As filed with the Securities and Exchange Commission on January 8, 1998
Registration No. _________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
WHEELING-PITTSBURGH CORPORATION
(Exact name of Registrants as specified in their charters)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3312 55-0309927
(State or other jurisdiction (Primary Standard Industrial Classification (I.R.S. Employer
of incorporation or organization) Code Number) Identification No.)
</TABLE>
Wheeling-Pittsburgh Corporation
1134 Market Street
Wheeling, West Virginia 26003
(304) 234-2460
(Address and telephone number of registrants' principal executive offices)
------------------------------------
John R. Scheessele
Wheeling-Pittsburgh Corporation
1134 Market Street
Wheeling, West Virginia 26003
(304) 234-2460
(Name, address and telephone number of agent for service for registrants)
------------------------------------
Copy to:
Steven Wolosky, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
(212) 753-7200
------------------------------------
Approximate date of commencement of proposed exchange offer: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------------------
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CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Maximum
Title of Each Class of Amount to be Proposed Maximum Aggregate Offering Amount of
Securities to be Registered Registered Offering Price Per Note Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Exchange Notes Due 2007(1) $275,000,000 $1,000 $275,000,000 $83,333.33
====================================================================================================================================
</TABLE>
(1) The subsidiary guarantees of principal and interest on the Notes are also
being registered hereby.
The registrants hereby amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to buy nor shall there
be any sale of these securities in any state in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such state.
Prospectus (Subject to Completion)
Dated January 8, 1998
OFFER TO EXCHANGE
9 1/4% Senior Exchange Notes Due 2007
for
all outstanding
9 1/4% Senior Notes Due 2007
($275,000,000 aggregate principal amount outstanding)
of
WHEELING-PITTSBURGH CORPORATION
which are guaranteed by all of the subsidiaries
of Wheeling-Pittsburgh Corporation
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON __________ __, 1998, UNLESS EXTENDED
--------------
See "Risk Factors" immediately following the Prospectus Summary for a
discussion of certain information that should be considered in connection with
the Exchange Offer and an investment in the New Notes.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
The date of this Prospectus is _________, 1998
(Continued on next page)
<PAGE>
(Cover page continued)
Wheeling-Pittsburgh Corporation, a Delaware corporation (the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the
"Exchange Offer"), to exchange $1,000 principal amount of its 9 1/4% Senior
Exchange Notes Due 2007 (the "New Notes") for each $1,000 principal amount of
its outstanding 9 1/4% Senior Notes Due 2007 (the "Old Notes"). The offer and
sale of the New Notes have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to the Registration Statement (as
defined herein) of which this Prospectus constitutes a part. As of December __,
1997, $275,000,000 aggregate principal amount of the Old Notes was outstanding.
The Exchange Offer is being made pursuant to the terms of the registration
rights agreement (the "Registration Rights Agreement") dated November 20, 1997,
by and between the Company, Donaldson, Lufkin & Jenrette Securities Corporation
("Donaldson, Lufkin & Jenrette") and Citicorp Securities, Inc. ("Citicorp,"
together with Donaldson, Lufkin & Jenrette, the "Initial Purchasers"), pursuant
to the terms of the Purchase Agreement dated November 20, 1997, by and between
the Company and the Initial Purchasers. The New Notes and the Old Notes are
collectively referred to herein as the "Notes." As used herein, the term
"Holder" means a holder of the Notes.
The Notes are senior unsecured obligations of the Company. The Notes
are guaranteed (the "Subsidiary Guarantees") by all of the Company's present and
future operating subsidiaries (the "Guarantors"). The Subsidiary Guarantees rank
pari passu in right of payment to all existing and future senior indebtedness of
the Guarantors. The Notes will be effectively junior to secured indebtedness of
the Company and its subsidiaries, including borrowings under the Revolving
Credit Facility (as defined), to the extent of the assets securing such
indebtedness. At September 30, 1997, on a pro forma basis, the Notes would have
been effectively subordinated to the $56.8 million of secured indebtedness of
the Company and its subsidiaries and the Notes would have been pari passu with
$75.0 million of borrowings under the Term Loan Agreement (as defined).
The Company will accept for exchange any and all Old Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City time,
on the date the Exchange Offer expires, which will be __________ __, 1998 [20
BUSINESS DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER], unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. The
Exchange Offer is not conditioned upon any aggregate minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions, which may be waived by the Company, and to the terms and
provisions of the Registration Rights Agreement. Old Notes may be tendered only
in denominations of $1,000 aggregate principal amount and integral multiples
thereof. The Company has agreed to pay the expenses of the Exchange Offer. See
"The Exchange Offer."
Any waiver, extension or termination of the Exchange Offer will be
publicly announced by the Company through a release to the Dow Jones News
Service and as otherwise required by applicable law or regulations.
The Notes were issued in a private placement (the "November Offering")
under an indenture (the "Indenture"), dated as of November 26, 1997, by and
among the Company and Bank One Trust Company, N.A. (in such capacity, the
"Trustee"). The New Notes will be obligations of the Company and are entitled to
the benefits of the Indenture, including the accrual of interest from the time
of their issuance. The net proceeds of the November Offering, together with the
borrowings under the Term Loan Agreement, were used to defease the Company's 9
3/8% Senior Notes due 2003 (the "9 3/8% Notes") pursuant to the terms of the
indenture under which the 9 3/8% Notes were issued and to reduce outstanding
borrowings under the Revolving Credit Facility.
The form and terms of the New Notes are identical in all material
respects to the form and terms of the Old Notes, except that the offer and sale
of the New Notes have been registered under the Securities Act. Any Old Notes
not tendered and accepted in the Exchange Offer will remain outstanding and will
be entitled to all the rights and preferences and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the Holders of Old Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have no further
obligation to such Holders to provide for the registration under the Securities
Act of the offer and sale of the Old Notes held by them. Following the
<PAGE>
completion of the Exchange Offer, none of the Notes will be entitled to the
contingent increase in interest rate provided pursuant to the Registration
Rights Agreement. See "The Exchange Offer."
The Notes will mature on November 15, 2007. Interest on the Notes will
be paid in cash at a rate of 9 1/4% per annum on each May 15 and November 15,
commencing May 15, 1998.
The Notes will be redeemable at the option of the Company whole or in
part, on or after November 15, 2002, initially at 104.625% of their principal
amount, plus accrued and unpaid interest, declining to 100% of their principal
amount, plus accrued and unpaid interest on or after November 15, 2005. In
addition, upon a Change of Control (as hereinafter defined), the Company will be
required to make an offer to purchase the Notes at a purchase price equal to
101% of their principal amount plus accrued and unpaid interest and liquidated
damages, if any. See "Description the New Notes -- Mandatory Redemption," "--
Optional Redemption," and "-- Repurchase at the Option of Holders."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by a Holder thereof
other than (i) a broker-dealer who purchased such Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" (within the meaning
of Rule 405 of the Securities Act) of the Company, without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the Holder is acquiring the New Notes in the ordinary course of its
business and is not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes. Holders of Old
Notes who tender in the Exchange Offer with the intention to participate in a
distribution of the New Notes may not rely upon the position of the staff of the
Commission enunciated in the above-referenced no-action letters, and, in the
absence of an exemption, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. Holders of Old Notes wishing to participate in the Exchange
Offer must represent to the Company in the Letter of Transmittal that such
conditions have been met.
Each broker-dealer (other than an "affiliate" of the Company) that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of [180] days after the consummation of the Exchange Offer,
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution." Any broker-dealer
who is an affiliate of the Company may not rely on such no-action letters and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
The New Notes constitute a new issue of securities with no established
trading market.
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered Holders of Old Notes as of _____________ __, 1997.
The Company will not receive any proceeds from the Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus and the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. The Company or the Exchange Agent (as defined herein). This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy the New Notes in any jurisdiction to any person to whom it is unlawful to
make such
<PAGE>
offer or solicitation in such jurisdiction. The delivery of this Prospectus
shall not, under any circumstances, create any implication that the information
herein is correct at any time subsequent to its date.
---------------------------
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.......................................................2
PROSPECTUS SUMMARY..........................................................4
RISK FACTORS...............................................................13
THE EXCHANGE OFFER.........................................................21
USE OF PROCEEDS............................................................27
SELECTED CONSOLIDATED FINANCIAL DATA.......................................29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..........................................................31
MATERIAL CHANGES...........................................................37
BUSINESS...................................................................38
DESCRIPTION OF PRINCIPAL INDEBTEDNESS......................................60
DESCRIPTION OF THE NEW NOTES...............................................62
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
FOR NON-U.S. HOLDERS...................................................87
PLAN OF DISTRIBUTION.......................................................89
LEGAL MATTERS..............................................................89
EXPERTS....................................................................89
INDEX TO FINANCIAL STATEMENTS.............................................F-1
<PAGE>
---------------------------
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the New Notes offered in the
Exchange Offer. For the purposes hereof, the term "Registration Statement" means
the original Registration Statement and any and all amendments thereto. In
accordance with the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and the schedules and exhibits thereto. Each statement made in this Prospectus
concerning a document filed as an exhibit to the Registration Statement is
qualified in its entirety by reference to such exhibit for a complete statement
of its provisions. For further information pertaining to the Company and the New
Notes offered in the Exchange Offer, reference is made to such Registration
Statement, including the exhibits and schedules thereto and the financial
statements, notes and schedules filed as a part thereof. The Registration
Statement (and the exhibits and schedules thereto) may be inspected and copied
at the public reference facilities maintained by the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, or at its regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, Suite 1300, New York,
New York 10048. Any interested party may obtain copies of all or any portion of
the Registration Statement and the exhibits thereto at prescribed rates from the
Public Reference Section of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, Room 1024, Washington, D.C. 20549. In addition,
registration statements and other filings made with the Commission through its
Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system are publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov.
Upon effectiveness of this Registration Statement the Company will be
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith file reports
and other information with the Commission. Such reports and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Indenture requires the Company to file with the Commission the
annual, quarterly and other reports required by Sections 13(a) and 15(d) of the
Exchange Act. The Company will supply without cost to each Holder of Notes, and
file with the Trustee under the Indenture, copies of the audited financial
statements, quarterly reports and other reports that the Company is required to
file with the Commission pursuant to Sections 13(a) and 15(d) of the Exchange
Act.
---------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
The delivery of this Prospectus at any time does not imply that information
contained herein is correct as of any time subsequent to its date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from the Company at 1134 Market Street, Wheeling,
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<PAGE>
West Virginia 26003, Attention: Vice President, Assistant Secretary and
Treasurer, (304) 234-2460. In order to ensure timely delivery of the documents,
any request should be made ________, 1998 [five business days prior to the date
on which the final investment decision must be made].
-3-
<PAGE>
PROSPECTUS SUMMARY
The following is qualified in its entirety by reference to, and should
be read in conjunction with, the more detailed information and consolidated
financial statements (including notes thereto) appearing elsewhere in this
Prospectus. All references to operating and financial data and other information
of Wheeling-Pittsburgh Corporation ("WPC," and together with its consolidated
subsidiaries, the "Company") for the year ended December 31, 1996 and the nine
months ended September 30, 1997 reflect the adverse impact of a ten-month strike
against the Company which commenced October 1, 1996 and was settled August 12,
1997 (the "Strike"). As used herein, "1996 Twelve Month Operating Period" refers
to the twelve month period ended September 30, 1996, the latest twelve month
period the operating results of which have not been adversely impacted by the
Strike.
The Company
General
The Company is a vertically integrated manufacturer of predominantly
value-added flat rolled steel products. The Company sells a broad array of
value-added products, including cold rolled steel, tin- and zinc-coated steels
and fabricated steel products. The Company's products are sold to steel service
centers, converters, processors, the construction industry, and the container,
automotive and appliance industries. During the 1996 Twelve Month Operating
Period, the Company had revenues of approximately $1.3 billion, EBITDA (as
defined) of approximately $134.7 million and shipped approximately 2.5 million
tons of steel.
The Company believes that it is one of the low cost domestic flat
rolled steel producers. The Company's low cost structure is the result of: (i)
the restructuring of its work rules and manning requirements under its new
five-year collective bargaining agreement (the "New Labor Agreement") with the
United Steelworkers of America ("USWA"), which settled the Company's ten-month
Strike in August 1997; (ii) the strategic balance between its basic steel
operations and its finishing and fabricating facilities; and (iii) its efficient
production of low cost, high quality metallurgical coke.
The Company believes that its New Labor Agreement is one of the most
flexible in the industry. The new work rule package affords the Company
substantially greater flexibility in down-sizing its overall workforce and
assigning and scheduling work, thereby reducing costs and increasing efficiency.
Furthermore, the Company expects to maintain pre-Strike steel production levels
with 850 fewer employees (a reduction of approximately 20% in its hourly
workforce). Finally, the Company believes the five year term provides the
Company with a significant advantage since a majority of the Company's
integrated steel competitors have labor contracts that will expire in 1999.
The Company has structured its operations so that its hot strip mill
and downstream operations have greater capacity than do its raw steel making
operations. The Company therefore can purchase slabs and ship at greater than
100% of its internal production capacity in periods of high demand, while
maintaining the ability to curtail such purchases and still operate its basic
steel facilities at or near capacity during periods of lower demand. The Company
believes this flexibility results in enhanced profitability throughout an
economic cycle. The Company also believes that it produces metallurgical coke at
a substantially lower cost than do other coke manufacturers because of its
proximity to high quality coal reserves and its efficient coke producing plant.
This reduces the Company's costs and, if coke demand remains high, allows the
Company to sell coke profitably in the spot and contract markets.
The Company conducts its operations primarily through two business
units, the Steel Division and Wheeling Corrugating Company ("Wheeling
Corrugating"). The Steel Division sells flat rolled steel products such as hot
rolled, cold rolled, coated and tin mill steel to third parties, and cold rolled
and coated steel substrate to Wheeling Corrugating. Wheeling Corrugating, the
Company's primary downstream operation, is a leading fabricator of roll-formed
products primarily for the construction and agricultural industries. As part of
the Company's strategy to expand its downstream operations, the Company has
acquired several fabricating facilities in order to enhance profit margins and
reduce exposure to downturns in steel demand. Other important examples of the
Company's downstream operations are its joint venture interests in
Wheeling-Nisshin, Inc. ("Wheeling-Nisshin") and Ohio Coatings Company ("OCC").
Wheeling-Nisshin, in which the Company owns a 35.7% interest, produces and ships
from its state-of-the-art production facility a diverse line of galvanized,
galvannealed, galvalume and aluminized products, principally to steel service
centers and the construction and
-4-
<PAGE>
automotive industries. OCC, in which the Company owns a 50% interest, operates a
new tin coating facility that commenced commercial production in January 1997.
The Company has long-term contracts to supply up to 75% of Wheeling-Nisshin's
steel requirements and almost 100% of OCC's. These downstream operations and
joint ventures are integral to the Company's strategy of increasing shipments of
higher value-added steel products while decreasing dependence on hot rolled
coils, a lower-margin commodity steel product.
All of the Company's raw steel producing facilities have been restarted
as of September 30, 1997, and the Company expects to be at pre-Strike production
and shipment levels during the second quarter of 1998.
