
<PAGE>
mortgage, deed of trust or other instrument to which AK Steel, AKR, AK
Ltd., or the Managing Member is a party or by which either of them or their
properties are bound,
(b) this Amendment has been duly executed and delivered by it, and the
Receivables Purchase Agreement and the Purchase and Servicing Agreement, as
amended hereby, is its legal, valid and binding obligation, enforceable
against it in accordance with its terms,
(c)(1) the representations and warranties made by it in the
Transaction Documents, without giving effect to this Amendment, are true
and correct immediately prior to the Merger as though made at such time,
except to the extent that they specifically relate to an earlier date, and
(ii) the representations and warranties made by it in the Transaction
Documents, after giving effect to this Amendment, will be true and correct
immediately after the Merger, and
(d) after giving effect to this Amendment, no Early Amortization Event
or Potential Early Amortization Event shall exist.
SECTION 6. Effectiveness. This Agreement (other than Sections 3, 4 and
-------------
7(c)) will become effective on the date when the Agent shall have received the
following:
(a) Counterparts of this Amendment executed by AK Steel, AKR, AK Ltd.,
the Managing Partner, PNC Bank, Ohio, National Association, and Purchasers
constituting a Majority in Interest;
(b) Certified resolutions of the Board of Directors of each of AKR,
AKS Investments, Inc. and the Managing Member and certified shareholder
consents of AKR and the Managing Member authorizing execution, delivery and
performance of this Amendment;
(c) Certified consents of all the members of AK Ltd. authorizing the
execution, delivery and performance of this Amendment;
(d) A copy of the Certificate of Incorporation of the Managing Member,
certified by its Secretary;
(e) A copy of the Articles of Organization of AK Ltd., certified by
the Managing Member;
(f) Certificates of the Secretary of State of Ohio as to the good
standing of AK Ltd. and the Managing Member;
(g) A certificate of the Secretary of the Managing Member, dated as
of December 31, 1996, and certifying (i) that attached thereto is a true
and complete copy of the bylaws of the Managing Member as in effect on the
date of such certification, (ii) that attached thereto are
9
<PAGE>
a true and complete copy of the Operating Agreement of AK Ltd., and (iii)
as to the incumbency of the officers of the Managing Member and AK Ltd.,
executing this Agreement and any other documents contemplated hereunder,
and appropriate evidence of the incumbency of such Secretary or Assistant
Secretary;
(h) Certificate of the Secretary or Assistant Secretary of each of AK
Steel, AKR, AKS Investments, Inc., and the Managing Member, dated the
Closing Date, and certifying as to the incumbency of the officers of such
Persons executing this Agreement and any other documents contemplated
hereunder, and appropriate evidence of the incumbency of such Secretary or
Assistant Secretary;
(i) A financing statement relating to the Transferred Assets, naming
AK Steel as seller debtor and AK Ltd. as purchaser/secured party, to be
filed with the Ohio Secretary of State and the Recorder of Butler County,
Ohio;
(j) A financing statement relating to the Transferred Assets, naming
AK Ltd. as seller/debtor and the Purchasers as purchasers/secured parties,
to be filed with the Ohio Secretary of State and the Recorder of Butler
County, Ohio;
(k) Amendments, in form UCC-3 or other appropriate form, to all
financing statements which were filed with the Secretary of State of Ohio
or Recorder of Butler County, Ohio in connection with the original closing
of the Transaction Documents, whether as secured party/purchaser or as
debtor/seller as the case may be, showing the change of name and corporate
structure of AKR to AK Ltd;
(l) Opinions of Joseph W. Plye, Esq., counsel to AK Steel, AKR, AK
Ltd., and the Managing Member in the form set forth in Exhibit A hereto;
and
(m) Opinions of Frost & Jacobs, counsel to AK Steel, AKR, AK Ltd., and
the Managing Member, in the forms set forth in Exhibits B and C hereto.
Section 3 and 4 and 7(c) hereof will become effective upon consummation of
the Merger. Promptly after consummation of the Merger AK Steel and AK Ltd. will
deliver to the Agent (A) certified copies of the Merger Agreement and the
certificate of merger and name change applicable to the Merger and the name
change of AK Ltd., and (B) a letter of Frost & Jacobs addressed to the Agent and
the Purchasers confirming that the Merger has occurred and that the name of AK
Ltd. has been changed from AKS Acquisition Receivables Ltd. to AK Steel
Receivables Ltd.
If the Merger has not occurred on or before January 31,1997, this Amendment
will be null and void and of no further effect.
