We have made forward-looking statements in this prospectus supplement and the documents that are incorporated by reference herein that are
based on our managements beliefs and assumptions and on information available to our management at the time such statements were made. Forward-looking statements include information concerning our possible or assumed future results of
operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking
statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words believe, expect, plan, intend, anticipate,
estimate, predict, potential, continue, may, should or the negative of these terms or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in our
forward-looking statements. You should not rely on any forward-looking statements. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
The risk factors discussed under
Risk Factors in this prospectus supplement and under similar headings in our Annual Report on Form
10-K,
as well as the other risks and uncertainties described in the other documents incorporated
by reference into this prospectus supplement and the accompanying prospectus, could cause our results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that we are unable to predict
at this time or that we currently do not expect to have a material adverse effect on our business. We expressly disclaim any obligation to update our forward-looking statements other than as required by law.
DESCRIPTION OF NOTES
AK Steel will issue the notes under an indenture, dated as of May 11, 2010, among AK Steel, as issuer, AK Holding, as guarantor, and U.S.
Bank National Association, as trustee (the Trustee), as heretofore supplemented, and as to be further supplemented by a seventh supplemental indenture, to be dated as of March 23, 2017, among AK Steel, as the issuer, AK Holding, AK
Tube LLC, a Delaware limited liability company (AK Tube), AK Steel Properties, Inc., a Delaware corporation (AK Steel Properties), and Mountain State Carbon, LLC, a Delaware limited liability company (MSC,
and together with AK Tube and AK Steel Properties the Subsidiary Guarantors), as guarantors, and the Trustee. We refer to the indenture, as so supplemented, as the Indenture. AK Steel previously issued $400.0 million aggregate
principal amount of its 7.625% Senior Notes due 2020 on May 11, 2010, an additional $150.0 million aggregate principal amount of its 7.625% Senior Notes due 2020 on December 9, 2011, $300.0 million aggregate principal amount of
its 8.375% Senior Notes due 2022 on March 22, 2012, $150.0 million aggregate principal amount of its 5.00% Exchangeable Senior Notes due 2019 on November 20, 2012 and $430.0 million aggregate principal amount of its 7.625% Senior
Notes due 2021 under the Indenture. The terms of the notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended.
The following is a summary of the material provisions of the Indenture insofar as relevant to the notes but such summary does not restate the
Indenture in its entirety. You can find the definitions of certain capitalized terms used in the following summary under the subheading Definitions. We urge you to read the Indenture because it, and not this description, defines your
rights as holders of the notes. A copy of the Indenture (including the supplemental indentures) have been filed as exhibits to current reports on Form
8-K
and quarterly reports on Form
10-Q,
and is incorporated by reference herein.
For purposes of this Description of Notes,
the terms AK Steel, we, us and our mean AK Steel Corporation and its successors under the Indenture, excluding its subsidiaries and parent, and the term AK Holding means AK Steel
Holding Corporation, a Delaware corporation, and its successors under the Indenture, excluding its subsidiaries.
General
The notes will be unsecured unsubordinated obligations of AK Steel, and will mature on March 15, 2027. AK Steel may, without the consent of the
holders of the notes, issue additional notes (the Additional Notes), provided that if the Additional Notes are not fungible with the notes for U.S. federal income tax purposes, the Additional Notes will have a separate CUSIP number. None
of these Additional Notes may be issued if an Event of Default (as defined under the subheading Events of Default) has occurred and is continuing with respect to the notes. The notes and any Additional Notes subsequently issued
would be treated as a single class for all purposes under the Indenture. In addition, AK Steel may issue additional series of debt securities under the Indenture at any time.
Each note will bear interest at the rate of 7.00% per annum from the most recent interest payment date to which interest has been paid on the
notes or, if interest has not been paid, from the issue date. Interest on the notes will be payable on March 15 and September 15 of each year beginning on September 15, 2017. Interest will be paid to Holders of record at the close of business on
March 1 or September 1 immediately preceding the interest payment date. Interest will be computed on the basis of a
360-day
year of twelve
30-day
months on a
U.S. corporate bond basis.
The notes may be exchanged or transferred at the office or agency of AK Steel. Initially, the paying agent
office of the Trustee will serve as such office. The notes will be issued only in fully registered form, without coupons, in denominations of $2,000 of principal amount and multiples of $1,000 in excess thereof. See Book-Entry;
Delivery and Form. 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 transfer tax or other similar governmental charge payable in connection
therewith.
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The notes will not be entitled to the benefit of any sinking fund.
Change of Control
AK Steel must
commence within 30 days of the occurrence of a Change of Control Repurchase Event and consummate an Offer to Purchase for all notes then outstanding, at a purchase price equal to 101% of their principal amount, plus accrued interest, if any, to the
Payment Date.
There can be no assurance that AK Steel will have sufficient funds available at the time of any Change of Control
Repurchase Event to make any debt payment (including repurchases of notes) required by the foregoing covenant, as well as any other repayments pursuant to covenants that may be contained in loan facilities or other securities of AK Steel that might
be outstanding at the time.
AK Steel will not be required to make an Offer to Purchase upon the occurrence of a Change of Control
Repurchase Event if a third party makes an offer to purchase the notes in the manner, at the times and price, and otherwise in compliance with the requirements of the Indenture applicable to an Offer to Purchase for a Change of Control Repurchase
Event, and purchases all notes validly tendered and not withdrawn in such offer to purchase.
Notwithstanding anything to the contrary
herein, an Offer to Purchase upon the occurrence of a Change of Control Repurchase Event may be made in advance of a Change of Control, conditional upon such Change of Control Repurchase Event, if a definitive agreement is in place for the Change of
Control at the time of making the Offer to Purchase pursuant to the Change of Control Repurchase Event.
The definition of Change of
Control includes a phrase relating to the direct or indirect sale, transfer, conveyance or other disposition of all or substantially all of the properties or assets of AK Steel and its Subsidiaries, taken as a whole. There is no precise,
established definition of the phrase substantially all under applicable law. Accordingly, the ability of a holder of the notes to require AK Steel to purchase its notes as a result of the sale, transfer, conveyance or other disposition
of less than all of the assets of AK Steel and its Subsidiaries may be uncertain.
Holders may not be able to require us to purchase their
notes in certain circumstances involving a significant change in the composition of the Board of Directors, including a proxy contest where the Board of Directors does not endorse the dissident slate of directors but approves them as
continuing directors. In this regard, a decision of the Delaware Chancery Court (not involving our company or our securities) considered a change of control redemption provision of an indenture governing publicly traded debt securities
substantially similar to the change of control described in clause (4) of the definition of Change of Control. In its decision, the court noted that a board of directors may approve a dissident shareholders nominees solely for
purposes of such an indenture, provided the board of directors determines in good faith that the election of the dissident nominees would not be materially adverse to the interests of the corporation or its stockholders (without taking into
consideration the interests of the holders of debt securities in making this determination).
Optional Redemption
At any time prior to March 15, 2022, we may redeem the notes, in whole or in part, at a redemption price equal to 100% of the principal amount
of the notes redeemed plus the Applicable Premium, plus accrued and unpaid interest to the redemption date.
Applicable
Premium means, with respect to any note on any redemption date, the greater of (1) 1.0% of the principal amount of such note and (2) the excess, if any of (a) the present value at such redemption date of (i) the redemption
price of such note at March 15, 2022 (such redemption price set forth in the table below), plus (ii) all required interest payments due on such note through March 15, 2022 (excluding accrued and unpaid interest to the redemption date), computed
using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the then outstanding principal amount of such note.
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Treasury Rate means, as of any redemption date, the yield to maturity as of such
redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two business days prior to the
redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to March 15, 2022; provided, however, that if the period from
the redemption date to March 15, 2022, is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.
We may redeem the notes, in whole or in part, at any time on or after March 15, 2022, at the redemption price for the notes (expressed as a
percentage of principal amount) set forth below, plus accrued and unpaid interest to the redemption date, if redeemed during the twelve-month period commencing on of the years indicated below:
|
|
|
|
|
Year
|
|
Redemption
Price
|
|
2022
|
|
|
103.500
|
%
|
2023
|
|
|
102.333
|
%
|
2024
|
|
|
101.167
|
%
|
2025 and thereafter
|
|
|
100.000
|
%
|
In addition, at any time prior to March 15, 2020, we may redeem up to 35% of the principal amount of the notes
(including any Additional Notes) with the net cash proceeds of one or more sales of AK Holdings common stock (to the extent proceeds are contributed to us as equity) at a redemption price (expressed as a percentage of principal amount) of
107.000%, plus accrued and unpaid interest to the redemption date; provided that at least 65% of the aggregate principal amount of notes originally issued on the Closing Date remains outstanding after each such redemption and notice of any such
redemption is mailed within 60 days of each such sale of common stock.
We will give not less than 30 days nor (except in connection
with the satisfaction and discharge or defeasance of the Indenture) more than 60 days notice of any redemption. If less than all of the notes are to be redeemed, subject to DTC procedures, selection of the notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the notes are listed, or, if the notes are not listed on a national securities exchange, by lot or by such other method as the Trustee in
its sole discretion shall deem to be fair and appropriate. However, no note of $2,000 in principal amount or less shall be redeemed in part. If any note is to be redeemed in part only, the notice of redemption relating to such note will state the
portion of the principal amount to be redeemed. A new note in principal amount equal to the unredeemed portion will be issued upon cancellation of the original note.