Business Strategy
The Company's business strategy includes the following initiatives:
Improve Cost Structure. The New Labor Agreement has allowed the Company
to eliminate 850 hourly positions (approximately 20% of its pre-Strike hourly
workforce). The Company believes that these reductions, combined with the
significantly more flexible work rules under the New Labor Agreement, will allow
it to operate at pre-Strike levels with 850 fewer employees. As a result, the
Company anticipates substantial cost savings and productivity improvements once
pre-Strike production levels are reached. In addition, the Company has directed
its capital expenditures towards upgrading and modernizing its steelmaking
facilities, with a goal toward increasing productivity. These expenditures
include modernization of its hot and cold rolling facilities and a major reline
in 1995 of its No. 5 blast furnace located in Steubenville, Ohio. This reline
increased productivity and provided the Company with the ability to produce 100%
of the hot metal necessary to satisfy caster production requirements from two
rather than three blast furnaces. The Company's ability to produce low cost,
high quality metallurgical coke helps the Company maintain lower costs than
those of many of its competitors. In addition, during periods of high demand the
Company is able to profitably sell coke produced in excess of its internal
needs.
Expand Production of Value-Added Products. The Company intends to
continue to expand its sale of value-added products such as coated and
fabricated steels in order to improve profit margins and reduce its exposure to
commodity steel market volatility. This strategy is evidenced by the Company's
expansion of Wheeling Corrugating and its emphasis on joint ventures, such as
Wheeling-Nisshin and OCC, which give the Company access to downstream markets
through long-term supply contracts. The Company's total shipments of value-added
products (including sales of Wheeling Corrugating and sales to Wheeling-Nisshin)
increased approximately 24% from 1992 to the 1996 Twelve Month Operating Period.
The Company will continue to target strategic acquisitions and joint ventures
that support the Company's sales of value-added products.
Recent Developments
In November 1997, the Company sold $275,000,000 of the Old Notes
pursuant to the Old Indenture in the November Offering. Concurrently with the
consummation of the November Offering, the Company entered into a Term Loan
Agreement with DLJ Capital Funding, Inc., as syndication agent, Donaldson,
Lufkin & Jenrette Securities Corporation, as arranger, Citicorp USA, Inc., as
documentation agent, a financial institution to be named as administrative agent
and the lenders party thereto (the "Term Loan Agreement"). Pursuant to the Term
Loan Agreement, the Company borrowed an aggregate of $75.0 million, the net
proceeds of which were, together with the proceeds of the November Offering,
used to defease the 9 3/8% Notes and reduce outstanding borrowings under the
Revolving Credit Facility. See "Use of Proceeds."
WPC is a wholly-owned subsidiary of WHX Corporation ("WHX"), a publicly
traded company listed on the New York Stock Exchange, Inc. ("NYSE"). The Company
comprises the majority of the operating assets of WHX. The principal executive
offices of the Company are located at 1134 Market Street; Wheeling, West
Virginia 26003; its telephone number is (304) 234-2400.
-5-
<PAGE>
Summary of the Terms of the Exchange Offer
The Exchange Offer............. Pursuant to the Exchange Offer, New Notes
will be issued in exchange for outstanding
Old Notes validly tendered and not
withdrawn. The aggregate principal amount of
the New Notes will be equal to that of the
Old Notes and will be issued in
denominations of $1,000 in principal amount
and any integral multiple of $1,000 in
excess thereof. The Company will issue New
Notes to tendering Holders of Old Notes as
promptly as practicable after the Expiration
Date.
Resale......................... Based on an interpretation by the staff of
the Commission set forth in no-action
letters issued to third parties, The Company
believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by any Holder thereof
(other than broker-dealers, as set forth
below, and any such Holder that is an
"affiliate" (within the meaning of Rule 405
under the Securities Act) of the Company)
without compliance with the registration and
prospectus delivery provisions of the
Securities Act, provided that such New Notes
are acquired in the ordinary course of such
Holder's business and that such Holder has
no arrangement or understanding with any
person to participate in the distribution of
such New Notes. Each broker-dealer (other
than an affiliate of the Company) that
receives New Notes for its own account in
exchange for Old Notes that were acquired as
a result of market-making or other trading
activity must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes. The Letter of
Transmittal states that by so acknowledging
and delivering a prospectus, such
broker-dealer will not be deemed to admit
that it is an "underwriter" within the
meaning of the Securities Act. This
Prospectus, as it may be amended or
supplemented from time to time, may be used
by such broker- dealer in connection with
resales of New Notes received in exchange
for Old Notes where such New Notes were
acquired by such broker-dealer as a result
of market-making activities or other trading
activities. The Company has agreed that, for
a period of 180 days after the Expiration
Date, it will make this Prospectus available
to any such broker-dealer for use in
connection with any such resale. See "Plan
of Distribution." Any Holder who tenders in
the Exchange Offer with the intention to
participate, or for the purpose of
participating, in a distribution of the New
Notes or who is an affiliate of the Company
may not rely on the position of the staff of
the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13,
1988) or similar no-action letters and, in
the absence of an exemption therefrom, must
comply with the registration and prospectus
delivery requirements of the Securities Act
in connection with a secondary resale
transaction. Failure to comply with such
requirements in such instance may result in
such Holder incurring liabilities under the
Securities Act for which the Holder is not
indemnified by the Company.
-6-
<PAGE>
The Exchange Offer is not being made to, nor
will the Company accept surrenders for
exchanges from, Holders of Old Notes in any
jurisdiction in which this Exchange Offer or
the acceptance thereof would not be in
compliance with the securities or blue sky
laws of such jurisdiction.
Expiration Date............... 5:00 p.m., New York City time, on _______
__, 1998 [20 BUSINESS DAYS AFTER
COMMENCEMENT OF THE EXCHANGE OFFER], unless
the Exchange Offer is extended, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended. Any extension, if made,
will be publicly announced through a release
to the Dow Jones News Service and as
otherwise required by applicable law or
regulations.
Conditions to the
Exchange Offer.............. The Exchange Offer is subject to certain
conditions, which may be waived by the
Company. See "The Exchange Offer --
Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered.
Procedures for
Tendering Old Notes......... Each Holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver the Letter of
Transmittal, or a facsimile thereof,
together with the Old Notes to be exchanged
and any other required documentation to Bank
One, N.A., as Exchange Agent, at the address
set forth herein and therein. By executing a
Letter of Transmittal, each Holder will
represent to the Company that, among other
things, the New Notes acquired pursuant to
the Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such New Notes, whether or not
such person is the Holder, that neither the
Holder nor any such other person has any
arrangement or understanding with any person
to participate in the distribution of such
New Notes and that neither the Holder nor
any such other person is an "affiliate," as
defined in Rule 405 under the Securities
Act, of the Company.
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender in the
Exchange Offer should contact such
registered Holder promptly and instruct such
registered Holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on his own
behalf, such beneficial owner must, prior to
completing and executing the Letter of
Transmittal and delivering his Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered Holder. The
transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date.
-7-
<PAGE>
Guaranteed Delivery
Procedures.................. Holders of Old Notes who wish to tender such
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes and a properly completed
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date
may tender their Old Notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer -- Procedures for
Tendering."
Acceptance of Old Notes and
Delivery of New Notes........ Subject to certain conditions (as described
more fully in "The Exchange Offer --
Conditions to the Exchange Offer"), the
Company will accept for exchange any and all
Old Notes that are properly tendered in the
Exchange Offer and not withdrawn, prior to
5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be
delivered as promptly as practicable
following the Expiration Date.
Withdrawal Rights.............. Subject to the conditions set forth herein,
tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
Certain United States Federal
Income Tax Considerations.... The exchange pursuant to the Exchange Offer
should not constitute a taxable exchange for
United States federal income tax purposes.
Each such New Note should be treated as
having been originally issued at the time
the Old Note exchanged therefor was
originally issued. See "Certain United
States Federal Income Tax Considerations."
Exchange Agent................ Bank One, N.A., the Trustee under the
Indenture, is serving as exchange agent (the
"Exchange Agent") in connection with the
Exchange Offer. For information with respect
to the Exchange Offer, the telephone number
for the Exchange Agent is (614) 248-5811 and
the facsimile number for the Exchange Agent
is (614) 248-2566.
See "The Exchange Offer" for more detailed information concerning the terms of
the Exchange Offer.
-8-
<PAGE>
Summary Description of the New Notes
The Exchange Offer applies to $275,000,000 aggregate principal amount
of Old Notes. The form and terms of the New Notes will be the same in all
material respects as the form and terms of the Old Notes, except that the offer
and sale of the New Notes will be registered under the Securities Act and,
therefore, the New Notes will not bear legends restricting the transfer thereof.
Upon consummation of the Exchange Offer, none of the Notes will be entitled to
registration rights under the Registration Rights Agreement. The New Notes will
evidence the same debt as the Old Notes, will be entitled to the benefits of the
Indenture and will be treated as a single class thereunder with any Old Notes
that remain outstanding. See "Description of the New Notes."
Securities Offered $275,000,000 principal amount of 9 1/4% Senior
Exchange Notes due 2007.
Maturity Date November 15, 2007.
Interest and Payment Dates The Notes bear interest at the rate of 9 1/4% per
annum, payable semi-annually on May 15 and
November 15 of each year, commencing May 15, 1998.
Optional Redemption The Notes are redeemable at the option of the
Company, in whole or in part, on or after November
15, 2002, at the redemption prices set forth
herein, together with accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
date of redemption. The Company has the option, at
any time prior to November 15, 2002, to redeem the
Notes, in whole but not in part, at a redemption
price equal to 100% of the principal amount
thereof plus the Applicable Premium, together with
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of
redemption. In addition, at any time on or prior
to November 15, 2000 in the event of one or more
Public Equity Offerings the Company may, subject
to certain requirements, redeem up to 35% of the
original aggregate principal amount of the Notes
with the net cash proceeds thereof at a redemption
price equal to 109.25% of the principal amount
thereof, together with accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
date of redemption; provided that at least 65% of
the original aggregate principal amount of the
Notes remains outstanding immediately after such
redemption. See "Description of Notes--Optional
Redemption."
Change of Control Upon the occurrence of a Change of Control, the
Company is required to make an offer to repurchase
all or a portion of such holder's Notes at a price
of 101% of the principal amount thereof plus
accrued interest and Liquidated Damages, if any,
thereon to the date of repurchase. See
"Description of Notes--Repurchase at the Option of
Holders--Change of Control."
Subsidiary Guarantees The Notes are guaranteed on a senior basis by the
Guarantors, which consist of all of the Company's
present and future Subsidiaries (excluding
Unrestricted Subsidiaries). The Subsidiary
Guarantees may be released under certain
circumstances. See "Description of
Notes--Guarantees."
Asset Sale Proceeds The Company is obligated in certain circumstances
to make an offer to purchase the Notes at a
purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the
repurchase date with the net cash proceeds of
certain sales or other dispositions of assets. See
"Description of Notes--Repurchase at the Option of
Holders--Asset Sales."
Ranking The Notes are unsecured obligations of the
Company, ranking senior in right of payment to all
existing and future subordinated indebtedness of
the Company and pari passu with all existing and
future senior unsecured indebtedness of the
Company, including borrowings under the Term Loan
Agreement. The Notes
-9-
<PAGE>
will be effectively junior to secured indebtedness
of the Company and its subsidiaries, including
borrowings under the Revolving Credit Facility, to
the extent of the assets securing such
indebtedness. As of September 30, 1997, on a pro
forma basis giving effect to the November
Offering, the borrowings under the Term Loan
Agreement and the use of proceeds therefrom, there
would have been an aggregate of $405.7 million of
indebtedness of the Company and its Subsidiaries,
the Notes would have been effectively subordinated
to $56.8 million of secured indebtedness of the
Company and its Subsidiaries, additional
availability of approximately $94.5 million would
have existed under the Revolving Credit Facility
and the Notes would have been pari passu with
$75.0 million of borrowings under the Term Loan
Agreement.
Certain Covenants The Indenture pursuant to which the Notes are
issued (the "Indenture") contains certain
covenants, including, but not limited to,
covenants with respect to: (i) limitations on
indebtedness; (ii) limitations on restricted
payments; (iii) limitations on transactions with
affiliates; (iv) limitations on liens; (v)
limitations on sale of assets; (vi) limitations on
issuance and sale of capital stock of
subsidiaries; (vii) limitations on dividends and
other payment restrictions affecting subsidiaries;
and (viii) restrictions on consolidations, mergers
and sales of assets. See "Description of
Notes--Certain Covenants."
Settlement at DTC Transfers of Notes between participants in The
Depository Trust Company ("DTC") will be effected
in the ordinary way in accordance with DTC rules
and will be settled in next-day funds.
Risk Factors
For a discussion of certain risks that should be considered by
prospective purchasers in connection with an investment in the Notes, including
risks relating to sensitivity of results of operations to realized steel prices;
impact of strike; resumption of operations, significant outstanding indebtedness
of the Company, cross-default provisions and joint venture obligations, see
"Risk Factors."