SECTION 7. Miscellaneous. (a) THIS AMENDMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF OHIO.
10
<PAGE>
(b) This Amendment may be executed in any number of counterparts and by the
different Parties in separate counterparts, each of which when so executed shall
be deemed to be an original, and all of which together shall constitute one and
the same agreement.
(c) Any reference to the Receivables Purchase Agent, the Purchase and
Servicing Agreement or any other Transaction Document contained in any notice,
request, certificate or other document executed in connection herewith shall be
deemed to be a reference to such Transaction Document as amended or modified
hereby. Except as expressly modified hereby, the Transaction Documents hereby
are ratified and confirmed by AK Steel, AKR, AK Ltd. and the Managing Member and
remain in full force and effect.
(d) Each of AK Steel, AK Ltd. and the Managing Member agree to take any and
all steps and to execute and deliver any and all documents and instruments,
which may be reasonably requested by the Agent in order to reflect the Merger
and the assumption by AK Ltd. of the right and obligations of AKR under the
Transaction Documents, including without limitation the execution of amendments
or replacements to the Swing Note, the Subordinated Note, any and all financing
statements, and any and all Collection Account Letters, lockbox agreements, Cash
Collateral Account agreements, Concentration Account Letters and other documents
and instruments as the Agent may reasonably request.
IN WITNESS WHEREOF, the Parties have caused their duly authorized officers
to execute this Amendment as of the day and year first above written.
AK STEEL CORPORATION,
as Originator and Servicer
By: __________________________________
Name: ____________________________
Title: ___________________________
AK STEEL RECEIVABLES INC.,
as Original Buyer and Transferor
By: __________________________________
Name: ____________________________
Title: ___________________________
11
<PAGE>
AK ACQUISITION RECEIVABLES LTD. (the name of which
is to be changed to AK Steel Receivables Ltd.
By AKSR INVESTMENTS, INC., its Managing
Member
By: __________________________________
Name: ____________________________
Title: ___________________________
and By: AKS INVESTMENTS, INC.
its only other Member
By: __________________________________
Name: ____________________________
Title: ___________________________
AKSR INVESTMENTS, INC.,
as Managing Member
By: __________________________________
Name: ____________________________
Title: ___________________________
PNC BANK, OHIO, NATIONAL ASSOCIATION,
as L/C Issuing Bank, as lender under Swing Line
Advances, and as Agent for the Purchasers
By: __________________________________
Name: ____________________________
Title: ___________________________
12
<PAGE>
NBD BANK, N.A., as a Purchaser
By: __________________________________
Name: ____________________________
Title: ___________________________
COMERICA BANK, as a Purchaser
By: __________________________________
Name: ____________________________
Title: ___________________________
KEY BANK, NATIONAL ASSOCIATION (formerly
called Society National Bank), as a Purchaser
By: __________________________________
Name: ____________________________
Title: ___________________________
THE FIFTH THIRD BANK, as a Purchaser
By: __________________________________
Name: ____________________________
Title: ___________________________
STAR BANK, NATIONAL ASSOCIATION, as a
Purchaser
By: __________________________________
Name: ____________________________
Title: ___________________________
13
<PAGE>
EXHIBIT 10.16
$550,000,000
AK Steel Corporation
9 1/8% Senior Notes Due 2006
REGISTRATION RIGHTS AGREEMENT
-----------------------------
December 12, 1996
CS First Boston Corporation
Goldman, Sachs & Co.
c/o CS First Boston Corporation
11 Madison Avenue
New York, New York 10010
Ladies and Gentlemen:
AK Steel Corporation, a Delaware corporation (the "Issuer"), proposes
to issue and sell to CS First Boston Corporation and Goldman, Sachs & Co.