We may at any time and from time to time purchase notes in the open market, by tender offer, through privately negotiated transactions or
otherwise.
Guarantees
Payment of
the principal of, premium, if any, and interest on the notes will be fully and unconditionally guaranteed on an unsecured unsubordinated basis by AK Holding, our direct parent, and by the Subsidiary Guarantors.
In addition, we may be required to cause certain Subsidiaries to Guarantee the notes pursuant to the provision described under Certain
CovenantsLimitation on Subsidiary Debt. Any such Guarantee of a Subsidiary Guarantor will be released upon the release or discharge (other than a discharge through payment thereon) of the Indebtedness of such Subsidiary which resulted in
the obligation to Guarantee the notes (or, in respect of the Subsidiary Guarantors on the Closing Date, release of their guarantees of all of our other
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Indebtedness), the disposition of capital stock in compliance with the Indenture of such Subsidiary such that it no longer is a Subsidiary of AK Holding or upon defeasance or satisfaction and
discharge of the notes. Finally, we may choose to cause any Subsidiary to Guarantee the notes and may cause such Note Guarantee to be released at any time, provided that after giving effect to such release, we would be in compliance with the
provision described under Certain CovenantsLimitation on Subsidiary Debt. We will not be restricted from selling or otherwise disposing of any of such Guarantor or any of its assets.
Ranking
The notes will be equal in
right of payment with all existing and future unsubordinated Indebtedness of AK Steel and senior in right of payment to any subordinated Indebtedness AK Steel may incur. The Note Guarantees of AK Holding and the Subsidiary Guarantors will be equal
in right of payment with all existing and future unsubordinated Indebtedness of AK Holding and the Subsidiary Guarantors, respectively, and senior in right of payment to any subordinated indebtedness AK Holding or the Subsidiary Guarantors may
incur, as applicable. The notes and the Note Guarantees will be effectively subordinated to any secured Indebtedness to the extent of the value of the assets securing such debt. Our credit facility is secured by the inventory and accounts receivable
of AK Steel, AK Tube, AK Steel Properties and MSC and our $380 million of 7.50% Senior Secured Notes due 2023 (the Secured Notes) are secured by substantially all of our, AK Tubes, AK Steel Properties and MSCs
property plant and equipment. As of December 31, 2016, on an
as-adjusted
basis to give effect to this offering and the application of the proceeds therefrom, including the Cash Tender Offer (and assuming
tender of all outstanding existing 2020 Notes), we would have had outstanding $1,740.5 million of indebtedness (excluding unamortized discount and debt issuance costs), and we would have had the ability to borrow up to $1,429.3 million of
additional indebtedness under our Credit Facility (after taking into account outstanding letters of credit and other obligations), subject to certain conditions, including satisfying specified financial covenants and a borrowing base limitation. See
Description of Other IndebtednessAK Steels Credit Facility. In the event of AK Steels bankruptcy, liquidation, reorganization or other winding up, its assets that secure secured debt will be available to pay obligations
on the notes only after all indebtedness under such secured debt has been repaid in full from such assets. There may not be sufficient assets remaining to pay amounts due on any or all the other debt then outstanding, including the notes.
The notes will be effectively subordinated to all of the liabilities of the subsidiaries of AK Steel that are not Guarantors of the notes. As
of December 31, 2016, on an
as-adjusted
basis to give effect to this offering and the application of the proceeds therefrom, including the Cash Tender Offer (and assuming tender of all outstanding
existing 2020 Notes), our
non-guarantor
subsidiaries would have had $32.1 million of indebtedness and other liabilities (including accounts payable, but excluding intercompany obligations and liabilities
of a type not required to be reflected on a balance sheet of such subsidiaries in accordance with GAAP) to which the notes would have been structurally subordinated.
Certain Covenants
Limitation on Liens
AK Holding will not, and will not permit any of its Subsidiaries to, create, incur, issue, assume or Guarantee any Indebtedness
secured by a Lien upon (a) any Principal Property of AK Steel or any Principal Property of a Subsidiary of AK Steel or (b) any shares of stock or other equity interests or Indebtedness of any Subsidiary of AK Steel that owns a Principal
Property (whether such Principal Property, shares of stock or other equity interests or Indebtedness is now existing or owned or hereafter created or acquired) or any shares of stock or other equity interests or Indebtedness of AK Steel, in each
case, without effectively providing concurrently that the notes are secured equally and ratably with or, at AK Holdings option, prior to such Indebtedness, so long as such Indebtedness shall be so secured.
The foregoing restriction shall not apply to, and there shall be excluded from Indebtedness in any computation under such restriction,
Indebtedness secured by:
(1) Liens on any property or assets existing at the time of the acquisition thereof by AK Steel or any of its
Subsidiaries and not incurred in contemplation of such acquisition;
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(2) Liens on property or assets of a Person existing at the time such Person is merged into or
consolidated with AK Steel or any of its Subsidiaries or at the time of a sale, lease or other disposition of the properties and assets of such Person (or a division thereof) as an entirety or substantially as an entirety to AK Steel or any of
its Subsidiaries; provided that any such Lien does not extend to any Principal Property owned by AK Steel or any of its Subsidiaries immediately prior to such merger, consolidation, sale, lease or disposition and not incurred in contemplation of
such acquisition;
(3) Liens on property or assets of a Person existing at the time such Person becomes a Subsidiary of AK Steel and
not incurred in contemplation of such acquisition;
(4) Liens in favor of AK Steel or any Guarantor;
(5) Liens on property or assets (including shares of Capital Stock or Indebtedness of any Subsidiary formed to acquire, construct, develop or
improve such property) to secure all or part of the cost of acquisition, construction, development or improvement of such property, or to secure Indebtedness incurred to provide funds for any such purpose; provided that the commitment of the
creditor to extend the credit secured by any such Lien shall have been obtained no later than 360 days after the later of (a) the completion of the acquisition, construction, development or improvement of such property or assets or (b) the
placing in operation of such property or assets;
(6) Liens in favor of the United States of America or any State thereof, or any
department, agency or instrumentality or political subdivision thereof, to secure partial, progress, advance or other payments;
(7) Liens
in favor of the Secured Notes and the guarantees thereof;
(8) Liens existing on the date of the Indenture or any extension, renewal,
replacement or refunding of any Indebtedness secured by a Lien existing on the date of the Indenture or referred to in clauses (1), (2), (3), (5), (7) or (9) or incurred pursuant to the next succeeding paragraph provided that (A) any such
extension, renewal, replacement or refunding of such Indebtedness shall be created within 360 days of repaying the Indebtedness secured by the Lien referred to in this clause or clauses (1), (2), (3), (5), (7) or (9) or within 30 days in the
case of the next succeeding paragraph and (B) the principal amount of the Indebtedness secured thereby and not otherwise authorized by clauses (1), (2), (3), (5), (7) or (9) or the next succeeding paragraph shall not exceed the principal
amount of Indebtedness plus any premium or fee or accrued and unpaid interest payable (any such principal in respect of premium, fees or interest, the Additional Refinancing Amount) in connection with any such extension, renewal,
replacement or refunding, so secured at the time of such extension, renewal, replacement or refunding, provided further that any Liens on any extension, renewal, replacement or refunding of Junior Lien Obligations incurred pursuant to clause
(9) below pursuant to this clause (8) shall constitute Junior Lien Obligations; and
(9) Liens on assets constituting collateral
securing Junior Lien Obligations, provided that the aggregate principal amount of Indebtedness so secured does not exceed, together with any Indebtedness incurred pursuant to clause (8) to extend, renew, replace or refund any Indebtedness
incurred pursuant to this clause (9) (but excluding any Additional Refinancing Amount), (x) $500.0 million or (y) if greater, an amount which after giving effect to the incurrence of such Indebtedness so secured, would not cause AK
Holdings Fixed Charge Coverage Ratio to be less than 2.0 to 1.0.
Notwithstanding the restrictions described above, AK Holding and
any of its Subsidiaries may create, incur, issue, assume or Guarantee Indebtedness secured by Liens, without equally and ratably securing the notes, if at the time of such creation, incurrence, issuance, assumption or Guarantee, after giving effect
thereto and to the retirement of any Indebtedness which is concurrently being retired, the aggregate amount of all such Indebtedness secured by Liens which would otherwise be subject to such restrictions (other than any Indebtedness secured by Liens
permitted as described in clauses (1) through (9) of the immediately preceding paragraph) plus the aggregate amount (without duplication) of (x) all
Non-Guarantor
Subsidiary Debt (other than
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Non-Guarantor
Subsidiary Debt described in clauses (1) through (6) of the first sentence of the second paragraph under Limitation on
Subsidiary Debt below) and (y) all Attributable Debt of AK Steel and any of its Subsidiaries in respect of Sale and Leaseback Transactions (with the exception of such transactions which are permitted under clauses (1) through (4) of
the first sentence of the first paragraph under Limitation on Sale and Leaseback Transactions below) does not exceed an amount equal to (x) 15% of Consolidated Net Tangible Assets less (y) the aggregate principal amount of the
Secured Notes outstanding at such time and the amount of (i) any Indebtedness incurred to extend, renew, replace or refund the Secured Notes secured by Liens pursuant to clause (8) above, (ii) any Indebtedness incurred pursuant to clause
(8) above to refinance Indebtedness incurred pursuant to this paragraph and (iii) any Indebtedness incurred pursuant to clause (6) under Limitation on Subsidiary Debt to refinance Indebtedness incurred pursuant to the last
paragraph of such covenant (but excluding any Additional Refinancing Amount).