-10-
<PAGE>
Summary Consolidated Financial Data
The following table sets forth certain summary consolidated financial
data of the Company for each of the five years in the period ended December 31,
1996. Such information is derived from the consolidated financial statements of
the Company which have been audited by independent accountants. The data for the
nine-month periods ended September 30, 1996 and 1997 and as of September 30,
1997 and the twelve-month period ended September 30, 1996 are unaudited, but, in
the opinion of the management of the Company, include all adjustments necessary
for a fair presentation of the results for such periods. The selected
consolidated data presented below for the nine-month periods ended September 30,
1996 and 1997, and as of September 30, 1997, are derived from the unaudited
consolidated financial statements of the Company included elsewhere in this
Prospectus. The selected consolidated data presented below for the twelve-month
period ended September 30, 1996 was derived from the unaudited accounting
records of the Company. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related consolidated
notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months
Twelve Ended
Fiscal Year Ended December 31, Months Ended September 30,
--------------------------------------------------------------- September 30, -------------------
1992 1993 1994 1995 1996 1996 1996 1997
---- ---- ---- ---- ---- ----------- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............. $929,786 $1,046,795 $1,193,878 $1,267,869 $1,110,684 $1,281,735 $976,209 $270,109
Cost of products sold
(excluding depreciation
and profit sharing) 815,801 876,814 980,044 1,059,622 988,161 1,086,799 824,161 356,694
Depreciation.......... 54,931 57,069 61,094 65,760 66,125 74,133 56,498 29,927
Profit sharing........ -- 4,819 9,257 6,718 -- 3,901 2,990 --
Selling, administrative and
general expenses... 67,105 58,564 60,832 55,023 54,903 56,377 42,237 38,676
Restructuring/special
charges............ 7,098(1) -- -- -- -- -- -- 88,910(2)
------- ------- ------- ------- ------- ------- ------- ------
Operating income (loss) (15,149) 49,529 82,651 80,746 1,495 60,525 50,323 (244,098)
------- ------- ------ ------ ------- ------ ------ --------
Interest expense...... 21,659 21,373 22,581 22,431 25,885 25,511 19,684 19,658
Other income (expense) 3,181 11,965 6,731 3,234 11,598 6,462 4,773 (214)
B & LE lawsuit settlement -- -- 36,091 -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------
Income (loss) before
taxes, extraordinary
items and cumulative
effect of change in
accounting method.. (33,627) 40,121 102,892 61,549 (12,792) 41,476 35,412 (263,970)
Tax provision (benefit) -- 9,400 21,173 3,030 (7,509) 5,821 9,780 (92,350)
------- ------- ------- ------- -------- ------- -------- --------
Income (loss) before
extraordinary items and
cumulative effect of
change in accounting
method............. $(33,627) $ 30,721 $81,719 $ 58,519 $ (5,283) $ 35,655 $25,632 $(171,620)
======== ======== ======= ======== ========== ======== ======= ==========
Other Data:
EBITDA(3)............. $46,880 $106,598 $143,745 $146,506 $ 67,620 $134,658 $106,821 $(125,261)
Capital expenditures.. 67,318 73,652 69,139 81,554 31,188 37,235 28,742 17,977
Depreciation.......... 54,931 57,069 61,094 65,760 66,125 74,133 56,498 29,927
Selected Operating Data:
Tons shipped (000's).. 2,068 2,251 2,397 2,385 2,105 2,480 1,898 363
Percent value-added
products........... 68.5% 67.9% 68.6% 70.1% 71.9% 70.6% 70.8% 91.9%
Dollars per shipped ton:
Sales.............. $450 $465 $498 $532 $528 $517 $514 $744
Cost of products sold
(excluding
depreciation and
profit sharing) 394 390 409 444 469 438 434 983
Gross profit....... 56 75 89 88 59 79 80 (239)
EBITDA(3).......... 23 47 60 61 32 54 56 (345)
Operating income
(loss)........... (7) 22 34 34 1 24 27 (672)
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Twelve Ended
Fiscal Year Ended December 31, Months Ended September 30,
-------------------------------------------------------------- September 30, -------------------
1992 1993 1994 1995 1996 1996 1996 1997
---- ---- ---- ---- ---- ----------- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average number of active
employees(4)....... 5,634 5,381 5,402 5,333 5,228 5,255 5,239 1,521
Man-hours per net ton
shipped(5)......... 5.46 4.91 4.58 4.62 4.54 4.42 4.31 5.79
Raw steel production
(000's of tons).... 2,350 2,260 2,270 2,200 1,780 2,364 1,780 120
Capacity utilization.. 98% 94% 95% 92% 74% 98% 99% 7%
</TABLE>
<TABLE>
<CAPTION>
As of September 30, 1997
-----------------------------------
Actual As Adjusted(6)
------ --------------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments............................. $ 0 $ 0
Working capital (excluding cash, cash equivalents and short-term investments). (33,420) 8,150
Property, plant and equipment, net............................................ 696,134 696,134
Total assets.................................................................. 1,375,694 1,380,197
Total debt (including current portion)........................................ 364,486 405,719
Stockholder's equity.......................................................... 166,867 142,996
</TABLE>
- -------------------------
(1) The Company recorded a non-cash restructuring charge of $7.1 million to
reflect the elimination of 156 salaried positions through a separation
incentive program.
(2) The loss for the first nine months of 1997 includes a special charge
for benefits included in the New Labor Agreement related to enhanced
retirement benefits, 1997 bonuses and special assistance payments for
those not returning to work immediately.
(3) EBITDA is operating income plus depreciation, amortization and
restructuring/special charges. The Company has included EBITDA because
it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt. EBITDA
does not represent cash flows as defined by generally accepted
accounting principals and does not necessarily indicate that cash flows
are sufficient to fund all of the Company's cash needs. EBITDA should
not be considered in isolation or as a substitute for net income
(loss), cash flows from operating activities or other measures of
liquidity determined in accordance with generally accepted accounting
principles.
(4) "Average number of active employees" is calculated for each period as
the quotient of: the sum of total salaried and hourly employees paid
for one pay period of each month, as determined from the mid-month
salaried and hourly payroll registers, divided by the total number of
months in the respective period.
(5) "Man-hours per net ton shipped" is calculated for each period as the
quotient of: the sum of total hours worked for all union and non-union
employees for the related period plus an estimated amount of 173 hours
worked per month for each of the Company's selling, general and
administrative employees, divided by the sum of total tons shipped plus
any increase or less any decrease in inventory tons.
(6) The Balance Sheet Data as adjusted reflects adjustments to give pro
forma effect to the November Offering and the use of proceeds
therefrom. The decrease in stockholder's equity, as adjusted, is
attributable to the anticipated extraordinary loss of approximately
$23.9 million, net of an estimated $12.8 million income tax benefit,
related to the Defeasance of the Old Notes.
-12-
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk
factors set forth below as well as the other information set forth in this
Prospectus.
Factors Relating to the Company
Sensitivity of Results of Operations to Realized Steel Prices
The Company's results of operations are significantly affected by
relatively small variations (on a percentage basis) in the realized sales prices
of its products, which, in turn, depend upon both the prevailing prices for
steel and the demand for particular products. During the first nine months of
1996, the Company shipped approximately 1.9 million tons, and realized an
average sales price per ton of approximately $514. A one percent increase or
decrease in this average realized price would have resulted in an increase or
decrease in net sales and operating income of approximately $9.8 million. The
Company sells approximately 75% of its products at spot prices (including
shipments to Wheeling-Nisshin and OCC under supply contracts at prices
approximating spot prices, see "Business--Wheeling-Nisshin" and "--Ohio Coatings
Company"). The Company believes its percentage of sales at spot prices is higher
than that of many of its domestic integrated competitors. The Company therefore
may be affected by price decreases (and may benefit from price increases) more
quickly than many of such competitors.
Impact of Strike; Resumption of Operations
The Strike has had a material adverse effect on the Company's results
of operations and may continue to adversely affect the Company in the short-run.
The Company reported losses for the fourth quarter of 1996 and the first three
quarters of 1997 of $30.9 million, $40.3 million, $34.6 million and $96.8
million, respectively. Included in the loss for the third quarter of 1997 is a
pre-tax charge of $88.9 million primarily associated with the costs attributable
to the New Labor Agreement. The Company anticipates that it will continue
reporting losses until shipments return to pre-Strike levels, which is
anticipated to occur during the second quarter of 1998, although there can be no
assurance that delays will not occur. Until the Company's operations are fully
restarted, the Company anticipates that it will need to invest substantial
resources to rebuild inventories and generate accounts receivable. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." In addition, there can be no
assurance that the Company will return to pre-Strike shipment levels or that the
Company will otherwise operate profitably.
Significant Outstanding Indebtedness of the Company
The Company has, and after giving effect to the November Offering and
the use of proceeds therefrom, will continue to have substantial indebtedness
and debt service requirements. At September 30, 1997, after giving pro forma
effect to the November Offering, the borrowings under the Term Loan Agreement
and the use of proceeds therefrom, the Company's total indebtedness would have
been $405.7 million and its stockholder's equity would have been $143.0 million.
The Company's level of indebtedness will have several important effects
on its future operations, including the following: (a) a significant portion of
the Company's cash flow from operations will be dedicated to the payment of
interest on and principal of its indebtedness and will not be available for
other purposes; (b) the financial covenants and other restrictions contained in
the Company's existing $150.0 million revolving credit agreement (the "Revolving
Credit Facility") require the Company to meet certain financial tests and limit
its ability to borrow additional funds or to dispose of assets; and (c) the
Company's ability to obtain additional financing in the future for working
capital, postretirement health care and pension funding, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired.
Additionally, the Company's ability to meet its debt service
-13-
<PAGE>
obligations and to reduce its total debt will be dependent upon the Company's
future performance, which will be subject to general economic conditions and to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Description of Principal Indebtedness."
The Company believes that, based on current levels of operations and
anticipated improvements in operating results, cash flows from operations and
borrowings available under the Revolving Credit Facility will enable the Company
to fund its liquidity and capital expenditure requirements for the foreseeable
future, including scheduled payments of interest on the Notes and payments of
interest and principal on the Company's other indebtedness, including borrowings
under the Term Loan Agreement. There can be no assurance, however, that the
Company's business will generate sufficient cash flow from operations or that
future borrowings will be available under the Revolving Credit Facility in an
amount sufficient to enable the Company to service its indebtedness, including
the Notes and the Term Loan Agreement, or to make anticipated capital
expenditures. If the Company is unable to draw amounts under the Revolving
Credit Facility in the future, such inability could have a material adverse
effect on the financial condition and results of operations of the Company.
Moreover, an inability of the Company to meet the financial covenants contained
in the Revolving Credit Facility or other indebtedness could result in an
acceleration of amounts due thereunder. In the event the Company is unable to
make required payments or otherwise comply with the terms of its indebtedness,
including borrowings under the Revolving Credit Facility and the Term Loan
Agreement, the holders of such indebtedness could accelerate the obligations of
the Company thereunder, which could result in the Company being forced to seek
protection under applicable bankruptcy laws or in an involuntary bankruptcy
proceeding being brought against the Company. Under such circumstances, the
holders of the Notes may be adversely affected. If it becomes necessary for the
Company to refinance all or a portion of the principal of the Notes on or prior
to maturity there can be no assurance that the Company will be able to effect
such refinancing on commercially reasonable terms or at all.
A portion of the Company's outstanding indebtedness, including all
borrowings under the Revolving Credit Facility and the Term Loan Agreement,
bears interest at floating rates. As a result, the Company's results of
operations and ability to service its indebtedness will be affected by future
fluctuations in interest rates.
For further information on the Company's outstanding indebtedness and
Receivables Facility (as defined herein), see "Description of Principal
Indebtedness," "Description of Receivables Facility" and "Indemnification and
Intercreditor Agreement."
Cross-default Provisions
Wheeling-Pittsburgh Steel Corporation ("WPSC") is the borrower under
the Revolving Credit Facility, which is guaranteed by WPC, two subsidiaries of
the Company and Unimast Incorporated ("Unimast"), a wholly-owned subsidiary of
WHX. Unimast's inventory is included in the borrowing base under the Revolving
Credit Facility, and Unimast receives advances from WPSC of funds borrowed by
WPSC under the Revolving Credit Facility. Under the Indenture, such advances may
not exceed $40 million at any time outstanding and must be repaid not later than
the first anniversary of the date of the Indenture. Unimast is also a
participant in the Receivables Facility, and its receivables are included in the
pool of receivables sold. Unimast, WHX and the Company entered into an
intercreditor agreement upon the consummation of the November Offering which
provides, among other things, that Unimast and WHX will be solely responsible
for repayment of any funds advanced by WPSC to Unimast in respect of borrowings
under the Revolving Credit Facility and have agreed to indemnify the Company if
a default occurs under the Revolving Credit Facility or if the Receivables
Facility is terminated as a result of a breach of either of such agreements by
Unimast or WHX. In addition, the Company is solely responsible for repayment of
its borrowings under the Revolving Credit Facility and has agreed to indemnify
WHX and Unimast if a default occurs under the Revolving Credit Facility or if
the Receivables Facility is terminated as a result of a breach of either of such
agreements by the Company. There can be no assurance, however, that in the event
of a default by Unimast or WHX, that either Unimast or WHX will be able to make
any payments to the Company required by such intercreditor agreement. In
addition, in the event Unimast or WHX causes a default under the
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<PAGE>
Revolving Credit Facility, the amounts due thereunder for all participants
including the Company could be accelerated (which could lead to an event of
default under the Notes) and the Company's ability to borrow additional funds
under the Revolving Credit Facility could be terminated. In the event such
acceleration occurs, there can be no assurance that the Company will be able to
refinance such borrowings. A failure by the Company to refinance such borrowings
would have a material adverse effect on the Company. See "Description of
Principal Indebtedness."
Joint Venture Obligations
WPC has certain commitments and contingent obligations with respect to
the OCC joint venture including the following: (i) WPC is required, along with
Dong Yang Tinplate Ltd. ("Dong Yang"), to contribute additional funds to OCC to
cover its pro rata share of any cost overruns and working capital needs of OCC
to the extent that OCC is unable to otherwise finance such amounts (the Company
anticipates that its pro rata share of such funding obligations will be between
$5.0 million and $10.0 million through December 31, 1998); and (ii) WPC is
jointly and severally liable, together with Dong Yang, to contribute to OCC,
either as a loan or a capital contribution, amounts sufficient to cure certain
defaults and violations of certain financial covenants of OCC under OCC's
borrowing facility, which currently has a maximum availability of $17.0 million.
OCC is negotiating to increase such borrowing facility from $17.0 million to
$20.0 million, and in connection therewith Dong Yang and the Company may agree
to jointly and severally guarantee all of such obligations. In addition, WPC
also has certain commitments and contingent obligations under the
Wheeling-Nisshin joint venture including the following: (i) WPC is required,
along with Nisshin Steel, to contribute additional funds to Wheeling-Nisshin to
cover its pro rata share of working capital needs of Wheeling-Nisshin, to the
extent Wheeling-Nisshin is unable to cover its working capital needs or
Wheeling-Nisshin is unable to finance such needs; and (ii) WPC has agreed to
indemnify WHX for WHX's agreement with Nisshin Steel to contribute in proportion
to WPC's interest in Wheeling-Nisshin to the repayment of outstanding borrowings
of Wheeling-Nisshin should Wheeling-Nisshin be unable to repay its debt
obligations. There can be no assurance that the Company will be able to make any
such required payments or if made, that they will not have a material adverse
effect upon the Company. If the Company is unable to make any of such required
payments, it would be a breach of the Company's joint venture agreements.
Ranking; Holding Company Structure
The Notes are unsecured obligations of the Company, ranking senior in
right of payment to all existing and future subordinated indebtedness of the
Company, and pari passu with all existing and future senior unsecured
indebtedness of the Company, including borrowings under the Term Loan Agreement.
The Subsidiary Guarantees rank pari passu in right of payment with all existing
and future senior indebtedness of the Guarantors, including the obligations of
the Guarantors under the Revolving Credit Facility, any successor credit
facility and the Term Loan Agreement. At September 30, 1997, on a pro forma
basis after giving effect to the November Offering, the borrowings under the
Term Loan Agreement and the use of proceeds therefrom, the aggregate principal
amount of indebtedness (excluding trade payables, other accrued liabilities and
the Notes) of the Company and its subsidiaries would have been approximately
$56.8 million, all of which would have ranked effectively senior to the Notes.
Although the Notes constitute senior obligations of the Company, the holders of
secured indebtedness would have a prior claim to the assets securing such
indebtedness. The Revolving Credit Facility is secured by the inventory of WPSC,
two of the Company's Subsidiaries, and Unimast, and certain other assets. In
addition, pursuant to the Receivables Facility, WPSC sells an undivided
percentage ownership in a designated pool of accounts receivable generated by
it, two of the Company's Subsidiaries, and Unimast. See "Description of
Principal Indebtedness" and "Description of Receivables Facility."