(collectively, the "Initial Purchasers"), upon the terms set forth in a purchase
agreement of even date herewith (the "Purchase Agreement"), $550,000,000
aggregate principal amount of its 9 1/8% Senior Notes Due 2006 (the "Notes") to
be unconditionally guaranteed on a senior basis (the "Guarantee") by AK Steel
Holding Corporation, a Delaware corporation (the "Guarantor" and together with
the Issuer, the "Company"). The Notes will be issued pursuant to an Indenture,
dated as of December 17, 1996, (the "Indenture") among the Issuer, the Guarantor
and The Bank of New York (the "Trustee"). As an inducement to the Initial
Purchasers, the Company agrees with the Initial Purchasers, for the benefit of
the holders of the Notes (including, without limitation, the Initial
Purchasers), the Exchange Notes (as defined below) and the Private Exchange
Notes (as defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its cost,
-------------------------
prepare and, not later than 60 days after (or if the 60th day is not a Business
Day (as defined in the Indenture), the first Business Day thereafter) the date
of original issue of the Notes (the "Issue Date"), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the "Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to a proposed offer
(the
<PAGE>
"Registered Exchange Offer") to the Holders of Transfer Restricted Notes (as
defined in Section 6 hereof), who are not prohibited by any law or policy of the
Commission from participating in the Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for the Notes, a like aggregate principal
amount of debt securities (the "Exchange Notes") of the Company issued under the
Indenture and identical in all material respects to the Notes (except for the
transfer restrictions relating to the Notes) that would be registered under the
Securities Act. The Company shall use its best efforts to cause such Exchange
Offer Registration Statement to become effective under the Securities Act within
150 days (or if the 150th day is not a Business Day, the first Business Day
thereafter) after the Issue Date of the Notes and shall keep the Exchange Offer
Registration Statement effective for not less than 20 Business Days (or longer,
if required by applicable law) after the date notice of the Registered Exchange
Offer is mailed to the Holders (such period being called the "Exchange Offer
Registration Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer 20 Business Days after the
commencement thereof provided that the Company has accepted all the Notes
theretofore validly tendered in accordance with the terms of the Registered
Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Notes electing to exchange the Notes
for Exchange Notes (assuming that such Holder is not an affiliate of the Company
within the meaning of the Securities Act, acquires the Exchange Notes in the
ordinary course of such Holder's business and has no arrangements with any
person to participate in the distribution of the Exchange Notes and is not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Notes from and after their
receipt without any limitations or restrictions under the Securities Act and
without material restrictions under the securities laws of the several states of
the United States.
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder that is a broker-dealer electing
to exchange Notes, acquired for its own account as a result of market making
activities or other trading activities, for Exchange Notes (an "Exchanging
Dealer"), is required to deliver a prospectus containing the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, and in
Annex C hereto in the "Plan of Distribution" section of such prospectus in
connection with a sale of any such Exchange Notes received by such Exchanging
Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser
that elects to sell Exchange Notes acquired in exchange for Notes constituting
any portion of an unsold allotment is required to deliver a prospectus
containing the information required by Items 507 or 508 of Regulation S-K
promulgated by the Commission under the Securities Act, as applicable, in
connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery
-2-
<PAGE>
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Notes; provided,
--------
however, that (i) in the case where such prospectus and any amendment or
- -------
supplement thereto must be delivered by an Exchanging Dealer or an Initial
Purchaser, such period shall be the lesser of 180 days and the date on which all
Exchanging Dealers and the Initial Purchasers have sold all Exchange Notes held
by them (unless such period is extended pursuant to Section 3(j) below) and (ii)
the Company shall make such prospectus and any amendment or supplement thereto
available to any broker-dealer for use in connection with any resale of any
Exchange Notes for a period not less than 90 days after the consummation of the
Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Notes acquired by it as part of its initial distribution, the
Company, simultaneously with the delivery of the Exchange Notes pursuant to the
Registered Exchange Offer, shall issue and deliver to such Initial Purchaser
upon the written request of such Initial Purchaser, in exchange for the Notes
held by such Initial Purchaser (the "Private Exchange"), a like principal amount
of debt securities of the Company issued under the Indenture and identical in
all material respects (including the existence of restrictions on transfer under
the Securities Act and the securities laws of the several states of the United
States) to the Notes (the "Private Exchange Notes"). The Notes, the Exchange
Notes and the Private Exchange Notes are herein collectively called the
"Securities."
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter of
transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
Business Days (or longer, if required by applicable law) after the date notice
thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York, which
may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last Business Day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all material respects with all applicable
laws.
As soon as practicable after the close of the Registered Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all the Notes validly tendered and not
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange, as the case may be;
-3-
<PAGE>
(ii) deliver to the Trustee for cancellation all the Notes so accepted
for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to
each Holder of the Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
The Indenture will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Note and Private Exchange Note issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the date of original issue of the Notes.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Notes received by such Holder will be
acquired in the ordinary course of business, (ii) such Holder will have no
arrangements or understanding with any person to participate in the distribution
of the Exchange Notes within the meaning of the Securities Act, (iii) such
Holder is not an "affiliate," as defined in Rule 405 promulgated by the
Commission under the Securities Act, of the Company or, if it is an affiliate,
such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Notes and (v) if such Holder is a broker-
dealer, that it will receive Exchange Notes for its own account in exchange for
Notes that were acquired as a result of market-making activities or other
trading activities and that it will be required to acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies as to
form in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not include any untrue statement of
a material fact or omit 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.