Limitation on Subsidiary Debt
AK Steel will not permit any of its Restricted Subsidiaries that is not a Guarantor to create, assume, incur, Guarantee or otherwise become
liable for or suffer to exist any Indebtedness (any Indebtedness of a
non-Guarantor
Subsidiary of AK Steel,
Non-Guarantor
Subsidiary Debt), without
Guaranteeing the payment of the principal of, premium, if any, and interest on the notes on an unsecured unsubordinated basis.
The
foregoing restriction shall not apply to, and there shall be excluded from Indebtedness in any computation under such restriction,
Non-Guarantor
Subsidiary Debt constituting:
(1) Indebtedness of a Person existing at the time such Person is merged into or consolidated with any Restricted Subsidiary of AK Steel or at
the time of a sale, lease or other disposition of the properties and assets of such Person (or a division thereof) as an entirety or substantially as an entirety to any Restricted Subsidiary of AK Steel and is assumed by such Restricted Subsidiary;
provided that any Indebtedness was not incurred in contemplation thereof and is not Guaranteed by any other Subsidiary of AK Steel;
(2)
Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of AK Steel; provided that any Indebtedness was not incurred in contemplation thereof;
(3) Indebtedness owed to AK Steel or any Guarantor;
(4) Indebtedness outstanding on the date of the Indenture or any extension, renewal, replacement or refunding of any Indebtedness existing on
the date of the Indenture or referred to in clauses (1), (2) or (3) or incurred pursuant to the next succeeding paragraph; provided that any such extension, renewal, replacement or refunding of such Indebtedness shall be created within 360 days
of repaying the Indebtedness referred to in this clause or clauses (1), (2) or (3) above or within 30 days in the case of the next succeeding paragraph and the principal amount of the Indebtedness shall not exceed the principal amount of
Indebtedness plus any premium or fee payable in connection with any such extension, renewal, replacement or refunding, so secured at the time of such extension, renewal, replacement or refunding;
(5) Indebtedness in respect of a Receivables Facility; and
(6) Indebtedness in an amount of not more than $5.0 million at any time outstanding.
Notwithstanding the restrictions described above, AK Steel and any of its Restricted Subsidiaries may create, incur, issue, assume or
Guarantee
Non-Guarantor
Subsidiary Debt, without Guaranteeing the notes, if at the time of such creation, incurrence, issuance, assumption or Guarantee, after giving effect thereto and to the retirement of any
Indebtedness which is concurrently being retired, the aggregate amount of all such
Non-Guarantor
Subsidiary Debt which would otherwise be subject to such restrictions (other than
Non-Guarantor
Subsidiary Debt which is described in clauses (1) through (6) of the immediately preceding paragraph) plus the
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aggregate amount (without duplication) of (x) all Indebtedness secured by Liens (not including any such Indebtedness secured by Liens described in clauses (1) through (9) of the second
paragraph under the heading Limitation on Liens) and (y) all Attributable Debt of AK Steel and any of its Subsidiaries in respect of Sale and Leaseback Transactions (with the exception of such transactions which are permitted
under clauses (1) through (4) of the first sentence of the first paragraph under Limitation on Sale and Leaseback Transactions below) does not exceed an amount equal to (x) 15% of Consolidated Net Tangible Assets less
(y) the aggregate principal amount of the Secured Notes outstanding at such time and the amount of (i) any Indebtedness incurred to extend, renew, replace or refund the Secured Notes secured by Liens pursuant to clause (8) of the
second paragraph of the provision Limitation on Liens, (ii) any Indebtedness incurred pursuant to clause (8) of the second paragraph of the provision Limitation on Liens to refinance Indebtedness incurred
pursuant to the last paragraph under the heading Limitation on Liens and (iii) any Indebtedness incurred pursuant to clause (6) above to refinance Indebtedness incurred pursuant to this paragraph (but excluding any
Additional Refinancing Amount).
Limitation on Sale and Leaseback Transactions
AK Steel will not, and will not permit any of its Subsidiaries to, enter into any Sale and Leaseback Transaction unless:
(1) the Sale and Leaseback Transaction is solely with AK Steel or any of its Subsidiaries;
(2) the lease is for a period not in excess of 24 months, including renewals;
(3) AK Steel or such Subsidiary would (at the time of entering into such arrangement) be entitled as described in clauses (1) through (9)
of the second paragraph under the heading Limitation on Liens, without equally and ratably securing the notes then outstanding under the Indenture, to create, incur, issue, assume or guarantee Indebtedness secured by a Lien
on such property or assets in the amount of the Attributable Debt arising from such Sale and Leaseback Transaction;
(4) AK Steel or such
Subsidiary, within 360 days after the sale of property or assets in connection with such Sale and Leaseback Transaction is completed, applies an amount equal to the greater of (A) the net proceeds of the sale of such Principal Property or
(B) the fair market value of such Principal Property to (i) the retirement of notes, other Funded Debt of AK Steel ranking on a parity with the notes or Funded Debt of a Subsidiary of AK Steel or (ii) the purchase of property or
assets used or useful in its business or to the retirement of long-term indebtedness; or
(5) the Attributable Debt of AK Steel and its
Subsidiary in respect of such Sale and Leaseback Transaction and all other Sale and Leaseback Transactions entered into after the Closing Date (other than any such Sale and Leaseback Transaction as would be permitted as described in clauses
(1) through (4) of this sentence), plus the aggregate principal amount (without duplication) of (x) Indebtedness secured by Liens then outstanding (not including any such Indebtedness secured by Liens described in clauses (1) through
(9) of the second paragraph under the heading Limitation on Liens) which do not equally and ratably secure the notes (or secure notes on a basis that is prior to other Indebtedness secured thereby) and
(y) Non-Guarantor
Subsidiary Debt (with the exception of
Non-Guarantor
Subsidiary Debt which is described in clauses (1) through (6) of the second paragraph under
the heading Limitation on Subsidiary Debt), would not exceed an amount equal to (x) 15% of Consolidated Net Tangible Assets less (y) the aggregate principal amount of the Secured Notes outstanding at such time and the
amount of (i) any Indebtedness incurred to extend, renew, replace or refund the Secured Notes secured by Liens pursuant to clause (8) of the second paragraph of the provision Limitation on Liens, (ii) any
Indebtedness incurred pursuant to clause (8) of the second paragraph of the provision Limitation on Liens to refinance Indebtedness incurred pursuant to the last paragraph under the heading Limitation on
Liens and (iii) any Indebtedness incurred pursuant to clause (6) under Limitation on Subsidiary Debt to refinance Indebtedness incurred pursuant to the last paragraph of such covenant (but excluding any
Additional Refinancing Amount).
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Consolidation, Merger and Sale of Assets
Neither AK Steel nor AK Holding will consolidate with, merge with or into, directly or indirectly, or sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any Person, or permit any Person to merge with or into it, unless:
(1) it shall be the continuing Person, or the Person (if other than it) formed by such consolidation or into which it is merged or that
acquired or leased such property and assets (the Surviving Person), shall be a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof, and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, all of its obligations under the Indenture and the notes;
(2) immediately
after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and
(3) it delivers to the
Trustee an Officers Certificate and Opinion of Counsel, in each case stating that such consolidation, merger or transfer and such supplemental indenture complies with this provision and that all conditions precedent provided for herein
relating to such transaction have been complied with.
It is understood that AK Holding may merge with or into AK Steel pursuant to the
provisions described above. In addition, notwithstanding the foregoing, AK Steel or AK Holding may transfer its property or assets to a Guarantor.
The Surviving Person will succeed to, and except in the case of a lease be substituted for, AK Steel or AK Holding, as applicable, under the
Indenture and the notes.
Restrictions on Activities of AK Holding
AK Holding (a) shall not engage in any activities or hold any assets other than (i) the issuance of Capital Stock, (ii) holding
100% of the Capital Stock of AK Steel and debt securities of AK Steel that were held by AK Holding at the date of the Indenture and (iii) those activities incidental to maintaining its status as a public company, and (b) will not incur any
liabilities other than liabilities relating to its Guarantee of the notes, its Guarantee of any other debt of AK Steel, any other Indebtedness it may incur and any other obligations or liabilities incidental to holding 100% of the Capital Stock of
AK Steel and its liabilities incidental to its status as a public company; provided, however, that for purposes of this covenant only, the term liabilities shall not include any liability for the declaration and payment of dividends on
any Capital Stock of AK Holding; and provided further that if AK Holding merges with or into AK Steel, this covenant shall no longer be applicable.