The Company is a holding company that conducts substantially all of its
business operations through its subsidiaries. Consequently, the Company's
operating cash flow and its ability to service its indebtedness, including the
Notes, is dependent upon the cash flow of its subsidiaries and the payment of
funds by such subsidiaries to the Company in the form of loans, dividends or
otherwise. The Company's subsidiaries are separate and distinct legal entities
apart from the Company and each operating subsidiary has agreed to guarantee
payment of the Notes on
-15-
<PAGE>
a senior basis. The Indenture contains financial and restrictive covenants that
limit the ability of the Company and its subsidiaries to, among other things,
borrow additional funds, dispose of assets, pay cash dividends or make certain
restricted payments. See "Description of Notes--Certain Covenants" and
"Description of Principal Indebtedness."
Substantial Capital Expenditure Requirements
The Company operates in a capital intensive industry. From 1992 through
1996, the Company's capital expenditures totalled approximately $322.9 million.
This level of capital expenditures was used to maintain productive capacity,
improve productivity and upgrade selected facilities to meet competitive
requirements and maintain compliance with environmental laws and regulations,
including the Clean Air Act of 1990. The Company anticipates funding its capital
expenditures in 1998 from cash on hand and funds generated by operations. Prior
to the resolution of the Strike, the Company had delayed most capital
expenditures at the Strike-affected plants. The Company anticipates that capital
expenditures will approximate depreciation, on average, over the next few years.
There can be no assurance that the Company will have adequate funds from
operations to make all required capital expenditures or that the amount of
future capital expenditures will be commensurate with historical averages.
Substantial Employee Postretirement Obligations
The Company has substantial financial obligations related to its
employee and retiree postretirement plans for medical and life insurance and
pensions. Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" ("SFAS 106")
requires accrual of retiree medical and life insurance benefits rather than
recognition of costs as claims are paid. In accordance with SFAS 106, a
liability has been established for the present value of the estimated future
unfunded medical obligations. In addition, in accordance with the Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," the
Company has recognized a liability equal to its unfunded accumulated pension
benefit obligations. As of September 30, 1997, the Company had an unfunded
accumulated postretirement benefit obligation for retiree health care of
approximately $295.0 million. In addition, the Company had recorded an unfunded
accumulated pension benefit obligation for the recently implemented defined
benefit pension plan ("DB Plan") of approximately $162.0 million, of which
approximately 75% must be funded over the next five years.
Labor Matters
As of September 30, 1997, the USWA represented approximately 78% of the
Company's employees. In August 1997, the Company entered into the New Labor
Agreement with the USWA, which expires on September 1, 2002. There can be no
assurance as to the results of negotiations of future collective bargaining
agreements, whether future collective bargaining agreements will be negotiated
without production interruptions or the possible impact of future collective
bargaining agreements, or the negotiations thereof, on the Company's financial
condition and results of operations. In addition, there can be no assurance that
strikes will not occur in the future in connection with labor negotiations or
otherwise.
Control by WHX; Conflicts of Interest; Transactions with WHX
The Company is a wholly-owned subsidiary of WHX and all directors are
elected at the direction of WHX. See "Management." The Company believes that WHX
will not be prohibited from acting in its own self interest in respect of, among
other things, approval of various corporate activities and the voting or
disposition of the shares of Common Stock owned by it. The ongoing relationship
between the Company and WHX could result in conflicts of interest between the
Company and WHX. Also, WHX and the Company have entered into certain agreements,
which were not the result of arms-length negotiations between independent
parties, providing for indemnification and certain other rights and obligations
for each of them after consummation of the November Offering.
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In addition, as a subsidiary of WHX, the Company has had the financial
resources of WHX available to meet its liquidity needs. The Notes are not an
obligation of WHX and are stand-alone obligations of WPC. WHX is not obligated
to provide funds to the Company, and the Company will in the future have to rely
on its own resources and third-party credit to meet its cash requirements. WHX
and WPC are jointly and severally obligated to make certain payments to WPSC
pursuant to the terms of a keepwell agreement entered into in connection with
the Revolving Credit Facility to maintain certain financial ratios of the
Company. The Company has agreed to indemnify WHX with respect to any payments
made by WHX on account of WHX's obligations under such keepwell agreement. See
"Certain Relationships and Related Transactions; Transactions between the
Company and WHX."
From time to time, WHX has made advances to the Company, principally to
fund working capital needs and interest payments on debt. The Company also has
made advances to WHX, from time to time, principally to fund the payment by WHX
of dividends on its outstanding preferred stock and the working capital needs of
Unimast. As of September 30, 1997, the Company had made advances to WHX in the
net amount of $15.2 million. All advances are repayable upon demand and do not
bear interest. To the extent the Company has net outstanding advances from WHX,
the Company's obligation to repay such advances will be subordinated to the
repayment obligations on the Notes.
Fraudulent Conveyance; Possible Invalidity of Subsidiary Guarantees
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance laws, if the
Company, at the time it issues the Notes, or any one of the Guarantors, at the
time it issues its Subsidiary Guarantee, (a) incurs such indebtedness with the
intent to hinder, delay or defraud creditors, or (b)(i) receives less than
reasonably equivalent value or fair consideration for incurring such
indebtedness and (ii)(A) is insolvent at the time of the incurrence, (B) is
rendered insolvent by reason of such incurrence (after the application of the
proceeds of the November Offering), (C) is engaged or is about to engage in a
business or transaction for which the assets that will remain with the Company
or such Guarantor constitute unreasonably small capital to carry on its
business, or (D) intends to incur, or believes that it will incur, debts beyond
its ability to pay such debts as they mature, then, in each such case, a court
of competent jurisdiction could avoid, in whole or in part, the Notes or such
Subsidiary Guarantee. The measure of insolvency for purposes of the foregoing
will vary depending upon the law applied in such case. Generally, however, the
Company or any Guarantor would be considered insolvent if the sum of its debts,
including contingent liabilities, was greater than all of its assets at fair
valuation or if the present fair saleable value of its assets was less than the
amount that would be required to pay the probable liability on its existing
debts, including contingent liabilities, as they become absolute and matured.
To the extent any Subsidiary Guarantee were to be avoided as a
fraudulent conveyance or held unenforceable for any other reason, holders of the
Notes would cease to have any claim in respect of such Guarantor and would be
creditors solely of the Company and any Guarantor whose Subsidiary Guarantee was
not avoided or held unenforceable. In such event, the claims of the holders of
the Notes against the issuer of an invalid Subsidiary Guarantee would be subject
to the prior payment of all other liabilities of such Guarantor. There can be no
assurance that, after providing for all prior claims, there would be sufficient
assets to satisfy the claims of the holders of the Notes relating to any avoided
Subsidiary Guarantee.
Based upon financial and other information currently available to it,
the Company believes that, for purposes of the United States Bankruptcy Code and
state fraudulent transfer or conveyance laws, (a) the Notes and the Subsidiary
Guarantee are being issued without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith, (b) the Company and the
Guarantors have received reasonably equivalent value or fair consideration for
incurring such indebtedness and (c) the Company and the Guarantors, after the
issuance of the Notes and the Subsidiary Guarantees and the application of the
net proceeds of the Notes, will be solvent, will have sufficient capital for
carrying on their respective businesses and will be able to pay their respective
debts as they mature. There can be no assurance, however, that a court passing
on such questions would agree with the
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Company's view. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Description of Notes."
Change of Control
The Indenture will provide that, upon the occurrence of any Change of
Control, the Company will be required to make a Change of Control Offer (as
defined) to purchase all or any part of each holder's Notes issued and then
outstanding under the Indenture at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase. The Revolving Credit Facility
prohibits the Company from purchasing any Notes prior to their stated maturity
and also provides that certain Change of Control events would constitute a
default thereunder. In addition, any future credit or other borrowing agreements
may contain similar restrictions. Finally, the Company's ability to pay cash to
the holders of Notes upon a repurchase may be limited by the Company's then
existing financial resources. See "Description of Principal Indebtedness" and
"Description of Notes--Repurchase at the Option of Holders--Change of Control."
If a Change of Control were to occur, it is unlikely that the Company
would be able to both repay all of its obligations under the Revolving Credit
Facility and repay other indebtedness, including borrowings under the Term Loan
Agreement that would become payable upon the occurrence of such Change of
Control, unless it could obtain alternate financing. There can be no assurance
that the Company would be able to obtain any such financing on commercially
reasonable terms or at all, and consequently no assurance can be given that the
Company would be able to purchase any of the Notes tendered pursuant to a Change
of Control Offer.
Factors Relating to the Industry
Cyclicality
Historically, steel industry performance has been cyclical in nature,
reflecting changes in industry capacity as well as the cyclicality of many of
the principal markets it serves, including the automotive, appliance and
construction industries. Although total domestic steel industry capacity was
substantially reduced during the 1980s through extensive restructuring, and
demand has been particularly strong since 1993, with domestic steel industry
earnings strong during the 1994-1996 period, there can be no assurance that
demand will continue at current levels or that the addition of new minimills and
recent restarts of previously idled domestic facilities will not adversely
impact pricing and margins.
Possible Fluctuations in the Cost of Raw Materials
The Company's operations require substantial amounts of raw materials,
including various types of iron ore pellets, steel scrap, coal, zinc, oxygen,
natural gas and electricity. The price and availability of these raw materials
are subject to steel industry and general market conditions affecting supply and
demand. Furthermore, worldwide competition in the steel industry has frequently
limited the ability of steel producers to raise finished product prices to
recover higher raw material costs. The Company's future profitability may be
adversely affected to the extent it is unable to pass on higher raw material
costs to its customers.
Competition
The domestic steel industry is highly competitive. Despite significant
reductions in raw steel production capacity by major domestic producers in the
1980s, partially offset by the recent minimill capacity additions and joint
ventures, the domestic industry continues to be threatened by excess world
capacity.
The Company faces increasing competitive pressures from other domestic
integrated producers, minimills and processors. Processors compete with the
Company in the areas of slitting, cold rolling and coating. Minimills are
generally smaller volume steel producers that use ferrous scrap metals as their
basic raw material. Compared
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to integrated producers, minimills, which rely on less labor and capital
intensive hot metal sources, have certain advantages. Since minimills typically
are not unionized, they have more flexible work rules that have resulted in
lower employment costs per net ton shipped. Since 1989, significant flat rolled
minimill capacity has been constructed and these minimills now compete with
integrated producers in product areas that traditionally have not faced
significant competition from minimills. In addition, there is significant
additional flat rolled minimill capacity under construction or announced with
various planned commissioning dates in 1997 through 1999. Near term, these
minimills are expected to compete with the Company primarily in the commodity
flat rolled steel market, and processors are expected to compete with the
Company in the flat rolled and cold rolled steel market. In the long-term, such
minimills may also compete with the Company in producing value-added products.
In addition, the increased competition in commodity product markets may
influence certain integrated producers to increase product offerings to compete
with the Company's custom products.
During the early 1990s, the domestic steel market experienced
significant increases in imports of foreign produced flat rolled products. The
level of imports, however, declined somewhat in late 1995 and early 1996. During
the same period, exports of domestically produced flat rolled steel increased
significantly. In recent months, there has been an increase in imports of flat
rolled products, and a decrease in exports of flat rolled steel products. The
strength of the U.S. dollar and economy, as well as the strength of foreign
economies, can significantly affect the import/export trade balance for flat
rolled steel products. The status of the trade balance may significantly affect
the ability of the new minimill capacity to come on-line without disrupting the
domestic flat rolled steel market.
Wheeling Corrugating and the Company's other fabricating operations
compete in a large number of regional markets with numerous other fabricating
operations, most of which are independent of the major integrated manufacturers.
Independent fabricators generally are able to acquire flat rolled steel
products, their basic raw material, at prevailing market prices. There are few
barriers to entry into the manufacture of fabricated products in certain
individual markets currently served by Wheeling Corrugating (although the
geographic breadth of the markets served by Wheeling Corrugating would be hard
to replicate). Other competitors, including domestic integrated producers and
minimills, may decide to manufacture fabricated products and compete with
Wheeling Corrugating in its markets. Such competition may negatively affect
prices that may be obtained in certain markets by the Company for its fabricated
products. Many of Wheeling Corrugating's competitors do not have a unionized
workforce and, therefore, may have lower operating costs than Wheeling
Corrugating.
Materials such as aluminum, cement, composites, glass and plastics
compete as substitutes for steel in many markets.
Environmental Considerations
The Company and other steel producers have become subject to
increasingly stringent environmental standards imposed by Federal, state and
local environmental laws and regulations. The Company has expended, and can be
expected to be required to expend in the future, significant amounts for
installation of environmental control facilities, remediation of environmental
conditions and other similar matters. The costs of complying with such stringent
environmental standards as the new ambient air quality standards for ozone and
PM2.5 as well as the climate change treaty negotiations may cause the Company
and other domestic steel producers to be competitively disadvantaged vis-a-vis
foreign steel producers and producers of steel substitutes, who may be subject
to less stringent standards. The Company has also been alleged to be a
potentially responsible party at various "Superfund" sites. The Superfund law
imposes strict joint and several liability upon potentially responsible parties.
The Company does not anticipate that any potential assessment and remediation
costs will have a material adverse effect on its financial condition or results
of operations; however, the Company cannot currently predict the actual
assessment and remediation costs for which it may be responsible. See "Legal
Proceedings--Environmental Matters."
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Exchange of Notes
No gain or loss will be recognized by an exchanging Holder upon an
exchange of the Old Notes for the New Notes. A Holder's basis in the New Notes
will be the same as the Holder's basis in the Old Notes, and the Holder's
holding period in the New Notes will include the period during which the Old
Notes had been held by the Holder. If the exchange of the Old Notes for the New
Notes were deemed by the Internal Revenue Service (the "Service") to constitute
the exchange of a debt instrument for a modified instrument that differed
materially either in kind or in extent, additional original issue discount could
arise. However, under the relevant regulations issued by the Service, the New
Notes should not be deemed to constitute a modification of the Old Notes,
inasmuch as the New Notes reflect all of the terms and conditions of the Old
Notes in registered form, which registration results from the original terms of
the Old Notes.
Lack of a Public Market
The New Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the New Notes on
any United States securities exchange or to seek approval for quotation through
any automated quotation system. The Company has been advised by the Initial
Purchasers that following completion of the Exchange Offer, the Initial
Purchasers intend to make a market in the New Notes. However, the Initial
Purchasers are not obligated to do so and any market-making activities with
respect to the New Notes may be discontinued at any time without notice.
Accordingly, no assurance can be given that an active public or other market
will develop for the New Notes or as to the liquidity of or the trading market
for the New Notes. If a trading market does not develop or is not maintained,
Holders of the New Notes may experience difficulty in reselling the New Notes or
may be unable to sell them at all. If a market for the New Notes develops, any
such market may cease to continue at any time. If a public trading market
develops for the New Notes, future trading prices of the New Notes will depend
on many factors, including, among other things, prevailing interest rates, the
Company's results of operations and the market for similar securities and other
factors, including the financial condition of the Company.