2. Shelf Registration. If, (i) because of any change in law
------------------
or in applicable interpretations thereof by the staff of the Commission, the
Company is not permitted to effect a Registered Exchange Offer, as contemplated
by Section 1 hereof, (ii) the Registered Exchange
-4-
<PAGE>
Offer is not consummated within 180 days of the Issue Date, (iii) any Initial
Purchaser or affiliate thereof so requests with respect to the Notes (or the
Private Exchange Notes) held by it following consummation of the Registered
Exchange Offer as part of an unsold allotment from the original offering of the
Notes or (iv) any Holder (other than an Exchanging Dealer) is not eligible by
reason of any law or any rules, policies or pronouncements of the Commission or
other governmental authority (including any self-regulatory organization) to
participate in the Registered Exchange Offer or, in the case of any Holder
(other than an Exchanging Dealer) that participates in the Registered Exchange
Offer, such Holder does not receive freely tradeable Exchange Notes by reason of
any law or any rules, policies or pronouncements of the Commission or other
governmental authority (including any self-regulatory organization) on the date
of the exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable (but in
no event more than 30 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use its best efforts to
cause to be declared effective a registration statement (the "Shelf Registration
Statement" and, together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Notes by the Holders
thereof from time to time in accordance with the methods of distribution set
forth in the Shelf Registration Statement and Rule 415 promulgated by the
Commission under the Securities Act (hereinafter, the "Shelf Registration");
provided, however, that no Holder (other than an Initial Purchaser) shall be
- -------- -------
entitled to have the Securities held by it covered by such Shelf Registration
Statement unless such Holder agrees in writing to be bound by all the provisions
of this Agreement applicable to such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities for a period of three years (or for such longer period if extended
pursuant to Section 3(j) below) from the date of its effectiveness or such
shorter period that will terminate when all the Securities covered by the Shelf
Registration Statement have been sold pursuant thereto. The Company shall be
deemed not to have used its best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Securities covered thereby not being able
to offer and sell such Securities during that period, unless (i) such action is
required by applicable law or (ii) such action was taken in good faith and for
valid business reasons (not including avoidance of the Issuers' obligations
hereunder), including without limitation the acquisition or divestiture of
assets, so long as the Issuers promptly thereafter comply with the requirements
of Section 3(j) hereof, if applicable.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the effective
date of the Shelf Registration Statement, amendment or supplement, (i) to comply
as to form in all material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission, (ii) with
respect to the Shelf Registration Statement and any amendment thereto, not to
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (iii) with respect to the related
-5-
<PAGE>
prospectus and any supplement thereto, not to contain any untrue statement of a
material fact or omit 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.
3. Registration Procedures. In connection with any Shelf
-----------------------
Registration contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any portion
of an unsold allotment from the original offering) is participating in the
Registered Exchange Offer or the Shelf Registration, shall use its best efforts
to reflect in each such document, when so filed with the Commission, such
comments as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in the
"Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section and in Annex C hereto in the "Plan of Distribution" section of the
prospectus forming a part of the Exchange Offer Registration Statement and
include the information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; (iii) if requested by an
Initial Purchaser, include the information required by Items 507 or 508 of
Regulation S-K promulgated by the Commission under the Securities Act, as
applicable, in the prospectus forming a part of the Exchange Offer Registration
Statement; (iv) include within the prospectus contained in the Exchange Offer
Registration Statement a section entitled "Plan of Distribution," reasonably
acceptable to the Initial Purchasers, which shall contain a summary statement of
the positions taken or policies made by the staff of the Commission with respect
to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of Exchange Notes received by such
broker-dealer in the Registered Exchange Offer (a "Participating Broker-
Dealer"), whether such positions or policies have been publicly disseminated by
the staff of the Commission or such positions or policies, in the reasonable
judgment of the Initial Purchasers based upon advice of counsel (which may be
in-house counsel), represent the prevailing views of the staff of the
Commission; and (v) in the case of a Shelf Registration Statement, include the
names of the Holders who propose to sell Securities pursuant to the Shelf
Registration Statement, as selling securityholders.