SEC Reports and Reports to Holders
Whether or not AK Steel is then required to file reports with the SEC, AK Steel shall file with the SEC all such reports and other information
as it would be required to file with the SEC by Section 13(a) or 15(d) under the Exchange Act if it were subject thereto within the time periods specified by the SECs rules and regulations. AK Steel shall supply the Trustee and each Holder who
so requests or shall supply to the Trustee for forwarding to each such Holder, without cost to such Holder, copies of such reports and other information. AK Steel shall be deemed to have complied with this covenant to the extent that AK Holding
files all reports and other information required to be filed with the SEC by Section 13(a) or 15(d) under the Exchange Act relating to AK Holding and its consolidated subsidiaries, including AK Steel.
Events of Default
The following events
will be defined as Events of Default in the Indenture with respect to the notes:
(a) default in the payment of principal of
(or premium, if any, on) any note when the same becomes due and payable at maturity, upon acceleration, redemption or otherwise;
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(b) default in the payment of interest on any note when the same becomes due and payable, and
such default continues for a period of 30 days;
(c) AK Steel defaults in the performance of or breaches any other covenant or agreement
in the Indenture applicable to the notes or under the notes (other than a default specified in clause (a) or (b) above) and such default or breach continues for a period of 90 consecutive days (or, in the case of a default in the performance of
or breach of the covenant described under SEC Reports and Reports to Holders, such default or breach continues for a period of 120 consecutive days) after written notice by the Trustee or the Holders of 25% or more in
aggregate principal amount of the notes;
(d) there occurs with respect to any issue or issues of Indebtedness of AK Holding, AK Steel or
any Significant Subsidiary having an outstanding principal amount of $75 million or more in the aggregate for all such issues of all such Persons, whether such Indebtedness now exists or shall hereafter be created, (I) an event of default
that has caused the holder thereof to declare such Indebtedness to be due and payable prior to its stated maturity and such Indebtedness has not been discharged in full or such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final (but not any interim) fixed maturity and such defaulted payment shall not have been made, waived or extended within 30 days of such payment default;
(e) any final judgment or order (not covered by insurance) for the payment of money in excess of $75 million in the aggregate for all
such final judgments or orders against all such Persons (treating any deductibles, self-insurance or retention as not so covered) shall be rendered against AK Holding, AK Steel or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against all such Persons to exceed
$75 million during which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;
(f) a court having jurisdiction in the premises enters a decree or order for (A) relief in respect of AK Holding, AK Steel or any
Significant Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (B) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official
of AK Holding, AK Steel or any Significant Subsidiary or for all or substantially all of the property and assets of AK Holding, AK Steel or any Significant Subsidiary or (C) the
winding-up
or liquidation
of the affairs of AK Holding, AK Steel or any Significant Subsidiary and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days;
(g) AK Holding, AK Steel or any Significant Subsidiary (A) commences a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (B) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of AK Holding, AK Steel or any Significant Subsidiary or for all or substantially all of the property and assets of AK Holding, AK Steel or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors; or
(h) any Guarantor repudiates its obligations under its Note Guarantee or, except as permitted
by the Indenture, any Note Guarantee is determined to be unenforceable or invalid or shall for any reason cease to be in full force and effect.
If an Event of Default (other than an Event of Default specified in clause (f) or (g) above that occurs with respect to AK Steel) occurs
and is continuing under the Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the notes then outstanding, by written notice to AK Steel (and to the Trustee if such notice is given by the Holders), may declare the
principal of, premium, if any, and accrued interest on the notes to be immediately due and payable. Upon a declaration of acceleration, such principal of, premium, if any, and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because
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an Event of Default set forth in clause (d) above has occurred and is continuing, such declaration of acceleration shall be automatically rescinded and annulled if the event of default
triggering such Event of Default pursuant to clause (d) shall be remedied or cured by AK Holding, AK Steel or the relevant Significant Subsidiary or waived by the holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause (f) or (g) above occurs with respect to AK Steel, the principal of, premium, if any, and accrued interest on the notes then outstanding shall automatically become and
be 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 outstanding notes by written notice to AK Steel and to the Trustee, may waive
all past defaults and rescind and annul a declaration of acceleration and its consequences if (x) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the notes that have become due
solely by such declaration of acceleration, have been cured or waived and (y) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. For information as to the waiver of defaults, see
Modification and Waiver.
The Holders of at least a majority in aggregate principal amount of the outstanding
notes 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 the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of notes not joining in the giving of such direction and may take any other
action it deems proper that is not inconsistent with any such direction received from Holders of notes. A Holder may not pursue any remedy with respect to the Indenture or the notes unless:
(1) the Holder gives the Trustee written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of outstanding notes make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee against any costs, liability or expense;
(4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of indemnity; and
(5) during such
60-day
period, the Holders of a majority in aggregate principal amount of the
outstanding notes do not give the Trustee a direction that is inconsistent with the request.
However, such limitations do not apply to
the right of any Holder of a note to receive payment of the principal of, premium, if any, or interest on, such note or to bring suit for the enforcement of any such payment, on or after the due date expressed in the notes, which right shall not be
impaired or affected without the consent of the Holder.
An officer of AK Steel must certify, on or before a date not more than 90 days
after the end of each fiscal year, that a review has been conducted of the activities of AK Steel and its Subsidiaries and AK Steels and its Subsidiaries performance under the Indenture and that AK Steel has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof. AK Steel will also be obligated to notify the Trustee of any default or defaults in the
performance of any covenants or agreements under the Indenture.
Satisfaction and Discharge; Defeasance
The Indenture shall be satisfied and discharged if (i) AK Steel shall deliver to the Trustee all notes then outstanding for cancellation
or (ii) all notes not delivered to the Trustee for cancellation shall have become due
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and payable, are to become due and payable within one year or are to be called for redemption within one year and AK Steel shall deposit an amount sufficient to pay the principal, premium, if
any, and interest to the date of maturity, redemption or deposit (in the case of notes that have become due and payable), provided that in either case AK Steel shall have paid all other sums payable under the Indenture;
provided
,
(i) upon any redemption that requires the payment of the Applicable Premium, the amount deposited will be sufficient for purposes of the Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium
calculated as of the date of the notice of redemption, with any deficit as of the applicable redemption date (the Applicable Premium Deficit) only required to be deposited with the Trustee on or prior to the date of redemption and
(ii) any Applicable Premium Deficit will be set forth in an Officers Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms that such Applicable Premium Deficit will be
applied toward such redemption.
Defeasance and Discharge
The Indenture provides that AK Steel will be deemed to have paid and will be discharged from any and all obligations in respect of the notes
after the deposit referred to below, and the provisions of the Indenture will no longer be in effect with respect to the notes (except for, among other matters, certain obligations to register the transfer or exchange of the notes, to replace
stolen, lost or mutilated notes, to maintain paying agencies and to hold monies for payment in trust) if, among other things:
(A) AK
Steel has deposited with the Trustee, in trust, money and/or U.S. Government Obligations that through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient without
consideration of any reinvestment of such principal and interest, as certified by the chief financial officer of AK Steel in a written certification delivered to the Trustee, to pay the principal of, premium, if any, and accrued interest on the
notes (i) on the stated maturity of such payments in accordance with the terms of the Indenture and the notes or (ii) on any earlier redemption date pursuant to the terms of the Indenture and the notes; provided that AK Steel has provided
the Trustee with irrevocable instructions to redeem all of the outstanding notes on such redemption date;
provided
, (i) upon any redemption that requires the payment of the Applicable Premium, the amount deposited will be sufficient for
purposes of the Indenture to the extent that an amount is deposited with the Trustee equal to the Applicable Premium calculated as of the date of the notice of redemption, with any Applicable Premium Deficit only required to be deposited with the
Trustee on or prior to the date of redemption and (ii) any Applicable Premium Deficit will be set forth in an Officers Certificate delivered to the Trustee simultaneously with the deposit of such Applicable Premium Deficit that confirms
that such Applicable Premium Deficit will be applied toward such redemption.
(B) AK Steel has delivered to the Trustee (1) either
(x) an Opinion of Counsel to the effect that beneficial owners of the notes will not recognize income, gain or loss for federal income tax purposes as a result of AK Steels exercise of its option under this Defeasance provision and
will be subject to federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same effect unless there has been a change in applicable federal income tax law after the Closing Date such that a ruling is no longer required or (y) a ruling directed
to the Trustee received from the Internal Revenue Service to the same effect as the aforementioned Opinion of Counsel and (2) an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company
Act of 1940; and
(C) immediately after giving effect to such deposit on a pro forma basis, no Event of Default, or event that after the
giving of notice or lapse of time or both would become an Event of Default other than may arise from making such deposit.
Defeasance of Certain
Covenants and Certain Events of Default
The Indenture further provides that the provisions of the Indenture will no longer be in
effect with respect to the provisions of the Indenture described herein under Change of Control, and all the covenants described herein under Certain Covenants, clauses (c), (d), (e) and (h) under Events of
Default, shall be
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deemed not to be Events of Default, in each case with respect to the notes, upon, among other things, the deposit with the Trustee, in trust, of money and/or U.S. Government Obligations that
through the payment of interest and principal in respect thereof in accordance with their terms will provide money in an amount sufficient without consideration of any reinvestment of such principal and interest, as certified by the chief financial
officer of AK Steel in a written certification delivered to the Trustee, to pay the principal of, premium, if any, and accrued interest on the notes (i) on the stated maturity of such payments in accordance with the terms of the Indenture and
the notes or (ii) on any earlier redemption date pursuant to the terms of the Indenture and the notes; provided that AK Steel has provided the Trustee with irrevocable instructions to redeem all of the outstanding notes on such redemption date,
the satisfaction of the provisions described in clauses (B)(2) and (C) of the preceding paragraph and the delivery by AK Steel to the Trustee of an Opinion of Counsel to the effect that, among other things, the beneficial owners of the notes
will not recognize income, gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain covenants and Events of Default and will be subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance had not occurred.