Consequences of the Exchange Offer to Non-Tendering Holders of the Old Notes
In the event the Exchange Offer is consummated, the Company will not be
required to register any Old Notes not tendered and accepted in the Exchange
Offer. In such event, Holders of Old Notes seeking liquidity in their investment
would have to rely on exemptions to the registration requirements under the
Securities Act. Following the Exchange Offer, none of the Notes will be entitled
to the contingent increase in interest rate provided for (in the event of a
failure to consummate the Exchange Offer in accordance with the terms of the
Registration Rights Agreement) pursuant to the Registration Rights Agreement.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Notes were sold by the Company on November 26, 1997 to the
Initial Purchasers, which placed the Old Notes with certain institutional
investors in reliance on Section 4(2) of, and Rule 144A under, the Securities
Act. In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement, pursuant to which the Company agreed to use its
best efforts to consummate an offer to exchange the Old Notes for the New Notes
pursuant to an effective registration statement on or before April 10, 1998. A
copy of the Registration Rights Agreement has been filed as an exhibit to this
Registration Statement. Unless the context requires otherwise, the term "Holder"
with respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered Holder, or any person whose
Old Notes are held of record by DTC who desires to deliver such Old Notes by
book-entry transfer at DTC.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any Holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the Commission set
forth in no-action letters issued to third parties, the Company believes that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any Holder of such New
Notes (other than any such Holder that is an "affiliate" of the Company, within
the meaning of Rule 405 under the Securities Act and except in the case of
broker-dealers, as set forth below) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such Holder's business and such
Holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes. Any Holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes or who is an
affiliate of the Company may not rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
By tendering in the Exchange Offer, each Holder of Old Notes will
represent to the Company that, among other things, (i) the New Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
such Holder, (ii) neither the Holder of Old Notes, nor any such other person,
has an arrangement or understanding with any person to participate in the
distribution of such New Notes, (iii) if the Holder is not a broker-dealer, or
is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the Holder, nor any such other person, is
engaged in or intends to participate in the distribution of such New Notes and
(iv) neither the Holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or, if such
Holder is an "affiliate," that such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Following the consummation of the Exchange Offer, Holders of Old Notes
not tendered will not have any further registration rights and the Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for the Old Notes could be adversely affected.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. Subject to the minimum denomination requirements
of the New Notes, the Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
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outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000 principal amount.
The forms and terms of the New Notes will be identical in all material
respects to the forms and terms of the corresponding Old Notes, except that the
offer and sale of the New Notes will have been registered under the Securities
Act and, therefore, the New Notes will not bear legends restricting the transfer
thereof. The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange. As of _______, 1998,
$275,000,000 aggregate principal amount of the Old Notes were outstanding. This
Prospectus, together with the Letter of Transmittal, is being sent to all
Holders as of ________, 1997. Holders of Old Notes do not have any appraisal or
dissenters' rights under the Indenture in connection with the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the New Notes from the Company. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, such unaccepted Old Notes
will be returned, without expense, to the tendering Holder thereof as promptly
as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
" -- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
_____________, 1998, [20 BUSINESS DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE
OFFER] unless the Company in its sole discretion, extends the Exchange Offer, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. Although the Company has no current
intention to extend the Exchange Offer, the Company reserves the right to extend
the Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to the Dow Jones News Service. During any extension of the Exchange Offer, all
Old Notes previously tendered pursuant to the Exchange Offer and not withdrawn
will remain subject to the Exchange Offer. The date of the exchange of the New
Notes for Old Notes will be the first AMEX trading day following the Expiration
Date.
The Company expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Old Notes if any of the events set forth
below under " -- Conditions to the Exchange Offer" shall have occurred and shall
not have been waived by the Company and (ii) amend the terms of the Exchange
Offer in any manner that, in its good faith judgment, is advantageous to the
Holders of the Old Notes, whether before or after any tender of the Old Notes.
Procedures for Tendering
The tender to the Company of Old Notes by a Holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
Holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal signed by such
holder. A Holder of the Old Notes may tender such Old Notes by (i) properly
completing and signing a Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing the Old Notes being
tendered (if in certificated form) and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmittal on or prior
to the Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
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If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC whose name appears on a security listing as the owner of
Old Notes), the signature of such signer need not be guaranteed. In any other
case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered Holder and the signature on the endorsement or instrument of
transfer must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" as defined by Rule 17Ad-15 under
the Exchange Act (any of the foregoing hereinafter referred to as an "Eligible
Institution"). If the New Notes and/or the Old Notes not exchanged are to be
delivered to an address other than that of the registered Holder appearing on
the register for the Old Notes, the signature in the Letter of Transmittal must
be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF TRANSMITTAL AND ALL
OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO
THE COMPANY.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish an account with respect
to the Old Notes at DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account with respect to
the Old Notes in accordance with DTC's procedure for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an appropriate Letter of Transmittal with any
required signature guarantee and all other revised documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at the address
set forth in the Letter of Transmittal on or prior to the Expiration Date, or,
if the guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures.
If the Holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Old Notes to reach the Exchange Agent before
the Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, a tender may be effected if the Exchange Agent has received
at its office, on or prior to the Expiration Date, a letter, telegram or
facsimile transmission from an Eligible Institution setting forth the name and
address of the tendering Holder, the name(s) in which the Old Notes are
registered and the certificate number(s) of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that, within
three AMEX trading days after the date of execution of such letter, telegram or
facsimile transmission by the Eligible Institution, such Old Notes, in proper
form for transfer (or a confirmation of book-entry transfer of such Old Notes
into the Exchange Agent's account at DTC), will be delivered by such Eligible
Institution together with a properly completed and duly executed Letter of
Transmittal (and any other required documents). Unless Old Notes being tendered
by the above-described method are deposited with the Exchange Agent within the
time period set forth above (accompanied or preceded by a properly completed
Letter of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery, which may
be used by Eligible Institutions for the purposes described in this paragraph,
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i)
the tendering Holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), is received by the Exchange
Agent or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes.
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All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or will incur any liability for failure to give any
such notification. Any Old Notes received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived, or if Old Notes are submitted in an aggregate principal amount
greater than the aggregate principal amount of Old Notes being tendered by such
tendering Holder, will be returned by the Exchange Agent to the tendering
holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
(a) purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date and (b) to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Old Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to acquire
New Notes issuable upon the exchange of such tendered Old Notes, and that, when
the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by DTC. All
authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor and every obligation of the Transferor will be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By executing a Letter of Transmittal, each Holder will make to the
Company the representations set forth above under the heading " -- Purpose and
Effect of the Exchange Offer."
Withdrawal of Tenders
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable,
except that Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at the
address set forth in the Letter of Transmittal prior to 5:00 p.m., New York City
time on the Expiration Date. Any such notice of withdrawal must specify the
holder named in the Letter of Transmittal as having tendered Old Notes to be
withdrawn, the certificate numbers and designation of Old Notes to be withdrawn,
the principal amount of Old Notes delivered for exchange, a statement that such
Holder is withdrawing his election to have such Old Notes exchanged, and the
name of the registered Holder of such Old Notes, and must be signed by the
Holder in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Old Notes being withdrawn. The Exchange Agent
will return the properly withdrawn Old Notes promptly following receipt of
notice of withdrawal.
-24-
<PAGE>
If Old Notes have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Old Notes or otherwise comply
with DTC procedure. All questions as to the validity of notices of withdrawal,
including time of receipt, will be determined by the Company, and such
determination will be final and binding on all parties.
Conditions to the Exchange Offer
Notwithstanding any other provision of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to issue New
Notes in exchange for any properly tendered Old Notes not theretofore accepted
and may terminate the Exchange Offer, or, at its option, modify or otherwise
amend the Exchange Offer, if either of the following events occur:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority
which, in the sole judgment of the Company, would prohibit, restrict or
otherwise render illegal consummation of the Exchange Offer, or
(b) there shall occur a change in the current interpretation by the
staff of the Commission which, in the Company's sole judgment, might
materially impair the Company's ability to proceed with the Exchange
Offer.
The Company expressly reserves the right to terminate the Exchange
Offer and not accept for exchange any Old Notes upon the occurrence of either of
the foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes).
The foregoing conditions are for the sole benefit of the Company and
may be waived by the Company, in whole or in part, in its sole discretion. The
foregoing conditions must be either satisfied or waived prior to termination of
the Exchange Offer. Any determination made by the Company concerning an event,
development or circumstance described or referred to above will be final and
binding on all parties.
Exchange Agent
Bank One, N.A. has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Mail (registered or certified mail recommended):
Bank One, N.A.
100 E. Broad Street
Columbus, Ohio 43215-3607
By Overnight Courier:
Bank One, N.A.
100 E. Broad Street
Columbus, Ohio 43215-3607
By Hand Delivery:
Bank One, N.A.
100 E. Broad Street
Columbus, Ohio 43215-3607
By Facsimile: (614) 248-2566 Confirm by Telephone: (614) 248-5811
(For Eligible Institutions Only)
-25-
<PAGE>
Fees and Expenses
The expense of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitations
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting
agent in connection with the Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes and
in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees of the Company, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Old Notes pursuant to the Exchange Offer. If, however, New Notes, or
Old Notes for principal amounts not tendered or accepted for exchange, are to be
delivered to, or are to be issued in the name of, any person other than the
registered Holder of the Old Notes tendered or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old
Notes as reflected in the Company's accounting records on the date of the
exchange because the exchange of the Old Notes for the New Notes is the
completion of the selling process contemplated in the issuance of the Old Notes.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer and the unamortized expenses related to the
issuance of the Old Notes will be amortized over the term of the New Notes.
Other
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, shall create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) Holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to Holders of Old Notes
in such jurisdiction.
As a result of the making of the Exchange Offer, the Company will have
fulfilled a covenant contained in the Registration Rights Agreement. Holders of
the Old Notes who do not tender their Old Notes in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
limitations applicable thereto
-26-
<PAGE>
under the Indenture except for any such rights under the Registration Rights
Agreement and except that the Old Notes will not be entitled to the contingent
increase in interest rate provided for in the Old Notes. All untendered Old
Notes will continue to be subject to the restrictions on transfer set forth in
the Indenture and the Old Notes. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market, if any, for untendered Old
Notes could be adversely affected.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
New Notes offered hereby. In consideration for issuing the New Notes as
contemplated in this Prospectus, the Company will receive in exchange Old Notes
in like principal amount, the terms of which are identical in all material
respects to the New Notes, except that the offer and sale of such New Notes will
be registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. Old Notes surrendered in exchange for New
Notes will be retired and canceled and cannot be reissued. Accordingly, issuance
of the New Notes will not result in a change in the indebtedness of the Company.
The Company received gross proceeds of approximately $275.0 million
from the November Offering. Additionally, the Company borrowed an aggregate of
$75.0 million pursuant to the Term Loan Agreement, the net proceeds of which
were, together with the proceeds of the November Offering, used to defease the
9 3/8% Notes and reduce outstanding borrowings under the Revolving Credit
Facility.
-27-
<PAGE>
CAPITALIZATION
The following table sets forth short-term debt and the current portion
of long-term debt and the consolidated capitalization of the Company as of
September 30, 1997 and as adjusted to give effect to the November Offering and
the application of the estimated net proceeds therefrom. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Selected Consolidated Financial Data." This table should be
read in conjunction with the Consolidated Financial Statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of September 30, 1997
------------------------------------------------
Actual As Adjusted
------ -----------
(in thousands)
<S> <C> <C>
Short-term debt............................... $ 97,000 $ 55,430
Current portion of long-term debt 199 199
Long-term debt:
9 1/4% Senior Notes offered hereby...... -- 273,958
Term Loan............................... -- 75,000
9 3/8% Senior Notes..................... 266,155 --
Other debt.............................. 1,132 1,132
-------- --------
Total long-term debt................. 267,287 350,090
-------- --------
Stockholder's equity:
Common stock.................................. -- --
Additional paid-in capital.................... 265,387 265,387
Accumulated earnings (deficit)(1)............. (98,520) (122,391)
-------- --------
Total stockholder's equity........... 166,867 142,996
-------- --------
Total capitalization.......................... $531,353 $548,715
======== ========
</TABLE>
- -------------------------------
See Notes F and G of Notes to Consolidated Financial Statements.
(1) The decrease in accumulated earnings (deficit), as adjusted, is
attributable to the anticipated extraordinary loss of approximately
$23.9 million, net of an estimated $12.8 million income tax benefit,
related to the Defeasance of the 9 3/8% Notes.
-28-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
the Company for each of the five years in the period ended December 31, 1996.
Such information is derived from the consolidated financial statements of the
Company which have been audited by Price Waterhouse LLP, independent
accountants. The data for the nine-month periods ended September 30, 1996 and
1997 and as of September 30, 1997 are unaudited, but, in the opinion of the
management of the Company, includes all adjustments (consisting only of normal,
recurring accruals) necessary for a fair presentation of the results for such
periods. The selected consolidated data presented below for the nine-month
periods ended September 30, 1996 and 1997, and as of September 30, 1997, are
derived from the unaudited consolidated financial statements of the Company
included elsewhere in this Prospectus. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements and related
consolidated notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended December 31, September 30,
----------------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales................... $929,786 $1,046,795 $1,193,878 $1,267,869 $1,110,684 $976,209 $270,109
Cost of products sold (excluding
depreciation and profit sharing) 815,801 876,814 980,044 1,059,622 988,161 824,161 356,694
Depreciation................ 54,931 57,069 61,094 65,760 66,125 56,498 29,927
Profit sharing.............. -- 4,819 9,257 6,718 -- 2,990 --
Selling, administrative and general
expenses................. 67,105 58,564 60,832 55,023 54,903 42,237 38,676
Restructuring/special charges 7,098(1) -- -- -- -- -- 88,910(2)
------- ------- ------- ------- ------- ------- ------
Operating income (loss)..... (15,149) 49,529 82,651 80,746 1,495 50,323 (244,098)
------- ------- ------ ------ ------- ------ --------
Interest expense............ 21,659 21,373 22,581 22,431 25,885 19,684 19,658
Other income (expense)...... 3,181 11,965 6,731 3,234 11,598 4,773 (214)
B & LE lawsuit settlement... -- -- 36,091 -- -- -- --
------- ------- ------- ------- ------- ------- ------
Income (loss) before taxes,
extraordinary items and
cumulative effect of change in
accounting method........ (33,627) 40,121 102,892 61,549 (12,792) 35,412 (263,970)
Tax provision (benefit)..... -- 9,400 21,173 3,030 (7,509) 9,780 (92,350)
------- ------- ------- ------- -------- ------ --------
Income (loss) before extraordinary
items and cumulative effect of
change in accounting method $(33,627) $ 30,721 $81,719 $ 58,519 $ (5,283) $25,632 $(171,620)
======== ======== ======= ======== ========== ======= ==========
Financial Ratios and Other Data:
EBITDA(3)................... $46,880 $106,598 $143,745 $146,506 $ 67,620 $106,821 $(125,261)
Capital expenditures........ 67,318 73,652 69,139 81,554 31,188 28,742 17,977
Depreciation................ 54,931 57,069 61,094 65,760 66,125 56,498 29,927
Ratio of earnings to fixed
charges(4)............... -- 2.0x 3.7x 2.5x -- 2.2x --
Selected Operating Data:
Tons shipped (000's)........ 2,068 2,251 2,397 2,385 2,105 1,898 363
Percent value-added products 68.5% 67.9% 68.6% 70.1% 71.9% 70.8% 91.9%
Dollars per shipped ton:
Sales.................... $450 $465 $498 $532 $528 $514 $744
Cost of products sold
(excluding depreciation and
profit sharing) 394 390 409 444 469 434 983
Gross profit............. 56 75 89 88 59 80 (239)
EBITDA(3)................ 23 47 60 61 32 56 (345)
Operating income (loss).. (7) 22 34 34 1 27 (672)
Average number of active
employees(5)............. 5,634 5,381 5,402 5,333 5,228 5,239 1,521
Man-hours per net ton shipped(6) 5.46 4.91 4.58 4.62 4.54 4.31 5.79
Raw steel production (000's of
tons).................... 2,350 2,260 2,270 2,200 1,780 1,780 120
Capacity utilization........ 98% 94% 95% 92% 74% 99% 7%
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
As of December 31, As of September 30,
------------------------------------------------------------------ -----------------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and
short term investments... $8,658 $279,856 $12,778 $42,826 $35,950 $7,529 $0
Working capital (excluding
cash, cash equivalents
and short-term
investments)............. 96,070 118,195 129,137 104,973 73,072 143,334 (33,420)
Property, plant and
equipment, net........... 752,518 748,673 732,615 748,999 710,999 721,202 696,134
Total assets................ 1,116,732 1,491,600 1,266,372 1,340,035 1,245,892 1,352,141 1,375,694
Total debt (including
current portion)......... 260,886 350,279 292,825 288,740 269,414 279,461 364,486
Stockholder's equity........ 230,696 432,283 246,194 343,770 338,487 369,702 166,867
</TABLE>
- ------------------------------------
(1) The Company recorded a non-cash restructuring charge of $7.1 million to
reflect the elimination of 156 salaried positions through a separation
incentive program.