(b) The Company shall give written notice to the Initial Purchasers,
the Holders of the Securities and any Participating Broker-Dealer from whom the
Company has received prior written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
-6-
<PAGE>
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order that
(x) the Registration Statement does not contain an untrue statement of a
material fact nor omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and (y)
the prospectus does not contain any untrue statement of a material fact or
omit 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.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge, at
least one copy of the Exchange Offer Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, and,
if any Exchanging Dealer, Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).
(f) The Company shall, until the Securities covered by the Shelf
Registration Statement have been sold, deliver to each Holder of Securities
included within the coverage of the Shelf Registration, without charge, as many
copies of the prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto as such
person may reasonably request. The Company consents, subject to the provisions
of this Agreement, to the use of the prospectus or any amendment or supplement
thereto by each of the selling Holders of the Securities in connection with the
offering and sale of the Securities covered by the prospectus, or any amendment
or supplement thereto, included in the Shelf Registration Statement.
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<PAGE>
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the Exchange
Offer Registration Statement and any amendment or supplement thereto as such
persons may reasonably request. The Company consents, subject to the provisions
of this Agreement, to the use of the prospectus or any amendment or supplement
thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer
and such other persons required to deliver a prospectus following the Registered
Exchange Offer in connection with the offering and sale of the Exchange Notes
covered by the prospectus, or any amendment or supplement thereto, included in
such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Securities included therein and their respective counsel in
connection with the registration or qualification of the Securities for offer
and sale under the securities or "blue sky" laws of such states of the United
States as any Holder of the Securities reasonably requests in writing and shall
do any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Securities covered by such Registration
Statement; provided, however, that the Company shall not be required to (i)
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qualify generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action which would subject it to general service of
process or to taxation in any jurisdiction where it is not then so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing the
Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Company is
required to maintain an effective Registration Statement, the Company shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Notes or purchasers
of Securities, the prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the prospectus have been made, then
the Initial Purchasers, the Holders of the Securities and any such Participating
Broker-Dealers shall suspend use of such prospectus, and the period of
effectiveness of the Shelf Registration Statement provided for in Section 2(b)
above and the Exchange Offer Registration Statement provided for in Section 1
above shall each be extended by the number of days from and including the date
of the giving of such notice to and including the date when the Initial
Purchasers, the Holders of the Securities and any known Participating Broker-
Dealer shall have received such amended or supplemented prospectus pursuant to
this Section 3(j).
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<PAGE>
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Notes, the Exchange
Notes or the Private Exchange Notes, as the case may be, and provide the
applicable trustee with printed certificates for the Notes, the Exchange Notes
or the Private Exchange Notes, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration and will make generally available to
its security holders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earning statement satisfying the provisions of Section
11(a) of the Securities Act, no later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the first
month of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement, which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in a timely
manner and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as the
Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such registration the
Securities of any Holder that unreasonably fails to furnish such information
within a reasonable time after receiving such request.
(o) The Company shall enter into such customary agreements (including
if requested an underwriting agreement in customary form) and take all such
other action, if any, as any Holder of the Securities shall reasonably request
in order to facilitate the disposition of the Securities pursuant to any Shelf
Registration.
(p) In the case of any Shelf Registration, the Company shall (i) make
reasonably available for inspection by the Holders of the Securities, any
underwriter participating in any disposition pursuant to the Shelf Registration
Statement and any attorney, accountant or other agent retained by the Holders of
the Securities or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to supply all
relevant information reasonably requested by the Holders of the Securities or
any such underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
-------- -------
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in Section 4
hereof.