In the event AK Steel exercises its option to
omit compliance with certain covenants and provisions of the Indenture with respect to the notes as described in the immediately preceding paragraph and the notes are declared due and payable because of the occurrence of an Event of Default that
remains applicable, the amount of money and/or U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the notes at the time of their stated maturity but may not be sufficient to pay amounts due on the notes
at the time of the acceleration resulting from such Event of Default. However, AK Steel will remain liable for such payments and AK Holdings Note Guarantee with respect to such payments will remain in effect.
Modification and Waiver
The
Indenture may be amended, with respect to the notes, without the consent of any Holder, to:
(1) cure any ambiguity, defect or
inconsistency in the Indenture, provided that such amendments shall not adversely affect the interests of Holders in any material respect;
(2) comply with the provisions described under Consolidation, Merger and Sale of Assets;
(3) comply with any requirements of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act or in order to
maintain such qualification;
(4) evidence and provide for the acceptance of appointment by a successor Trustee;
(5) provide for the issuance of Additional Notes;
(6) make any change that, in the good faith opinion of the board of directors of AK Steel, does not materially and adversely affect the rights
of any Holder under the Indenture;
(7) to conform any provision to this Description of Notes; or
(8) to provide for any Guarantee of the notes or to confirm and evidence the release, termination or discharge of any Guarantee of the notes
when such release, termination or discharge is permitted by the Indenture.
Modifications and amendments of the Indenture affecting the
notes may be made by AK Steel and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding notes; provided, however, that no such modification or amendment may, without the consent of
each Holder affected thereby,
(1) change the stated maturity of the principal of, or any installment of interest on, any note;
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(2) reduce the principal amount of, or premium, if any, or interest on, any note;
(3) change the optional redemption dates or optional redemption prices of the notes from that stated under the caption Optional
Redemption;
(4) change the place or currency of payment of principal of, or premium, if any, or interest on, any note;
(5) impair the right to institute suit for the enforcement of any payment on or after the stated maturity (or, in the case of a redemption, on
or after the redemption date) of any note;
(6) waive a default in the payment of principal of, premium, if any, or interest on the notes;
(7) modify any of the provisions of this Modification and Waiver requiring the consent of a requisite number of holders,
except to increase any percentage requiring consent or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each outstanding note;
(8) release any Guarantor from its Note Guarantee, except as provided in the Indenture;
(9) amend, change or modify the obligation of AK Steel to make and consummate an Offer to Purchase under the Change of Control
covenant after a Change of Control Repurchase Event has occurred, including, in each case, amending, changing or modifying any definition relating thereto;
(10) reduce the percentage or aggregate principal amount of outstanding notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain defaults; or
(11) modify or change any provision of the
Indenture affecting the ranking of the notes or any Note guarantee in a manner adverse to any Holder.
Definitions
Set forth below are defined terms used in the covenants and other provisions of the Indenture insofar as relevant to the notes. Reference is
made to the Indenture for other capitalized terms used in this Description of Notes for which no definition is provided.
Affiliate means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition, control (including, with correlative meanings, the terms controlling, controlled by and under common control with), as
applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
Attributable Debt, in respect of any Sale and Leaseback Transaction, means, as of the time of determination, the total obligation
(discounted to present value at the rate per annum equal to the discount rate which would be applicable to a capital lease obligation with like term in accordance with GAAP) of the lessee for rental payments (other than amounts required to be paid
on account of property taxes, maintenance, repairs, insurance, water rates and other items which do not constitute payments for property rights) during the remaining portion of the initial term of the lease included in such Sale and Leaseback
Transaction.
Board of Directors means the board of directors of AK Holding.
Capital Stock means, with respect to any Person, any and all shares, interests, participations or other equivalents (however
designated, whether voting or
non-voting)
in equity of such Person, whether outstanding on the Closing Date or issued thereafter, including, without limitation, all common stock and preferred stock but
excluding any convertible or exchangeable debt securities.
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Change of Control means such time as:
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the properties or assets of AK Steel and its Subsidiaries, taken as a whole, to any person (as that term is used in Section 13(d)(3) of the Exchange Act);
(2) a person or group (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the ultimate
beneficial owner (as defined in Rule
13d-3
under the Exchange Act) of more than 50% of the total voting power of the Voting Stock of AK Holding on a fully diluted basis;
(3) the adoption of a plan relating to the liquidation or dissolution of AK Holding or AK Steel;
(4) individuals who on the Closing Date constitute the Board of Directors (together with any new directors whose election by the Board of
Directors or whose nomination by the Board of Directors for election by AK Holdings stockholders was approved by a vote of a majority of the members of the Board of Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the members of the Board of Directors then in office;
(5) AK Holding or AK Steel consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into AK
Holding or AK Steel, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of AK Holding or AK Steel, as the case may be, or such other Person is converted into or exchanged for cash, securities or other property,
other than any such transaction where (A) the Voting Stock of AK Holding or AK Steel outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock of the surviving or transferee Person constituting a majority
of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and (B) immediately after such transaction, no person or group (as such terms are
used in Sections 13(d) and 14(d) of the Exchange Act) becomes, directly or indirectly, the beneficial owner of 50% or more of the voting power of the Voting Stock of the surviving or transferee Person; or
(6) AK Holding fails to own 100% of the Capital Stock of AK Steel; provided, however, that it shall not be deemed a Change of Control if AK
Holding merges into AK Steel, except that in such case, AK Steel shall be substituted for AK Holding for purposes of this definition of Change of Control, and this clause (6) shall no longer be applicable.
Change of Control Repurchase Event means the occurrence of both a Change of Control and a Ratings Event.
Closing Date means the date on which the notes are issued under the Indenture.
Consolidated Net Tangible Assets means the total assets of AK Holding and its 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 the Subsidiaries, all as would be set forth on the most recently available quarterly or annual consolidated balance sheet of AK Holding and its Subsidiaries, prepared in conformity with GAAP. For purposes
of calculating Consolidated Net Tangible Assets, pro forma effect shall be given on the date of calculation to the items set forth in Fixed Charge Coverage Ratio.
Default means any event that is, or after notice or passage of time or both would be, an Event of Default.
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EBITDA shall be determined on a
last-in
first-out
inventory method and consolidated basis for AK Holding and its subsidiaries in conformity with GAAP, as the sum, without duplication, of net income, calculated before interest expense, provision for income
taxes, depreciation and amortization expense, losses arising from the sale of capital assets, other
non-cash
losses and charges deducted in the calculation of net income (other than any such
non-cash
item to the extent that it represents an accrual of or reserve for cash expenditures in any future period), any
non-recurring,
unusual or extraordinary losses or
charges, all plant consolidation, shut-down or idling costs or charges, including any contract termination or union settlement charges, all write-offs and writedowns and all
non-cash
corridor charges
associated with pensions and other post-retirement benefit obligations (in each case, only to the extent included in determining net income), less
non-cash
gains included in the calculation of net income
(other than any such
non-cash
item to the extent that it will result in the receipt of cash payments within 12 months after the date on which it was accrued), gains arising from the sale of capital assets,
gains arising from the
write-up
of assets, any
non-recurring,
unusual or extraordinary gains and all
non-cash
corridor gains
associated with pensions and other postretirement benefit obligations (in each case, only to the extent included in determining net income).
Fixed Charge Coverage Ratio means, on any date (the transaction date), the ratio of (a) the aggregate amount of
EBITDA for the most recent four fiscal quarters immediately prior to the transaction date for which internal financial statements are available (the reference period) to (b) the aggregate Fixed Charges during such reference period.
In making the foregoing calculation,
(1) the Fixed Charge Coverage Ratio shall be calculated for AK Holding and its subsidiaries on a consolidated basis;
(2) pro forma effect will be given to any Indebtedness incurred during or after the reference period and on or prior to such date of
determination to the extent the Indebtedness is outstanding or is to be incurred on such date as if the Indebtedness had been incurred on the first day of the reference period;
(3) pro forma calculations of interest on Indebtedness bearing a floating interest rate will be made as if the rate in effect on the
transaction date (taking into account any hedging agreement applicable to the Indebtedness if the hedging agreement has a remaining term of at least 12 months) had been the applicable rate for the entire reference period;
(4) Fixed Charges related to any Indebtedness no longer outstanding or to be repaid or redeemed on the transaction date, except for interest
expense accrued during the reference period under a revolving credit to the extent of the commitment thereunder (or under any successor revolving credit) in effect on the transaction date, will be excluded; and
(5) Any acquisitions, dispositions, amalgamations, mergers, consolidations and discontinued operations (as determined in accordance with
GAAP), that the Company or any of its Subsidiaries has made during the reference period or subsequent to such reference period and on or prior to or simultaneously with the Fixed Charge Coverage Ratio calculation date shall be calculated on a pro
forma basis assuming that all such acquisitions, dispositions, amalgamations, mergers, consolidations and discontinued operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred
on the first day of the reference period in accordance with Article 11 of Regulation
S-X
under the Securities Exchange Act of 1934 (the Exchange Act). If since the beginning of such period any
Person that subsequently became a Subsidiary or was merged, amalgamated or consolidated with or into the Company or any of its Subsidiaries since the beginning of such period shall have made any acquisition, disposition, amalgamation, merger,
consolidation or discontinued operation that would have required adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect thereto for such period as if such acquisition, disposition,
discontinued operation, merger, amalgamation or consolidation or had occurred at the beginning of the applicable four-quarter period.