(2) The loss for the first nine months of 1997 includes a special charge
for benefits included in the New Labor Agreement related to enhanced
retirement benefits, 1997 bonuses and special assistance payments for
those not returning to work immediately.
(3) EBITDA is operating income plus depreciation, amortization and
restructuring/special charges. The Company has included EBITDA because
it is commonly used by certain investors and analysts to analyze and
compare companies on the basis of operating performance, leverage and
liquidity and to determine a company's ability to service debt. EBITDA
does not represent cash flows as defined by generally accepted
accounting principals and does not necessarily indicate that cash flows
are sufficient to fund all of the Company's cash needs. EBITDA should
not be considered in isolation or as a substitute for net income
(loss), cash flows from operating activities or other measures of
liquidity determined in accordance with generally accepted accounting
principles.
(4) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of earnings before income taxes, extraordinary items
and fixed charges. Fixed charges consist of interest expense and the
portion of rental expense deemed representative of the interest factor.
For the years ended December 31, 1992 and December 31, 1996 and the
nine months ended September 30, 1997, earnings were not sufficient to
cover fixed charges. Additional earnings of $42.3 million for 1992,
$24.8 million for 1996 and $264.2 for the nine months ended September
30, 1997 would have been required to achieve a ratio of 1.0 for such
periods.
(5) "Average number of active employees" is calculated for each period as
the quotient of: the sum of total salaried and hourly employees paid
for one pay period of each month, as determined from the mid-month
salaried and hourly payroll registers, divided by the total number of
months in the respective period.
(6) "Man-hours per net ton shipped" is calculated for each period as the
quotient of: the sum of total hours worked for all union and non-union
employees for the related period plus an estimated amount of 173 hours
worked per month for each of the Company's selling, general and
administrative employees, divided by the sum of total tons shipped plus
any increase or less any decrease in inventory tons.
-30-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Introduction
The Company was reorganized on January 3, 1991 with a business strategy
of shifting its product mix to value-added products through downstream expansion
and acquisitions. In July 1994, a new holding company, WHX, which separated the
steel related operations from non-steel related businesses, was created. The
Company comprises primarily all of the steel related operations of WHX.
On August 12, 1997, the Company and the USWA entered into the New Labor
Agreement which settled the Strike. The Strike directly affected facilities
accounting for approximately 80% of the Company's steel shipments on an annual
basis. The Company believes the five year term of the New Labor Agreement
provides the Company with a significant competitive advantage since a majority
of the Company's integrated steel competitors have labor contracts that expire
in 1999. The New Labor Agreement provides for a restructuring of work rules and
manning requirements and a reduction in the expense associated with retiree
healthcare costs. The improved work rules allow the Company to eliminate 850
hourly jobs (approximately 20% of the work force) which the Company believes
will materially reduce its labor costs. Partially offsetting these savings are
wage increases and the costs of the DB Plan, which includes a retirement
incentive. Based on actual wage and certain direct employee benefits costs
during the first nine months of 1996 for employees represented by the USWA, the
elimination of 850 USWA-represented employees working a standard number of hours
per year would have resulted in estimated labor cost savings of approximately
$45 million during the Twelve Month Operating Period ended September 30, 1996.
The Company is directing its selling efforts to attain pre-Strike sales
and production levels. Market conditions for the Company's products have
remained stable since the time of the Company's return to operation after the
settlement of the Strike. The orders booked by the Company to date have been at
prices comparable to those prevailing in the market. All of the Company's
production facilities have resumed operations as of September 30, 1997. Full
primary steel operations are expected during the fourth quarter of 1997. The
Company expects to be at full shipping levels, at competitive market pricing,
during the second quarter of 1998. The Company anticipates that it will continue
reporting losses until shipments return to pre-Strike levels, which is
anticipated to occur during the second quarter of 1998, although there can be no
assurance that delays will not occur.
The Company believes that it has sufficient resources to fund the
start-up of its production facilities for re-entry into the marketplace. These
resources include the sale of the coke produced during the Strike, the sale of
receivables under the Receivables Facility and availability under the Revolving
Credit Facility. As of September 30, 1997, the Company's liquidity from the
above sources was in excess of $150 million.
Nine Months ended September 30, 1997 compared to Nine Months ended
September 30, 1996
Net sales for the first nine months of 1997 totaled $270.1 million on
shipments of .4 million tons of steel products. Net sales for the same period of
the prior year totaled $976.2 million on shipments of 1.9 million tons. The
decrease in sales and tons shipped is primarily attributable to the Strike at
eight plants located in Ohio, Pennsylvania and West Virginia. No steel products
were produced or shipped at these facilities which represented approximately 80%
of the tons shipped by the Company during the nine-month period ended September
30, 1996.
Cost of goods sold for the first nine months of 1997 totaled $356.7
million, compared to $824.2 million for the corresponding 1996 nine month
period. The decrease in costs of goods sold reflects the effects of the Strike
on the volume of steel products shipped. Cost of goods sold per ton increased to
$983 per ton from $434 per ton. The increase in cost per ton shipped reflects
higher fixed cost absorption due to lower volumes shipped, increased purchases
of steel for use by Wheeling Corrugating and Pittsburgh-Canfield Corporation
("PCC") operations, and a higher-cost mix of products shipped. Raw steel
production in the first nine months of 1997 totaled .1 million tons, compared to
1.8 million tons for the corresponding 1996 nine month period.
-31-
<PAGE>
Depreciation decreased to $29.9 million for the first nine months of
1997 from $56.5 million for the corresponding 1996 nine month period. The
decrease in depreciation is due to the effects of the Strike on production and
the units of production depreciation method.
No profit sharing was earned in the first nine months of 1997 as a
result of the Strike and its impact on pre-tax income. Profit sharing totaled
$3.0 million in the corresponding 1996 nine month period.
Selling, administrative and general expenses decreased to $38.7 million
for the first nine months of 1997 from $42.2 million in the corresponding 1996
nine month period due to a reduced salaried workforce, lower property and
liability insurance premiums and lower computer time sharing expenses.
The loss for the first nine months of 1997 includes a special charge
for benefits included in the New Labor Agreement totaling $88.9 million, related
to enhanced retirement benefits, 1997 bonuses and special assistance payments
for those not returning to work immediately.
Interest expense for the first nine months of 1997 totaled $19.7
million, substantially the same as in the corresponding 1996 nine month period.
Other income/expense for the first nine months of 1997 totaled a $.2
million expense, compared to other income of $4.8 million for the corresponding
1996 nine month period. The decrease is due primarily to equity losses of $7.3
million for start-up of OCC. For the first nine months of 1997 OCC had a net
loss of $9.9 million, primarily attributable to start-up costs.
The 1997 tax benefit and 1996 tax provision for the first nine months
reflect estimated annual effective tax rates of 35% and 28%, respectively. The
1996 rate is lower than the statutory rate of 35% due to the effect of permanent
tax differences on a relatively low pre-tax income.
Net loss for the first nine months of 1997 totaled $171.6 million.
Excluding the special charge, the net loss would be $113.8 million. Net income
for the first nine months of 1996 was $25.6 million.
1996 Compared to 1995
Net sales for the twelve months ended December 31, 1996 totaled
$1,110.7 million on shipments of 2.1 million tons of steel products. Net sales
for the twelve months ended December 31, 1995 totaled $1,267.9 million on
shipments of 2.4 million tons. The decrease in sales and tons shipped is
primarily attributable to the Strike at eight plants located in Ohio,
Pennsylvania and West Virginia. Production and shipment of steel products at
these plants ceased on October 1, 1996 and did not resume until the third
quarter of 1997. Shipments in the fourth quarter of 1996 decreased to 207,000
tons compared to 582,000 tons shipped in the fourth quarter of 1995. Also, steel
prices declined 3.8% in 1996 compared to the prior year, but were partially
offset by a higher value-added product mix. Average sale price per ton decreased
to $528 per ton in the year ended December 31, 1996 from $532 per ton in the
year ended December 31, 1995.
Cost of goods sold increased from $444 per ton shipped in the twelve
months ended December 31, 1995 to $469 in the twelve months ended December 31,
1996. This increase reflects the volume effect of lower production on fixed cost
absorption and higher levels of external steel purchases due to the Strike,
higher costs for coal, ore and natural gas and a higher value-added product mix.
The operating rate for the nine months prior to the Strike was 98.9%, but
dropped to 74.0% for the full twelve months of 1996 compared to 91.6% in 1995.
Raw steel production is 100% continuous cast.
Depreciation expense increased to $66.1 million in the twelve months
ended December 31, 1996 from $65.8 million in the twelve months ended December
31, 1995. Increased depreciation attributable to higher amounts of depreciable
property were partially offset by lower levels of raw steel production and its
effect on units of production depreciation methods.
-32-
<PAGE>
No profit sharing was earned in the twelve months ended December 31,
1996 as a result of the Strike and its impact on pre-tax income. Profit sharing
totaled $6.7 million in the twelve months ended December 31, 1995.
Selling, administrative and general expense remained stable, decreasing
to $54.9 million in the twelve months ended December 31, 1996 compared to $55.0
million in the twelve months ended December 31, 1995.
Interest expense increased to $25.9 million in the twelve months ended
December 31, 1996 from $22.4 million in the twelve months ended December 31,
1995 due to a reduction in capitalized interest from $6.4 million in the twelve
months ended December 31, 1995 to $2.5 million in the twelve months ended
December 31, 1996. The reduction in capitalized interest reflects lower amounts
of capital expenditures and shorter construction periods in the twelve months
ended December 31, 1996.
Other income increased to $11.6 million in the twelve months ended
December 31, 1996 from $3.2 million in the twelve months ended December 31,
1995. The increase reflects higher equity income from investments and increased
coal royalties.
The tax provision for the twelve months ended December 31, 1996 and the
twelve months ended December 31, 1995 was a $7.5 million benefit and $3.0
million provision, respectively, before recording a tax benefit related to
extraordinary charges in the twelve months ended December 31, 1995. The tax
provision (benefit) was calculated on an alternative minimum tax basis. The 1995
provision includes the effect of recognizing $58.0 million of deferred tax
assets, but excludes the benefit of applying $30.2 million of pre-reorganization
tax benefits, which are direct additions to paid-in-capital. There were no
pre-reorganization tax benefits applied in 1996.
Income before extraordinary charges in the twelve months ended December
31, 1995 totaled $58.5 million. The 1995 extraordinary charge of $4.7 million
($3.0 million net of tax) reflects additional liability for coal miner retiree
medical expense attributable to the allocation of additional retirees to the
Company by the Social Security Administration.
Net loss in the twelve months ended December 31, 1996 totaled $5.3
million. Net income in the twelve months ended December 31, 1995 totaled $55.5
million.
1995 Compared to 1994
Net sales for the twelve months ended December 31, 1995 totaled
$1,267.9 million on shipments of 2.4 million tons of steel products, compared to
$1,193.9 million on shipments of 2.4 million tons in the twelve months ended
December 31, 1994. The 6.2% increase in net sales reflects a 3.0% increase in
steel prices and a higher value-added product mix. Average product prices
increased 6.8% from $498 per ton shipped to $532.
Cost of goods sold increased from $409 per ton shipped in the twelve
months ended December 31, 1994 to $444 in the twelve months ended December 31,
1995. This increase reflects a higher value-added product mix, higher prices for
ore, scrap and purchased slabs, higher employment costs and lower productivity
primarily attributable to the planned blast furnace relining.
The operating rate was 91.6% in the twelve months ended December 31,
1995 compared to 94.6% in the twelve months ended December 31, 1994. Raw steel
production was 100% continuous cast in 1995 and 1994.
Depreciation expense increased 7.6% to $65.8 million in the twelve
months ended December 31, 1995, compared to the twelve months ended December 31,
1994, due to increased amounts of depreciable property.
Profit sharing expense decreased from $9.3 million to $6.7 million in
the twelve months ended December 31, 1995, compared to the twelve months ended
December 31, 1994, due to lower income before income taxes.
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<PAGE>
Selling, administrative and general expense decreased 9.5% to $55.0
million in the twelve months ended December 31, 1995, from $60.8 million in the
twelve months ended December 31, 1994, due primarily to lower consulting and
state and local tax expenses.
Interest expense decreased to $22.4 million in the twelve months ended
December 31, 1995 from $22.6 million in the twelve months ended December 31,
1994. The decrease is due to less capitalized interest.
Other income decreased to $3.2 million in the twelve months ended
December 31, 1995 from $6.7 million in the twelve months ended December 31,
1994. This decrease in other income reflects a write down in coal royalties
receivable.
The tax provisions for the twelve months ended December 31, 1995 and
the twelve months ended December 31, 1994 were $3.0 million and $21.2 million,
respectively, before recording the tax benefit related to extraordinary charges.
The tax provisions were calculated on an alternative minimum tax basis. The 1995
provision includes the effect of recognizing $58.0 million of deferred tax
assets, but excludes the benefit of applying $30.2 million of pre-reorganization
tax benefits, which are direct additions to paid-in-capital. Direct additions to
paid-in-capital in 1994 totaled $17.6 million.
Income before change in accounting method and extraordinary items in
the twelve months ended December 31, 1995 totaled $58.5 million, compared to
$81.7 million in the twelve months ended December 31, 1994 (including $36.1
million related to a legal settlement).
The 1995 extraordinary charge of $4.7 million ($3.0 million net of tax)
reflects additional liability for coal miner retiree medical expense
attributable to the allocations of more retirees to the Company by the Social
Security Administration. The 1994 charge for change in accounting method of
$12.2 million ($10.0 million net of tax) reflects the adoption of SFAS 112,
which relates to post-employment benefits other than health care.