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<PAGE>
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall cause (i) its counsel to
deliver an opinion and updates thereof relating to the Securities in customary
form addressed to such Holders and the managing underwriters, if any, thereof
and dated, in the case of the initial opinion, the effective date of such Shelf
Registration Statement (it being agreed that the matters to be covered by such
opinion shall be subject to customary qualifications and exceptions and shall
include, without limitation, the due incorporation and good standing of the
Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental proceedings
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf Registration
Statement, the offering and sale of the applicable Securities, or any agreement
of the type referred to in Section 3(o) hereof; the compliance as to form of
such Shelf Registration Statement and any documents incorporated by reference
therein and of the Indenture with the requirements of the Securities Act and the
Trust Indenture Act, respectively; and, as of the date of the opinion and as of
the effective date of the Shelf Registration Statement or most recent post-
effective amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended or
supplemented, and from any documents incorporated by reference therein (x) with
respect to such Shelf Registration Statement and any amendment thereto, of an
untrue statement of a material fact or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading and (y) with respect to such prospectus and such documents
incorporated by reference, of any untrue statement of a material fact or the
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; (ii) its officers to execute and deliver all customary
documents and certificates and updates thereof requested by any underwriters of
the applicable Securities and (iii) its independent public accountants to
provide to the selling Holders of the applicable Securities and any underwriter
therefor a comfort letter in customary form and covering matters of the type
customarily covered in comfort letters in connection with primary underwritten
offerings, subject to receipt of appropriate documentation as contemplated, and
only if permitted, by Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Company shall
cause (i) its counsel to deliver to such Initial Purchaser or such Participating
Broker-Dealer signed opinions in the forms set forth in Section 6(c) of the
Purchase Agreement with such changes as are customary in connection with the
preparation of a Registration Statement and (ii) its independent public
accountants to deliver to such Initial Purchaser or such Participating Broker-
Dealer a comfort letter, in customary form, meeting the requirements as to the
substance thereof as set forth in Section 6(a) of the Purchase Agreement, with
appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Notes by Holders to the Company (or to such
other person as directed by the Company) in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be, the Company shall mark, or
caused to be marked, on the Notes so
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<PAGE>
exchanged that such Notes are being canceled in exchange for the Exchange Notes
or the Private Exchange Notes, as the case may be; in no event shall the Notes
be marked as paid or otherwise satisfied.
(t) The Company will use its best efforts to (a) if the Notes have
been rated prior to the initial sale of such Notes, confirm such ratings will
apply to the Securities covered by a Registration Statement, or (b) if the Notes
were not previously rated, cause the Securities covered by a Registration
Statement to be rated with the appropriate rating agencies, if so requested by
Holders of a majority in aggregate principal amount of Securities covered by
such Registration Statement, or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution" (within
the meaning of the Rules of Fair Practice and the By-Laws of the National
Association of Securities Dealers, Inc. (the "NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent or a
broker or dealer in respect thereof, or otherwise, assist such broker-dealer in
complying with the requirements of such Rules and By-Laws, including, without
limitation, by (i) if such Rules or By-Laws, including Schedule E thereto, shall
so require, engaging a "qualified independent underwriter" (as defined in such
Schedule) to participate in the preparation of the Registration Statement
relating to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities, (ii)
indemnifying any such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof and (iii) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of such Rules.
(v) The Company shall use its best efforts to take all other steps
necessary to effect the registration of the Securities covered by a Registration
Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and
---------------------
expenses incurred in connection with the performance of its obligations under
Sections 1 through 3 hereof including (a) all Commission, stock exchange or NASD
registration and filing fees, (b) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws and compliance with the
rules of the NASD (including reasonable fees and disbursements of one counsel
for Holders in connection with blue sky qualification of the Exchange Notes),
(c) all expenses of preparing, word processing, printing and distributing any
Registration Statement, any prospectus and any amendments or supplements
thereto, (d) all rating agency fees, (e) the fees and disbursements for counsel
for the Company and of the independent public accountants of the Company,
including the expenses of any "cold comfort" letters required by or incident to
such performance and compliance, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Securities of a Holder, (f) the fees and expenses of the Trustee and any escrow
agents or custodians, (g) the reasonable fees and expenses, if any, of Winthrop,
Stimson, Putnam & Roberts, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer, (h) any fees and disbursements of
the underwriters customarily required to be paid by issuers and sellers of
securities and the
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<PAGE>
reasonable fees and expenses of any special experts retained by the Company in
connection with any Registration Statement, but excluding any underwriting
discounts and commissions and transfer taxes, if any, and (i) in the event of a
Shelf Registration, the reasonable fees and disbursements of one firm of counsel
designated by the Holders of a majority in principal amount of the Securities
covered thereby to act as counsel for the Holders of the Securities in
connection therewith, in each case, whether or not the Registered Exchange Offer
or a Shelf Registration is filed or becomes effective.
5. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless each Holder of the Securities (other than a Holder that acquires
Securities pursuant to the Registered Exchange Offer that are freely
transferable without compliance with the prospectus delivery requirements of the
Securities Act), any Participating Broker-Dealer and each person, if any, who
controls such Holder or such Participating Broker-Dealer within the meaning of
the Securities Act or the Exchange Act (each Holder, any Participating Broker-
Dealer and such controlling persons are referred to collectively as the
"Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including, but
not limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Securities) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
-------- -------
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage, liability or action arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in a Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Company by or on behalf of such Holder specifically
for inclusion therein and (ii) with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
relating to a Shelf Registration Statement, the indemnity agreement contained in
this subsection (a) shall not inure to the benefit of any Holder or
Participating Broker-Dealer from whom the person asserting any such losses,
claims, damages or liabilities purchased the Securities concerned, to the extent
that a prospectus relating to such Securities was required to be delivered by
such Holder or Participating Broker-Dealer under the Securities Act in
connection with such purchase and any such loss, claim, damage or liability of
such Holder or Participating Broker-Dealer results from the fact that there was
not sent or given to such person, at or prior to the written confirmation of the
sale of such Securities to such person, a copy of the final prospectus if the
Company had previously furnished copies thereof to such Holder or Participating
Broker-Dealer and such final prospectus corrected such untrue statement or
omission; provided further, however, that this indemnity agreement will be in
-------- ------- -------
addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their
officers and directors and each person who
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<PAGE>
controls such underwriters within the meaning of the Securities Act or the
Exchange Act to the same extent as provided above with respect to the
indemnification of the Holders of the Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to the
limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons. The Issuers
shall be entitled to receive indemnities from underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, to the same extent as provided above with respect to
information so furnished in writing by such persons specifically for inclusion
in any prospectus or registration statement or any amendment or supplement
thereto or any preliminary prospectus.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. Subject to
the next sentence, in case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation. Notwithstanding the prior sentence, any indemnified party shall
have the right to retain its own counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
(ii) the indemnifying party fails to assume the defense and retain counsel or
(iii) the named parties to
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<PAGE>
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and the indemnified party shall
have been advised by such counsel that there may be one or more legal defenses
available to it that are different from or additional to those available to the
indemnifying party. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement (i) includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action and (ii) does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Notes
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) 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 or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified person, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5(d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect,
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<PAGE>
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a)
-----------------------------------------------
Additional interest (the "Additional Interest") with respect to the Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default"):
(i) If by February 17, 1997, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been filed
with the Commission;
(ii) If by June 16, 1997, neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement
or the Shelf Registration Statement is declared effective (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be usable
(except as permitted in paragraph (b) hereof) in connection with resales of
Transfer Restricted Notes during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit 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, or (2) it shall be necessary to
amend such Registration Statement or supplement the related prospectus to
comply with the Securities Act or the Exchange Act or the respective rules
and regulations thereunder.
Additional Interest shall accrue on the Notes over and above the interest set
forth in the title of the Notes from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults have been cured at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with respect
to the Company that would need to be described in such Shelf Registration
Statement or the related prospectus and (ii) in the case of clause (y), the
Company is proceeding promptly and in good faith to amend or supplement such
Shelf Registration Statement and related prospectus to describe such events;
provided, however, that in any case if such Registration Default occurs for a
- -------- -------
continuous period in excess of 45 days, Additional Interest shall be payable in
accordance with the above paragraph from the day following such 45 day period
until the date on which such Registration Default is cured.
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<PAGE>
(c) Any amounts of Additional Interest due pursuant to clause (a)(i),
(a)(ii) or (a)(iii) of Section 6 above will be payable in cash on the regular
interest payment dates with respect to the Notes. The amount of Additional
Interest will be determined by multiplying the applicable Additional Interest
rate by the principal amount of the Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Notes" means each Security until (i) the date
on which such Transfer Restricted Note has been exchanged by a person other than
a broker-dealer for a freely transferrable Exchange Note in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of a Transfer Restricted Note for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who receives from such broker-
dealer on or prior to the date of such sale a copy of the prospectus contained
in the Exchange Offer Registration Statement, (iii) the date on which such
Transfer Restricted Note has been effectively registered under the Securities
Act and disposed of in accordance with the Shelf Registration Statement or (iv)
the date on which such Transfer Restricted Note is distributed to the public
pursuant to Rule 144 promulgated by the Commission under the Securities Act or
is saleable pursuant to Rule 144(k) promulgated by the Commission under the
Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to
------------------
file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Transfer
Restricted Notes, make publicly available other information so long as necessary
to permit sales of their securities pursuant to Rules 144 and 144A promulgated
by the Commission under the Securities Act. The Company covenants that it will
take such further action as any Holder of Transfer Restricted Notes may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Notes without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A promulgated by the Commission under the Securities Act (including the
requirements of Rule 144A(d)(4) promulgated by the Commission under the
Securities Act). The Company will provide a copy of this Agreement to
prospective purchasers of Notes identified to the Company by the Initial
Purchasers upon request. Upon the request of any Holder of Transfer Restricted
Notes, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
--------------------------
Notes covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Notes to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably provided
-16-
<PAGE>
in any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
9. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(i) if to a Holder of the Securities, at the most current address
given by such Holder to the Company in accordance with the provisions of
this Section 9(b), which address initially is, with respect to each Holder,
the address of such Holder to which confirmation of the sale of the Notes
to such Holder was first sent by the Initial Purchasers, with a copy in
like manner to you as follows:
CS First Boston Corporation
11 Madison Avenue
New York, New York 10010
Fax No.: (212) 318-0532
Attention: Transactions Advisory Group
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Fax No.: (212) 858-1500
Attention: David W. Ambrosia
(ii) if to the Initial Purchasers, at the addresses specified in
Section 9(b)(1);
(iii) if to the Company, at its address as follows:
AK Steel Corporation
703 Curtis Street
Middletown, Ohio 45043
Fax No.: (513) 425-5607
Attention: John G. Hritz
-17-
<PAGE>
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10022
Fax No.: (212) 310-8007
Attention: Stephen H. Cooper
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Company has not, as of the date
--------------------------
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. The rights and duties of the Issuer, the Guarantor
-------------
and the Initial Purchasers under this Agreement shall, pursuant to New York
General Obligations Law Section 5-1401, be governed by the laws of the State of
New York.