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Fixed Charges means the sum of consolidated cash interest expense as determined in
accordance with GAAP and cash dividends on any preferred stock.
Foreign Subsidiary means any Subsidiary that is not organized
or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof.
Funded
Debt means all Indebtedness having a maturity of more than 12 months from the date as of which the determination is made or having a maturity of 12 months or less but by its terms being renewable or extendable beyond 12 months from such date
at the option of the borrower, but excluding any such Indebtedness owed to AK Holding or a Subsidiary of AK Holding.
GAAP
means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession which are in effect on the date of the Indenture.
Guarantee means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any
other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness
of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on
arms-length
terms and are entered into in the ordinary course of business), to
take-or-pay,
or to maintain financial
statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);
provided 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 means AK Steel Holding Corporation and any Subsidiary that Guarantees the notes.
Indebtedness means indebtedness for borrowed money.
Investment Grade means a rating of Baa3 or better by Moodys (or its equivalent under any successor Rating Categories of
Moodys), a rating of
BBB-or
better by S&P (or its equivalent under any successor Rating Categories of S&P) and the equivalent Investment Grade credit rating from any additional Rating Agency or
Rating Agencies selected by AK Steel.
Junior Lien Obligations means any Indebtedness of AK Steel or any Guarantor which is or
will be secured by a Lien on the collateral securing the Secured Notes or any extension, renewal, replacement or refunding thereof secured pursuant to clause (8) of the second paragraph under Limitation on Liens (or any other
Indebtedness secured on a first lien basis by liens on the Principal Property or shares of stock or other equity interests or Indebtedness subject to the provisions in the first paragraph of Limitation on Liens) (First Lien
Collateral) on a basis that is junior to the lien on such Indebtedness;
provided
that if no other secured Indebtedness secured by Principal Property or such shares of stock or other equity interests or Indebtedness is outstanding at
such time, it is understood that such Junior Lien Obligations would be secured on a senior lien basis at such time, but the terms thereof must provide that the Liens securing such Junior Lien Obligations would be subordinated to any liens on First
Lien Collateral that may be incurred in the future to secure other Indebtedness that is incurred and secured pursuant to the third paragraph under such covenant.
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Lien means, with respect to any property or assets, any mortgage or deed of trust,
pledge, hypothecation, assignment, security interest, lien, encumbrance, or any other security arrangement of any kind or nature whatsoever on or with respect to such property or assets (including any conditional sale or other title retention
agreement having substantially the same economic effect as any of the foregoing).
Moodys means Moodys Investors
Service Inc.
Note Guarantee means a Guarantee of the obligations of AK Steel under the Indenture and the notes by AK Holding
or any Subsidiary.
Offer to Purchase means an offer to purchase notes by AK Steel from the Holders commenced by mailing a
notice to the Trustee and each Holder stating:
(1) that all notes validly tendered will be accepted for payment on a pro rata basis;
(2) the purchase price and the date of purchase (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the Payment Date);
(3) that any note not tendered will continue to accrue interest pursuant to its
terms;
(4) that, unless AK Steel defaults in the payment of the purchase price, any note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date;
(5) that Holders electing to have a note purchased pursuant to the
Offer to Purchase will be required to surrender the note, together with the form entitled Option of the Holder to Elect Purchase on the reverse side of the note completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the Business Day immediately preceding the Payment Date;
(6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on the third Business Day immediately preceding the Payment Date, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of
notes delivered for purchase and a statement that such Holder is withdrawing his election to have such notes purchased; and
(7) that
Holders whose notes are being purchased only in part will be issued new notes equal in principal amount to the unpurchased portion of the notes surrendered; provided that each note purchased and each new note issued shall be in a principal amount of
$2,000 or integral multiples of $1,000 in excess thereof.
On the Payment Date, AK Steel shall (a) accept for payment on a pro rata
basis notes or portions thereof tendered pursuant to an Offer to Purchase; (b) deposit with the Paying Agent money sufficient to pay the purchase price of all notes or portions thereof so accepted; and (c) deliver, or cause to be
delivered, to the Trustee all notes or portions thereof so accepted together with an Officers Certificate specifying the notes or portions thereof accepted for payment by AK Steel. The Paying Agent shall promptly mail to the Holders of notes
so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail to such Holders a new note equal in principal amount to any unpurchased portion of the note surrendered; provided that each note
purchased and each new note issued shall be in a principal amount of $2,000 or integral multiples of $1,000 in excess thereof. AK Steel will publicly announce the results of an Offer to Purchase as soon as practicable after the Payment Date. The
Trustee shall act as the Paying Agent for an Offer to Purchase. AK Steel will comply with Rule
14e-1
under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable. in the event that AK Steel is required to repurchase notes pursuant to an Offer to Purchase.
Person means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision thereof.
S-37
Principal Property means any domestic blast furnace or steel producing facility, or
casters that are part of a plant that includes such a facility, in each case located in the United States, having a net book value in excess of 1% of Consolidated Net Tangible Assets at the time of determination.
Rating Agency means (1) each of Moodys and S&P and (2) if either of Moodys or S&P ceases to rate the
notes or fails to make a rating of the notes publicly available for reasons outside of the control of AK Steel, a nationally recognized statistical rating organization as defined in Section 3(a)(62) of the Exchange Act, selected by AK
Steel (as certified by a resolution of the board of directors of AK Steel) as a replacement agency for Moodys or S&P, or both, as the case may be.
Rating Category means (i) with respect to S&P, any of the following categories: BBB, BB, B, CCC, CC, C and D (or
equivalent successor categories); (ii) with respect to Moodys, any of the following categories: Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moodys
used by another Rating Agency. In determining whether the rating of the notes has decreased by one or more gradations, gradations within Rating Categories (+ and
-for
S&P; 1, 2 and 3 for Moodys; or
the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from
BB-to
B+, will constitute a decrease of
one gradation).
Rating Date means the date that is 60 days prior to the earlier of (i) a Change of Control or
(ii) public notice of the occurrence of a Change of Control or of the intention by AK Steel or AK Holding, as applicable, to effect a Change of Control.
Ratings Event means the occurrence of the events described in (a) or (b) of this definition on, or within 60 days after the
earlier of, (i) the occurrence of a Change of Control or (ii) public notice of the occurrence of a Change of Control or the intention by AK Steel or AK Holding, as applicable, to effect a Change of Control (which period shall be extended
so long as the rating of the notes is under publicly announced consideration for a possible downgrade by any of the Rating Agencies): (a) if the notes are rated by both Rating Agencies on the Rating Date as Investment Grade, the rating of the notes
shall be reduced so that the notes are rated below Investment Grade by both Rating Agencies, or (b) if the notes are rated below Investment Grade by at least one Rating Agency, the ratings of the notes by both Rating Agencies shall be decreased
by one or more gradations (including gradations within Rating Categories, as well as between Rating Categories) and the notes are then rated below Investment Grade by both Rating Agencies.
Notwithstanding the foregoing, a Ratings Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have
occurred in respect of a particular Change of Control (and thus shall not be deemed a Ratings Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this
definition would otherwise apply do not announce or publicly confirm or inform the trustee in writing at its request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in
respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Ratings Event).
Receivables Facility means one or more receivables financing facilities, as amended, supplemented, modified, extended, renewed,
restated or refunded from time to time, the obligations of which are
non-recourse
(except for customary representations, warranties, covenants and indemnities made in connection with such facilities) to AK
Steel or any of its Restricted Subsidiaries (other than a Receivables Subsidiary) pursuant to which AK Steel or any of its Restricted Subsidiaries sells their accounts receivable to either (a) a Person that is not a Restricted Subsidiary or
(b) a Receivables Subsidiary that in turn sells its accounts receivable to a Person that is not a Restricted Subsidiary.
Receivables Subsidiary means any Subsidiary formed for the purpose of, and that solely engages only in one or more Receivables
Facilities or other activities reasonably related thereto.
Restricted Subsidiary means any Subsidiary other than an
Unrestricted Subsidiary.
S-38
S&P means Standard & Poor Financial Services LLC, a subsidiary of
S&P Global Inc. or its successor.
Sale and Leaseback Transaction means any arrangement with any Person providing for the
leasing to AK Steel or any Subsidiary of AK Steel of any Principal Property, which Principal Property has been or is to be sold or transferred by AK Steel or any Subsidiary of AK Steel to such Person.