Net income totaled $55.5 million in the twelve months ended December
31, 1995, compared to net income of $71.7 million in the twelve months ended
December 31, 1994.
Liquidity and Capital Resources
The Company will require additional working capital to fund the
re-start of its production facilities for re-entry into the marketplace. The
Company expects that the sale during 1998 of the coke produced during the
Strike, the sale of receivables under the Receivables Facility and availability
under the Revolving Credit Facility will be adequate to fund such re-start. As
of September 30, 1997, the Company's liquidity from the above sources was in
excess of $150 million.
Net cash flow used in operating activities for the first nine months of
1997 totaled $167.1 million, reflecting losses of $145.1 million before
depreciation, taxes and a special charge. Inventories, valued principally by the
LIFO method for financial reporting purposes, totaled $256.3 million at
September 30, 1997, an increase of $63.0 million from December 31, 1996. The
increase in inventories is due to increases in furnace coke (as a result of
continuing coke production by salaried workers during the Strike) and
contractual commitments for iron ore pellets. Net cash flow used in investing
activities for the first nine months of 1997 totaled $19.7 million including
capital expenditures of $18.0 million. Net cash flow from financing activities
totaled $150.9 million including borrowings under the Revolving Credit Facility
of $97.0 million, and net intercompany advances of $43.3 million.
Net cash flow from operating activities for 1996 totaled $114.3
million. Working capital accounts (excluding cash, short term investments, short
term borrowings and current maturities of long-term debt) provided $64.6 million
of funds, principally due to the Strike at eight of the Company's facilities.
Accounts receivable decreased $50.1 million (excluding $22 million payment on
trade receivable securitization transactions presented separately as a financing
activity) due to a lower level of sales during the Strike. Inventories valued
principally by the LIFO method for financial reporting purposes, totaled $193.3
million at December 31, 1996, a decrease of $73.2 million from the prior year
end. Trade payables and accruals decreased $64.5 million due to lower operating
levels.
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<PAGE>
For the twelve months ended December 31, 1996, the Company spent $31.2
million (including capitalized interest) on capital improvements, including $6.8
million on environmental control projects. Capital expenditures were lower than
in prior years due to the Strike. Non-current accrued environmental liabilities
totaled $7.3 million at December 31, 1995 and $7.8 million at December 31, 1996.
These liabilities are reviewed and adjusted quarterly as new information becomes
available. Based upon all available information, the Company does not anticipate
that assessment and remediation costs resulting from the Company's status as a
potentially responsible party will have a material adverse effect on its
financial condition or results of operations. However, as further information
comes into the Company's possession, it will continue to reassess such
evaluations. The Clean Air Act Amendment of 1990, the new ambient air quality
for standards for ozone and PM 2.5 and climate change treaty negotiations are
expected to increase the Company's costs related to environmental compliance;
however, such an increase in costs is not reasonably estimable, but is not
anticipated to have a material adverse effect on the consolidated financial
condition of the Company.
Continuous and substantial capital and maintenance expenditures will be
required to maintain and, where necessary, upgrade operating facilities to
remain competitive, and to comply with environmental control requirements. It is
anticipated that necessary capital expenditures, including required
environmental expenditures, in future years will approximate depreciation
expense and represent a material use of operating funds. The Company anticipates
funding its capital expenditures in 1997 from cash on hand, the sale of
receivables under the Receivables Facility, availability under the Revolving
Credit Facility and funds generated from operations.
The Company has a commitment to fund the working capital requirements
of each of OCC and Wheeling-Nisshin in proportion to its ownership interest if
cash requirements of such joint ventures are in excess of internally-generated
and available borrowed funds. The Company anticipates that Wheeling-Nisshin will
not have such funding requirements in the foreseeable future. To date, the
Company has invested $27.5 million in the start-up of OCC, $5.5 million of which
was invested in 1997. The Company anticipates that through December 31, 1998
additional funding requirements from the Company will be between $5.0 million
and $10.0 million. OCC may also require future working capital contributions
from its equity partners; however, the Company does not believe that any such
required funding will be material to the Company's liquidity.
In August 1994 the Company entered into an agreement to sell, up to $75
million on a revolving basis, an undivided percentage ownership in a designated
pool of accounts receivable generated by WPSC and two of the Company's
Subsidiaries, Wheeling Construction Products, Inc. ("WCP") and PCC (the
"Receivables Facility"). The Receivables Facility expires in August 1999. In
July 1995, WPSC amended such agreement to sell an additional $20 million on
similar terms and conditions. In October 1995, WPSC entered into an agreement to
include the receivables generated by Unimast in the pool of accounts receivable
sold. Accounts receivable at September 30, 1997, exclude $48.5 million
representing accounts receivable sold with recourse limited to the extent of
uncollectible balances. As of September 30, 1997, fees under this agreement
ranged from 7.42% to 8.50% of the outstanding amount of receivables sold. Based
on the Company's collection history, the Company believes that credit risk
associated with the above arrangement is immaterial.
WPSC has a Revolving Credit Facility with Citibank, N.A. as agent. The
Revolving Credit Facility provides for borrowing for general corporate purposes
of up to $150 million, and with a $35 million sublimit for Letters of Credit.
The Revolving Credit Facility expires May 3, 1999. Borrowings under the
Revolving Credit Facility are secured primarily by inventory of WPSC, PCC and
WCP, subsidiaries of the Company, and Unimast. The terms of the Revolving Credit
Facility contain various restrictive covenants, limiting among other things,
dividend payments or other distributions of assets, as defined in the Revolving
Credit Facility. Certain financial covenants associated with leverage, net
worth, capital spending, cash flow and interest coverage must also be
maintained. The Company, PCC, WCP and Unimast have each guaranteed all of the
obligations of WPSC under the Revolving Credit Facility. Borrowings outstanding
against the Revolving Credit Facility at September 30, 1997 totaled $97.0
million.
The Revolving Credit Facility bears interest, payable monthly in
arrears, at the Citibank prime rate plus 1.0% and/or a Eurodollar rate margin
plus 2.25%, but the margin over the prime rate and the Eurodollar rate can
fluctuate up or down based upon performance. The maximum prime rate margin is
1.00% and the maximum Eurodollar margin is 2.25%. The letter of credit fee is
2.25% and is also performance-based. The average interest rate on the Company's
borrowings, at September 30, 1997 was 8.16%.
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<PAGE>
WPSC also has a separate facility with Citibank, N.A. for letters of
credit up to $50 million. At September 30, 1997 letters of credit totaling $16.9
million were outstanding under this facility. The letters of credit are
collateralized at 105% with U.S. Government securities owned by the Company, and
are subject to an administrative charge of .4% per annum on the amount of
outstanding letters of credit.
WPSC is the borrower under the Revolving Credit Facility, which is
guaranteed by WPC, two subsidiaries of the Company and Unimast, a wholly-owned
subsidiary of WHX. Unimast is also a participant in the Receivables Facility,
and its receivables are included in the pool of receivables sold. Unimast, WHX
and the Company entered into an intercreditor agreement upon the consummation of
the November Offering which provides, among other things, that Unimast and WHX
will be solely responsible for repayment of any of Unimast's borrowings under
the Revolving Credit Facility and have agreed to indemnify the Company if a
default occurs under the Revolving Credit Facility or if the Receivables
Facility is terminated as a result of a breach of either of such agreements by
Unimast. In addition, the Company is solely responsible for repayment of its
borrowings under the Revolving Credit Facility and has agreed to indemnify WHX
and Unimast if a default occurs under the Revolving Credit Facility or if the
Receivables Facility is terminated as a result of a breach of either of such
agreements by the Company. There can be no assurance, however, that in the event
of a default by Unimast or WHX, that either Unimast or WHX will be able to make
any payments to the Company required by such intercreditor agreement. In
addition, in the event Unimast causes a default under the Revolving Credit
Facility, the amounts due thereunder for all participants including the Company
could be accelerated (which could lead to an event of default under the Notes)
and the Company's ability to borrow additional funds under the Revolving Credit
Facility could be terminated. In the event such acceleration occurs, there can
be no assurance that the Company will be able to refinance such borrowings. A
failure by the Company to refinance such borrowings would have a material
adverse effect on the Company. See "Risk Factors--Cross Default Provisions;"
"Description of Principal Indebtedness."
The Company entered into the Term Loan Agreement with DLJ Capital
Funding, Inc., as syndication agent, Donaldson, Lufkin & Jenrette Securities
Corporation, as arranger, Citicorp USA, Inc., as documentation agent, a
financial institution to be named as administrative agent and the lenders party
thereto on November 20, 1997, pursuant to which the Company borrowed $75.0
million. The Term Loan Agreement matures on November 15, 2006. Amounts
outstanding under the Term Loan Agreement are expected to bear interest at
either (i) the Alternate Base Rate (as defined therein) plus 2.25% or (ii) the
LIBO Rate (as defined therein) plus 3.25%, determined at the Company's option.
The Company's obligations under the Term Loan Agreement will be guaranteed by
the Company's Restricted Subsidiaries.
As of September 30, 1997, the Company had an unfunded accumulated
postretirement benefit obligation for retiree health care of approximately
$295.0 million. Under the terms of the New Labor Agreement, the Company
established a DB Plan covering its hourly employees. As of September 30, 1997,
the Company had recorded an unfunded accumulated pension benefit obligation for
the recently implemented DB Plan of approximately $162.0 million, of which
approximately 75% must be funded over the next five years. In accordance with
ERISA regulations, the Company does not anticipate having to make significant
contributions to fund the obligations of the new plan prior to 1999. See "Risk
Factors--Substantial Employee Postretirement Obligations;"
"Business--Employment."
Short-term liquidity is dependent, in large part, on cash on hand,
investments, availability under the Revolving Credit Facility, sale of
receivables under the Receivables Facility, general economic conditions and
their effect on steel demand and prices. Long-term liquidity is dependent upon
the Company's ability to sustain profitable operations and control costs during
periods of low demand or pricing in order to sustain positive cash flow. The
Company believes that, based on current levels of operations and anticipated
improvements in operating results, cash flows from operations and borrowings
available under the Revolving Credit Facility will enable the Company to fund
its liquidity and capital expenditure requirements for the foreseeable future,
including scheduled payments of interest on the Notes and payments of interest
and principal on the Company's other indebtedness, including borrowings under
the Term Loan Agreement. However, external factors, such as worldwide steel
production and demand and currency exchange rates could materially affect the
Company's results of operations and financial condition. There can be no
assurance that the Company will be able to maintain its short-term and/or its
long-term liquidity. A failure by the Company to maintain its liquidity could
have a material adverse effect on the Company.
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<PAGE>
MATERIAL CHANGES
In November 1997, the Company sold $275,000,000 of the Old Notes
pursuant to the Indenture in the November Offering and borrowed $75,000,000
pursuant to the Term Loan Agreement. The proceeds were used as described in "Use
of Proceeds."
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<PAGE>
BUSINESS
General
The Company is a vertically integrated manufacturer of predominantly
value-added flat rolled steel products. The Company sells a broad array of
value-added products, including cold rolled steel, tin- and zinc-coated steels
and fabricated steel products. The Company's products are sold to steel service
centers, converters, processors, the construction industry, and the container,
automotive and appliance industries. During the 1996 Twelve Month Operating
Period, the Company had revenues of approximately $1.3 billion, EBITDA of
approximately $134.7 million and shipped approximately 2.5 million tons of
steel.
The Company believes that it is one of the low cost domestic flat
rolled steel producers. The Company's low cost structure is the result of: (i)
the restructuring of its work rules and manning requirements under its five-year
New Labor Agreement with the USWA, which settled the Company's ten-month Strike
in August 1997; (ii) the strategic balance between its basic steel operations
and its finishing and fabricating facilities; and (iii) its efficient production
of low cost, high quality metallurgical coke.
The Company believes that the New Labor Agreement is one of the most
flexible in the industry. The new work rule package affords the Company
substantially greater flexibility in down-sizing its overall workforce, and
assigning and scheduling work, thereby reducing costs and increasing efficiency.
Furthermore, the Company expects to maintain pre-Strike steel production levels
with 850 fewer employees (a reduction of approximately 20% in its hourly
workforce). Finally, the Company believes the five year term provides the
Company with a significant advantage since a majority of the Company's
integrated steel competitors have labor contracts that will expire in 1999.
The Company has structured its operations so that its hot strip mill
and downstream operations have greater capacity than do its raw steel making
operations. The Company therefore can purchase slabs and ship at greater than
100% of its internal production capacity in periods of high demand, while
maintaining the ability to curtail such purchases and still operate its basic
steel facilities at or near capacity during periods of lower demand. The Company
believes this flexibility results in enhanced profitability throughout an
economic cycle. The Company also believes that it produces metallurgical coke at
a substantially lower cost than do other coke manufacturers because of its
proximity to high quality coal reserves and its efficient coke producing plant.
This reduces the Company's costs and, if coke demand remains high, allows the
Company to sell coke profitably in the spot and contract markets.
The Company conducts its operations primarily through two business
units, the Steel Division and Wheeling Corrugating. The Steel Division sells
flat rolled steel products such as hot rolled, cold rolled, coated and tin mill
steel to third parties, representing 77.8% and 73.3% of the Company's net sales
in 1995 and 1996, respectively. The Steel Division sells cold rolled and coated
steel substrate to Wheeling Corrugating for further processing. Wheeling
Corrugating, the Company's primary downstream operation, is a leading fabricator
of roll-formed products primarily for the construction and agricultural
industries. As part of the Company's strategy to expand its downstream
operations, the Company has acquired several fabricating facilities to enhance
profit margins and reduce exposure to downturns in steel demand. Other important
examples of the Company's downstream operations are its joint venture interests
in Wheeling-Nisshin and OCC. Wheeling-Nisshin, in which the Company owns a 35.7%
interest, produces and ships from its state-of-the-art production facility a
diverse line of galvanized, galvannealed, galvalume and aluminized products,
principally to steel service centers and the construction and automotive
industries. OCC, in which the Company owns a 50% interest, operates a new tin
coating facility that commenced commercial production in January 1997. The
Company has long-term contracts to supply up to 75% of Wheeling-Nisshin's steel
requirements and almost 100% of OCC's. These downstream operations and joint
ventures are integral to the Company's strategy of increasing shipments of
higher value-added steel products while decreasing dependence on hot rolled
coils, a lower-margin commodity steel product.
All of the Company's raw steel producing facilities have been restarted
as of September 30, 1997, and the Company expects to be at pre-Strike production
and shipment levels during the second quarter of 1998 although the Company does
not anticipate the purchase and processing of steel slabs in 1998.