(h) Severability. If 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.
(i) Securities Held by the Company. Whenever the consent or approval
------------------------------
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
-18-
<PAGE>
(j) Submission to Jurisdiction. The Company hereby submits to the
--------------------------
nonexclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in the City of New York in any suit or proceeding between the parties
arising out of or relating to this Agreement or the transactions contemplated
hereby.
-19-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuer a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers, the Issuer and the Guarantor in accordance
with its terms.
Very truly yours,
AK Steel Corporation
By: /s/ Richard E. Newsted
--------------------------------
Name: Richard E. Newsted
Title: Senior Vice President,
Chief Financial Officer
AK Steel Holding Corporation
By: /s/ Richard E. Newsted
--------------------------------
Name: Richard E. Newsted
Title: Senior Vice President,
Chief Financial Officer
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CS First Boston Corporation
Goldman, Sachs & Co.
By: CS First Boston Corporation
By: /s/ Peter Matt
-----------------------------
Name: Peter Matt
Title: Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. 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 Notes where such Notes
were acquired by such broker-dealer 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 (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer 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 Existing Notes where such Existing 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 amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated transactions,
through the writing 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 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 commission 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 the Expiration Date 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 (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any broker-
dealers) against certain liabilities, including liabilities under the Securities
Act.
<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPT. 30,
---------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Pretax Income........... $(256.6) $(542.6) $(42.7) $152.0 $281.5 $ 224.5 $ 188.9
Interest expense........ 40.8 46.4 58.1 48.2 35.6 26.6 28.4
Interest factor in rent
expense................ 0.9 1.2 0.8 0.8 1.1 0.6 0.7
Distributed income of
less than 50% owned
affiliates............. 0.0 0.1 (2.2) (2.3) 0.0 0.0 0.0
------- ------- ------ ------ ------ -------- --------
Total earnings.......... (214.9) (494.9) 14.0 198.7 318.2 251.7 218.0
Total combined fixed
charges................ $ 48.8 $ 51.1 $ 60.1 $ 55.6 $ 57.4 $ 43.8 $ 44.1
Ratio of earnings to
combined fixed
charges................ 3.6 5.5 5.7 4.9
Deficiency of earnings
to fixed charges....... $(263.7) $(546.0) $(46.1)
Combined fixed charges:
Preferred dividends... n/a n/a n/a 4.0 16.0 12.7 13.9
Interest expense...... 40.8 46.4 58.1 48.2 35.6 26.6 28.4
Capitalized interest
credit............... 7.1 3.5 1.2 2.6 4.7 3.9 1.1
Interest factor in
rent expense......... 0.9 1.2 0.8 0.8 1.1 0.6 0.7
------- ------- ------ ------ ------ -------- --------
Total combined fixed
charges............... 48.8 51.1 60.1 55.6 57.4 43.8 44.1
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of AK Steel Holding
Corporation and AK Steel Corporation on Form S-4 of our report dated January
23, 1996 appearing in this Prospectus, which is a part of this Registration
Statement, and to the reference to us under the heading "Independent Auditors"
in such Prospectus.
DELOITTE & TOUCHE LLP
Cincinnati, Ohio
January 13, 1997