Secured Notes means the $380 million outstanding principal amount of 7.50% Secured Notes due 2023 of AK Steel outstanding on
the issue date of the notes.
Significant Subsidiary means (a) any Restricted Subsidiary of AK Holding that, at the time
of determination would be a significant subsidiary of AK Holding pursuant to Rule
1-02
of Regulation
S-X
as in effect on the Closing Date or (b) any group of
Restricted Subsidiaries that, taken together, would be a Significant Subsidiary under clause (a) above.
Subsidiary means with respect to any specified Person, any corporation of which at least a majority of the outstanding stock
having by the terms thereof ordinary voting power for the election of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is, or other entity of which at least a majority of the common equity interests are, at the time directly or indirectly owned by that Person, or by one or more other Subsidiaries of that Person, or by that Person
and one or more other Subsidiaries of that Person.
Subsidiary Guarantor means each Subsidiary that Guarantees the notes under
the Indenture.
U.S. Government Obligations means securities that are (1) direct obligations of the United States of
America for the payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the full and timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof at any time prior to the stated maturity of the notes, and
shall also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specific payment of interest on or principal of any such U.S. Government Obligation held by such
custodian for the account of the holder of a depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt.
Unrestricted Subsidiary means (i) any Foreign Subsidiary, (ii) any Receivables Subsidiary and (iii) any Subsidiary
of AK Holding created after the Closing Date, at least 10% of the Voting Stock of which is owned by Persons other than AK Holding or a Subsidiary thereof; provided that (a) such Subsidiary does not engage in the business of AK Steel as
conducted on the Closing Date (but shall engage in any extension thereof or activities incidental or related thereto) and (b) in the event (1) any such Subsidiary Guarantees Indebtedness of AK Steel in an aggregate amount in excess of
$50 million or (2) AK Steel or any of its Subsidiaries (other than an Unrestricted Subsidiary) contributes or otherwise transfers (other than a sale for fair market value) any Principal Property (including shares of stock of a Subsidiary
that owns the Principal Property) or the proceeds of any sale of Principal Property to such Subsidiary, in either case such Subsidiary shall cease to be an Unrestricted Subsidiary.
Voting Stock means with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body of such Person.
S-39
No Personal Liability of Incorporators, Stockholders, Officers, Directors, or Employees
No recourse for the payment of the principal of, premium, if any, or interest on any of the notes or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation, covenant or agreement of AK Steel in the Indenture, or in any of the notes or because of the creation of any Indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer, director, employee or controlling person of AK Steel or of any successor Person thereof. Each Holder, by accepting the notes, waives and releases all such liability. The waiver and release are part of the consideration for the
issuance of the notes. Such waiver may not be effective to waive liabilities under the federal securities laws.
Concerning the Trustee
Except during the continuance of an Event of Default, the Trustee need perform only such duties as are specifically set forth in the
Indenture. If an Event of Default has occurred and is continuing, the Trustee will use the same degree of care and skill in its exercise of the rights and powers vested in it under the Indenture as a prudent person would exercise under the
circumstances in the conduct of such persons own affairs. The Indenture and provisions of the Trust Indenture Act of 1939, as amended, incorporated by reference therein contain limitations on the rights of the Trustee, should it become a
creditor of AK Steel, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions; provided, however,
that if it acquires any conflicting interest as defined by the Trust Indenture Act of 1939, as amended, it must eliminate such conflict or resign as provided therein.
Book-Entry; Delivery and Form
The notes
will be issued in registered, global form in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof (Global Notes). The Global Notes will be deposited upon issuance with the Trustee as custodian for The
Depository Trust Company (DTC) and registered in the name of DTC or its nominee, in each case for credit to an account of a direct or indirect participant in DTC as described below. Except as set forth below, the Global Notes may be
transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may be exchanged for notes in certificated form. See Exchange of Global Notes for
Certificated Notes.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear and Clearstream are provided solely as a matter of convenience.
These operations and procedures are solely within the control of the respective settlement systems and are subject to changes by them. AK Steel takes no responsibility for these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised AK Steel that DTC is a limited-purpose trust company organized
under New York Banking Law, a banking organization within the meaning of the New York Banking Law, 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. DTC was created to hold securities for its participating organizations (collectively, the Participants) and to facilitate the
clearance and settlement of transactions in those securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the initial purchasers or
affiliates thereof), banks, trust companies, clearing corporations and certain other organizations. Access to DTCs system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly (collectively, the Indirect Participants). Persons who are not Participants may beneficially own securities held
S-40
by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised AK Steel that, pursuant to procedures
established by it:
(1) upon deposit of the Global Notes, DTC will credit the accounts of the Participants designated by the initial
purchasers with portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be
shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the Participants) or by the Participants and the Indirect Participants (with respect to other owners of beneficial interest in
the Global Notes).
All interests in a Global Note, including those held through Euroclear or Clearstream, may be subject to the
procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems.
Except as described below, owners of interests in the Global Notes will not have notes registered in their names, will not receive physical
delivery of notes in certificated form and will not be considered the registered owners or Holders thereof under the Indenture for any purpose.
Payments in respect of the principal of, premium, if any, interest, and additional Interest, if any, on a Global Note registered in the name
of DTC or its nominee will be payable to DTC or its nominee in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, AK Steel and the Trustee will treat the Persons in whose names the notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving payments and for all other purposes. Consequently, neither AK Steel, the Trustee nor any agent of AK Steel or the Trustee has or will have any responsibility or
liability for:
(1) any aspect of DTCs records or any Participants or Indirect Participants records relating to or
payments made on account of beneficial ownership interest in the Global Notes or for maintaining, supervising or reviewing any of DTCs records relating to the identity of the Participants to whose accounts the Global Notes are credited or any
Participants or Indirect Participants records relating to the beneficial ownership interests in the Global Notes; or
(2) any
other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants.
DTC has advised AK Steel
that its current practice, upon receipt of any payment in respect of securities such as the notes (including principal and interest), is to credit the accounts of the relevant Participants with the payment on the payment date unless DTC has reason
to believe it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial ownership of an interest in the principal amount of the relevant security as shown on the records of
DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and
will not be the responsibility of DTC, the Trustee or AK Steel. Neither AK Steel nor the Trustee will be liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the notes, and AK Steel and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from DTC or its nominee for all purposes.
Transfers between
Participants in DTC will be effected in accordance with DTCs procedures, and transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.
S-41
Cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or
Clearstream participants, on the other hand, will be effected through DTC in accordance with DTCs rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or
Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the
relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for
same-day
funds settlement applicable to DTC. Euroclear and Clearstream participants may not deliver
instructions directly to the depositories for Euroclear or Clearstream.
DTC has advised AK Steel that it will take any action permitted
to be taken by a Holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which
such Participant or Participants have given such direction. However, if there is an event of default under the debt securities, DTC reserves the right to exchange each global security for certificated debt securities, which it will distribute to its
participants.
Neither AK Steel nor the Trustee nor any of their respective agents will have any responsibility for the performance by
DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes, if:
(1) DTC (a) notifies AK Steel that it is unwilling or unable to continue as depositary for the Global Notes or (b) has ceased to be
a clearing agency registered under the Exchange Act, and in each case AK Steel fails to appoint a successor depositary; or
(2) there has
occurred and is continuing an event of default with respect to such notes.
In addition, beneficial interests in a Global Note may be
exchanged for Certificated Notes upon prior written notice given to the trustee by or on behalf of DTC in accordance with the indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
Same Day Settlement and Payment
The
notes represented by the Global Notes are expected to trade in DTCs
Same-Day
Funds Settlement System, and any permitted secondary market trading activity in such notes will, therefore, be required by DTC
to be settled in immediately available funds. AK Steel expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.
AK Steel expects that, because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an
interest in a Global Note from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for
Euroclear and Clearstream) immediately following the settlement date of DTC. DTC has advised AK Steel that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream
participant to a Participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTCs
settlement date.
S-42
UNDERWRITING (CONFLICTS OF INTEREST)
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and Goldman,
Sachs & Co. are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in a firm commitment underwriting agreement among us and the underwriters, we have agreed to sell to the
underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the principal amount of notes set forth opposite its name below.
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Underwriter
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Principal
Amount of Notes
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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$
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160,000,000
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Wells Fargo Securities, LLC
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76,000,000
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Citigroup Global Markets Inc.
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40,000,000
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Goldman, Sachs & Co.
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40,000,000
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BMO Capital Markets Corp.
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20,000,000
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Credit Suisse Securities (USA) LLC
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20,000,000
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Deutsche Bank Securities Inc.
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20,000,000
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Citizens Capital Markets, Inc.
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4,000,000
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Fifth Third Securities, Inc.
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4,000,000
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ING Financial Markets LLC
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4,000,000
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PNC Capital Markets LLC
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4,000,000
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Regions Securities LLC
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4,000,000
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U.S. Bancorp Investments, Inc.
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4,000,000
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Total
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$
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400,000,000
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Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed,
severally and not jointly, to purchase all of the notes sold under the underwriting agreement if any of these notes are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting
underwriters may be increased or the underwriting agreement may be terminated.
AK Steel, AK Holding, AK Tube, AK Steel Properties and MSC
have agreed to indemnify the several underwriters and their controlling persons against certain liabilities in connection with this offering, including liabilities under the Securities Act, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The underwriters are offering the notes, subject to prior sale, when, as and if issued
to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the notes, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers certificates
and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part. The underwriters may offer and sell notes through certain of their affiliates.
We expect that delivery of the notes will be made against payment thereof on or about March 23, 2017, which will be the fifth business day
following the date of this pricing supplement (this settlement cycle being referred to as T+5). Under Rule 15c6-1 of the SEC under the Exchange Act, trades in the secondary market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on the date of pricing or the next succeeding business day will be required, by virtue of the fact that the notes initially will settle
in T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of notes who wish to trade notes on the date of pricing or the next succeeding business day should consult their own advisor.
S-45
Commissions and Discounts
The representatives have advised us that the underwriters propose initially to offer the notes to the public at the public offering price set
forth on the cover page of this prospectus supplement and to certain dealers at such price less a concession not in excess of 1.75% of the principal amount of the notes. After the initial offering, the public offering price, concession or any other
term of the offering may be changed.
The expenses of the offering, not including the underwriting discount, are estimated at
$1.4 million and are payable by us.
New Issue of Notes
The notes are a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any national
securities exchange or for inclusion of the notes on any automated dealer quotation system. We have been advised by certain of the underwriters that they presently intend to make a market in the notes after completion of the offering. However, they
are under no obligation to do so and may discontinue any market-making activities at any time without any notice. We cannot assure the liquidity of the trading market for the notes or that an active public market for the notes will develop. If an
active public trading market for the notes does not develop, the market price and liquidity of the notes may be adversely affected. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing
interest rates, the market for similar securities, our operating performance and financial condition, general economic conditions and other factors.
No Sales of Similar Securities
AK Steel
and AK Holding have agreed that they will not, for a period of 30 days after the date of this prospectus supplement, without first obtaining the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated directly or
indirectly, issue, sell, offer to contract or grant any option to sell, pledge, transfer or otherwise dispose of, any debt securities or securities exchangeable for or convertible into debt securities, except for the notes sold to the underwriters
pursuant to the underwriting agreement.
Short Positions
In connection with the offering, the underwriters may purchase and sell the notes in the open market. These transactions may include short
sales and purchases on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater principal amount of notes than they are required to purchase in the offering. The underwriters must close
out any short position by purchasing notes in the open market. A short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the notes in the open market after pricing that could
adversely affect investors who purchase in the offering.
Similar to other purchase transactions, the underwriters purchases to
cover the syndicate short sales may have the effect of raising or maintaining the market price of the notes or preventing or retarding a decline in the market price of the notes. As a result, the price of the notes may be higher than the price that
might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may have on the price of the notes. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or
that these transactions, once commenced, will not be discontinued without notice.
S-46
Other Relationships
As described in Use of Proceeds, we will use the proceeds of this offering to refinance the Companys 7.625% Senior Notes due
2020. We have retained Merrill Lynch, Pierce, Fenner & Smith Incorporated to act as the dealer manager for the Cash Tender Offer of the existing 2020 Notes, and we have agreed to reimburse them for their reasonable
out-of-pocket
expenses in connection with such Cash Tender Offer.
Additionally, an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated serves as agent under the Credit Facility and each
of the underwriters or their affiliates are lenders under the Credit Facility. U.S. Bancorp Investments, Inc., one of the underwriters, is an affiliate of the trustee.
Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of
investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities
may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters or their affiliates that have a lending relationship with us routinely hedge, and certain other of those underwriters or their affiliates may hedge,
their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default
swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the notes offered hereby. The underwriters
and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short
positions in such securities and instruments.
Conflicts of Interest
Certain of the underwriters or their affiliates own, or manage accounts that own, existing 2020 Notes. As a result, certain of the
underwriters or their affiliates will receive a portion of the proceeds from this offering as a result of the Cash Tender Offer and/or redemption of the existing 2020 Notes. Because certain of the underwriters or their affiliates will receive 5% or
more of the net proceeds of the offering, such underwriters may be deemed to have a conflict of interest under FINRA Rule 5121. Accordingly, this offering will be conducted in accordance with FINRA Rule 5121. No underwriter with a
conflict of interest under FINRA Rule 5121 will confirm sales to any discretionary accounts without receiving specific written approval from the account holder.
Notice to Canadian Residents
Resale Restrictions
The sale of our notes in Canada is being made only in the provinces of Ontario, Quebec, Alberta and British Columbia on a private
placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where sales of these notes are made. Any resale of the notes in Canada must be made under applicable
securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of the notes.
S-47
Representations of Canadian Purchasers
By purchasing our notes in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from
whom the purchase confirmation is received that:
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the purchaser is entitled under applicable provincial securities laws to purchase the notes without the benefit of a prospectus qualified under those securities laws as it is an accredited investor as
defined under National Instrument
45-106Prospectus
Exemptions,
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the purchaser is a permitted client as defined in National Instrument
31-103Registration
Requirements, Exemptions and Ongoing Registrant Obligations,
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where required by law, the purchaser is purchasing as principal and not as agent, and
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the purchaser has reviewed the text above under Resale Restrictions.
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Conflicts of Interest
Canadian purchasers are hereby notified that the underwriters are relying on the exemption set out in section 3A.3 or 3A.4, if applicable, of
National Instrument
33-105Underwriting
Conflicts from having to provide certain conflict of interest disclosure in this document.
Statutory Rights of Action
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the
prospectus supplement (including any amendment thereto) such as this document contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities
legislation of the purchasers province or territory. The purchaser of these notes in Canada should refer to any applicable provisions of the securities legislation of the purchasers province or territory for particulars of these rights
or consult with a legal advisor.
Enforcement of Legal Rights
All of our 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 Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be
possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.
Taxation and Eligibility for Investment
Canadian purchasers of our notes should consult their own legal and tax advisors with respect to the tax consequences of an investment in the
notes in their particular circumstances and about the eligibility of the notes for investment by the purchaser under relevant Canadian legislation.
Notice to Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area, no offer of notes which are the subject of the offering has been, or will be
made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:
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A.
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to any legal entity which is a qualified investor as defined in the Prospectus Directive;
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B.
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to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the Representatives for any such offer; or
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C.
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in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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provided
that no such offer of notes referred to in (A) to (C) above shall result in a requirement for the Company or any Representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to
Article 16 of the Prospectus Directive.
This prospectus has been prepared on the basis that any offer of notes in any Member State will
be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of notes. Accordingly any person making or intending to make an offer in that Relevant Member State of notes which are the
subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the Company or any of the Representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation
to such offer. Neither the Company nor the Representatives have authorized, nor do they authorize, the making of any offer of notes in circumstances in which an obligation arises for the Company or the Representatives to publish a prospectus for
such offer.
For the purpose of this provision, the expression an offer of notes to the public in relation to any notes in any
Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in
that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in the each Member
State.
The above selling restriction is in addition to any other selling restriction set out below.
Notice to Prospective Investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may
only be directed at persons who are qualified investors (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the
Order (all such persons together being referred to as relevant persons). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment
activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Notice to Prospective Investors in
Switzerland
This prospectus supplement does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss
Code of Obligations and the notes will not be listed on the SIX Swiss Exchange. Therefore, this prospectus supplement may not comply with the disclosure standards of the listing rules (including any additional listing rules or prospectus schemes) of
the SIX Swiss Exchange. Accordingly, the notes may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors who do not subscribe to the notes with a view to distribution. Any such investors will be
individually approached by the underwriters from time to time.
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Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus supplement relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services
Authority (DFSA). This prospectus supplement is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no
responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for the prospectus
supplement. The notes to which this prospectus supplement relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the notes offered should conduct their own due diligence on the notes. If you do not
understand the contents of this prospectus supplement you should consult an authorized financial advisor.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian
Securities and Investments Commission (ASIC), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the
Corporations Act), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the notes may only be made to persons (the Exempt Investors) who are sophisticated investors
(within the meaning of section 708(8) of the Corporations Act), professional investors (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the
Corporations Act so that it is lawful to offer the notes without disclosure to investors under Chapter 6D of the Corporations Act.
The
notes applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the
Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person
acquiring notes must observe such Australian
on-sale
restrictions.
This prospectus contains
general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an
investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in Hong Kong
The securities have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to
professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a
prospectus as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the securities has been
or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except
if permitted to do so under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors as defined in the
Securities and Futures Ordinance and any rules made under that Ordinance.
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Notice to Prospective Investors in Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as
amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for
re-offering
or resale, directly or indirectly, in Japan or
to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph,
Japanese Person shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of
Non-CIS
Securities may not be circulated or distributed, nor may the
Non-CIS
Securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the
conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the
Non-CIS
Securities are subscribed or purchased under Section 275 of the SFA by a
relevant person which is:
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(a)
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a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or
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(b)
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a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
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securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries rights and interest (howsoever
described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the
Non-CIS
Securities pursuant to an offer made under Section 275 of the SFA except:
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(a)
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to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
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(b)
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where no consideration is or will be given for the transfer;
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(c)
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where the transfer is by operation of law;
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(d)
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as specified in Section 276(7) of the SFA; or
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(e)
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as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
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