Business Strategy
The Company's business strategy includes the following initiatives:
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<PAGE>
Improve Cost Structure. The New Labor Agreement has allowed the Company
to eliminate 850 hourly positions (approximately 20% of its pre-Strike hourly
workforce). The Company believes that these reductions, combined with the
significantly more flexible work rules under the New Labor Agreement, will allow
it to operate at pre-Strike levels with 850 fewer employees. As a result, the
Company anticipates substantial cost savings and productivity improvements once
pre-Strike production levels are reached. In addition, the Company has directed
its capital expenditures towards upgrading and modernizing its steelmaking
facilities, with a goal toward increasing productivity. These expenditures
include modernization of its hot and cold rolling facilities and a major reline
in 1995 of its No. 5 blast furnace located in Steubenville, Ohio. This reline
increased productivity and provided the Company with the ability to produce 100%
of the hot metal necessary to satisfy caster production requirements from two
rather than three blast furnaces. The Company's ability to produce low cost,
high quality metallurgical coke, helps the Company maintain lower costs than
those of many of its competitors. In addition, during periods of high demand the
Company is able to profitably sell coke produced in excess of its internal
needs.
Expand Production of Value-Added Products. The Company intends to
continue to expand its sale of value-added products such as coated and
fabricated steels in order to improve profit margins and reduce its exposure to
commodity steel market volatility. This strategy is evidenced by the Company's
expansion of Wheeling Corrugating and its emphasis on joint ventures, such as
Wheeling-Nisshin and OCC, which give the Company access to downstream markets
through long-term supply contracts. The Company's total shipments of value-added
products (including sales of Wheeling Corrugating and sales to Wheeling-Nisshin)
increased approximately 24% from 1992 to the 1996 Twelve Month Operating Period.
The Company will continue to target strategic acquisitions and joint ventures
that support the Company's sales of value-added products.
Product Mix
The tables below reflect the historical product mix of the Company's
shipments, expressed in tons. The Company has realized increases in the
percentage of higher value products during the 1990's as (i) the operations of
Wheeling Corrugating were expanded and (ii) Wheeling-Nisshin's second coating
line increased its requirements for cold rolled coils from WPSC. Additionally,
the OCC joint venture should enable the Company to increase tin mill product
shipments up to an additional 91,000 tons compared to 1996 levels.
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<PAGE>
Historical Product Mix
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------
1992 1993 1994 1995 1996(1)
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Product Category:
Higher Value-Added Products:
Cold Rolled Products--Trade 11.4% 11.1% 10.5% 7.9% 8.4%
Cold Rolled Products--Wheeling-Nisshin 12.0 15.6 17.3 18.9 16.6
Coated Products 21.5 20.4 21.7 21.3 21.5
Tin Mill Products 10.2 8.8 7.2 7.1 7.5
Fabricated Products (Wheeling Corrugating) 13.4 12.0 11.9 14.9 17.9
----------- ----------- ----------- ----------- ------------
Higher Value-Added Products as a Percentage
of Total Shipments 68.5 67.9 68.6 70.1 71.9
Hot Rolled Products 31.5 31.2 31.4 29.9 28.1
Semi-Finished -- 0.9 -- -- --
----------- ----------- ----------- ----------- ------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
=========== =========== =========== =========== ============
Average Net Sales per Ton $ 450 $ 465 $ 498 $ 532 $ 528
</TABLE>
(1) The allocation among product categories was affected by the Strike at
eight of the Company's facilities.
Steel Division
The Steel Division is the Company's primary steelmaking operation.
Products produced by the Steel Division are described below. These products are
sold directly to third party customers, to Wheeling-Nisshin and OCC pursuant to
long-term supply agreements between the Company and such entities and are also
transferred to Wheeling Corrugating for further processing.
Cold Rolled Products. Cold rolled coils are manufactured from hot
rolled coils by employing a variety of processing techniques, including
pickling, cold reduction, annealing and temper rolling. Cold rolled processing
is designed to reduce the thickness and improve the shape, surface
characteristics and formability of the product. In its finished form, the
product may be sold to service centers and to a variety of end users such as
appliance or automotive manufacturers or further processed internally into
corrosion-resistant coated products including hot dipped galvanized,
electrogalvanized, or tin mill products. In recent years, the Company has
increased its cold rolled production to support increased sales to
Wheeling-Nisshin and the expansion of Wheeling Corrugating, which are labeled as
separate product categories above.
Coated Products. The Company manufactures a number of
corrosion-resistant, zinc-coated products including hot dipped galvanized and
electrogalvanized sheets for resale to trade accounts and to support the
fabricating operations of Wheeling Corrugating. The coated products are
manufactured from a steel substrate of cold rolled or hot rolled pickled coils
by applying zinc to the surface of the material to enhance its corrosion
protection. The Company's trade sales of hot dipped galvanized products are
heavily oriented to unexposed applications, principally in the appliance,
construction, service center and automotive markets. Typical industry
applications include auto underbody parts, culvert pipe, refrigerator backs and
heating/air conditioning ducts. Over 30% of hot dipped galvanized production
tonnage is transferred to Wheeling Corrugating for further processing and are
reported under the fabricated products category. The Company sells
electrogalvanized products for application in the appliance and construction
markets.
Tin Mill Products. Tin mill products consist of blackplate and
tinplate. Blackplate is a cold rolled substrate (uncoated), the thickness of
which is less than .0142 inches, and is utilized extensively in the manufacture
of pails, shelving and sold to OCC for the manufacture of tinplate products.
Tinplate is produced by the electro-deposition of tin to a blackplate substrate
and is utilized principally in the manufacture of food, beverage, general line
and aerosol containers. While the majority of the Company's sales of these
products is concentrated in a variety of container markets, the Company also
markets products for automotive applications, such as oil filters and gaskets.
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<PAGE>
The Company has phased out its existing tin mill facilities and will produce all
of its tin coated products through OCC. The Company expects that its
participation in OCC will enable it to expand the Company's presence in the tin
plate market. OCC's $69 million tin coating mill, which commenced commercial
operations in January 1997, will have a nominal annual capacity of 250,000 net
tons. The Company will supply up to 230,000 tons of the substrate requirements
of the joint venture subject to quality requirements and competitive pricing.
The Company and Nittetsu Shoji America, a major Japanese trading company's U.S.
based operation, will act as the distributors of the joint venture's product,
with the Company selling between 81% and 85% of production based on volume.
Hot Rolled Products. Hot rolled coils represent the least processed of
the Company's finished goods. Approximately 72% of the Company's 1996 production
of hot rolled coils was further processed internally into value-added finished
products. The balance of the tonnage is sold as hot rolled black or pickled
(acid cleaned) coils to a variety of consumers such as converters/processors,
steel service centers and the automotive and appliance industries. The
converters/processors transform the hot rolled coil into a finished product such
as pipe and tubing, while the service centers typically slit or cut the material
to size for resale to the end user.
Fabricated Products
(Wheeling Corrugating)
Fabricated products represented 26.7% or $296.7 million of the
Company's net sales in 1996 and 22.2% or $280.9 million of the Company's net
sales in 1995. Fabricated products consist of cold rolled or coated products
further processed mainly via roll forming. The Company intends to increase sales
of fabricated products through expansion, selective acquisitions of fabricating
facilities and new product development. Wheeling Corrugating markets exclusively
value-added products.
Wheeling Corrugating is a leading fabricator of roll-formed products
for the construction, highway, and agricultural products industries. In
conjunction with the Company's business strategy of expanding its sales of
higher value-added products, Wheeling Corrugating has increased its shipments of
fabricated products by approximately 36% since 1992. Following the establishment
of its Lenexa, Kansas and Minneapolis, Minnesota locations, Wheeling Corrugating
expanded its regional operations, through acquisitions, in Wilmington, North
Carolina (1993), Gary, Indiana, Warren, Ohio (1994) and Brooks, Medford and
Klamath Falls, Oregon (1996). The regional presence of certain of these
facilities has enabled Wheeling Corrugating to take advantage of low-cost barge
freight from the Company's Ohio Valley plants and to provide customers in the
outlying areas with competitive services through "just-in-time delivery." In
some of its product lines, Wheeling Corrugating has substantial market share and
therefore has increased opportunity to pursue higher profit margins. The Company
believes that it would be difficult for a competitor to replicate Wheeling
Corrugating's geographical breadth.
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<PAGE>
The following table sets forth certain shipment information relating to
Wheeling Corrugating's product categories:
Net Tons Shipped by Wheeling Corrugating
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1992 1993 1994 1995 1996
--------- ----------- ----------- ----------- -----------
(tons in thousands)
<S> <C> <C> <C> <C> <C>
Construction Products 157.0 146.2 151.7 205.6 213.5
Agricultural Products 91.8 100.7 113.6 125.7 142.8
Highway Products 22.7 19.5 16.4 20.0 16.8
Other 4.6 4.0 4.0 3.9 3.6
--------- ----------- ----------- ----------- -----------
Total Net Tons Shipped 276.1 270.4 285.7 355.2 376.7
========= =========== =========== =========== ===========
</TABLE>
Construction Products. Construction products consist of roll-formed
sheets, which are utilized in sectors of the non-residential building market
such as commercial, institutional and manufacturing. They are classified into
three basic categories: roof deck; form deck; and composite floor deck. Roof
deck is a formed steel sheet, painted or galvanized, which provides structural
support in non-residential roofing systems. Form deck is a formed steel sheet,
painted, galvanized or uncoated, that provides structural form support for
structural or insulating concrete slabs in non-residential floor or roofing
systems. Composite floor deck is a formed steel sheet, painted, galvanized or
uncoated, that provides structural form support and positive reinforcement for
structural concrete slabs in non-residential floor systems.
Agricultural Products. Agricultural products consist of roll-formed,
corrugated sheets which are used as roofing and siding in the construction of
barns, farm machinery enclosures and light commercial buildings and certain
residential roofing applications. These products can be manufactured from hot
dipped or painted hot dipped galvanized coils. Historically, these products have
been sold primarily in rural areas. In recent years, however, such products have
found increasing acceptance in light commercial buildings.
Highway Products. Highway products consist of bridge form, which is
roll-formed corrugated sheets that are swedged on both ends and are utilized as
concrete support forms in the construction of highway bridges.
Wheeling-Nisshin
At September 30, 1997 and as of December 31, 1996, the Company had a
35.7% equity interest in Wheeling-Nisshin, which is a joint venture between the
Company and Nisshin Steel. Wheeling-Nisshin is a state-of-the-art processing
facility located in Follansbee, West Virginia which produces among the lightest
gauge galvanized steel products available in the United States. Shipments by
Wheeling-Nisshin of hot dipped galvanized, galvanneal, galvalume and aluminized
products, principally to the construction industry, have increased from 158,600
tons in 1988 to 665,787 tons in 1996. Wheeling-Nisshin products are marketed
through trading companies, and its shipments are not consolidated into the
Company's shipments.
Wheeling-Nisshin began commercial operations in 1988 with an initial
capacity of 360,000 tons. In March 1993, Wheeling-Nisshin added a second hot
dipped galvanizing line, which increased its capacity by approximately 80%, to
over 660,000 annual tons and allows Wheeling-Nisshin to offer the lightest-gauge
galvanized sheet products manufactured in the United States for construction,
heating, ventilation and air-conditioning and after-market automotive
applications. Wheeling-Nisshin has been profitable every year since inception.
Wheeling-Nisshin's results of operations for the twelve months ended December
31, 1996 and the first nine months of 1997 were negatively impacted by the
Strike, principally due to the Company's inability to supply cold rolled coils
to Wheeling-Nisshin during the period of the Strike, which caused
Wheeling-Nisshin to purchase cold rolled coils in the spot market at higher
prices.
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<PAGE>
The Company's amended and restated supply agreement with
Wheeling-Nisshin expires in 2013. Pursuant to the amended supply agreement, the
Company will provide not less than 75% of Wheeling-Nisshin's steel substrate
requirements, up to an aggregate maximum of 9,000 tons per week subject to
product quality requirements. Pricing under the supply agreement is negotiated
quarterly based on a formula which gives effect to competitive market prices.
Shipments of cold rolled steel by the Company to Wheeling-Nisshin were
approximately 467,000 tons, or 18.8% of the Company's total tons shipped in the
1996 Twelve Month Operating Period and approximately 450,000 tons, or 18.9%, in
1995. The increase in shipments of cold rolled sheet have reduced the Company's
shipments of hot rolled coils (a lower-margin steel product) and is an integral
part of the Company's strategy of increasing its presence in higher value-added
products.
The following chart provides certain financial and operating data for
Wheeling-Nisshin:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
(tons in thousands, dollars in millions)
<S> <C> <C> <C> <C> <C>
Tons sold 351.0 467.2 628.8 651.2 665.8
Revenues $187.3 $264.2 $374.6 $391.6 $377.5
EBITDA(1) 19.7 27.6 35.6 47.8 47.0
Net income 9.0 7.1 10.4 18.0 21.6
The Company's pro rata share:
Cash dividends received -- -- 2.5 2.5 2.5
Equity income 1.8 1.8 3.7 6.4 7.7
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- -----------
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Total assets $210.6 $253.2 $241.4 $205.5 $219.4
Total debt 103.4 95.7 68.7 36.7 25.3
Stockholders' equity 83.7 106.1 109.5 120.6 135.2
</TABLE>
(1) EBITDA is operating income plus depreciation and amortization. The
Company has included EBITDA because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance, leverage and liquidity and to determine a
company's ability to service debt. EBITDA does not represent cash flows
as defined by generally accepted accounting principals and does not
necessarily indicate that cash flows are sufficient to fund all of the
Company's cash needs. EBITDA should not be considered in isolation or
as a substitute for net income (loss), cash flows from operating
activities or other measures of liquidity determined in accordance with
generally accepted accounting principles.
Ohio Coatings Company
The Company has a 50% equity interest in OCC, which is a joint venture
between the Company and Dong Yang, a leading South Korea-based tin plate
producer. Nittetsu Shoji America ("Nittetsu"), a U.S. based tin plate importer,
holds non-voting preferred stock in OCC and will act, together with the Company,
as a distributor of OCC's products. OCC completed construction of a $69 million
state-of-the-art tin coating mill in 1996 and commenced commercial operations in
January 1997. OCC is the most modern domestic tin coating line and is positioned
to become a premier supplier of tin plate to the container and automotive
industries. The OCC tin coating line is anticipated to have a nominal annual
capacity of 250,000 net tons, and shipped 52,000 tons in the first nine months
of 1997. The Company has phased out its existing tin coating facilities and will
produce all of its tin coated products through OCC. The Company's participation
in OCC will enable it to expand the Company's presence in
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<PAGE>
the tin plate market and convert more hot rolled sheet into tin mill products.
As part of the joint venture agreement, the Company has the right to supply up
to 230,000 tons of the substrate requirements of OCC, subject to quality
requirements and competitive pricing. The Company will market between 81% and
85% of OCC's products. In the first nine months of 1997, OCC had operating
losses of $6.1 million, which were negatively impacted by the Strike.
Customers
The Company markets an extensive mix of products to a wide range of
manufacturers, converters and processors. The Company's 10 largest customers
(including Wheeling-Nisshin) accounted for approximately 40.4% of its net sales
in 1994, 35.4% in 1995, and 34.9% in 1996. Wheeling-Nisshin was the only
customer to account for more than 10% of net sales. Wheeling-Nisshin accounted
for 15.2%, 15.2% and 12.7% of net sales in 1994, 1995, and 1996, respectively.
Geographically, the majority of the Company's customers are located within a
350-mile radius of the Ohio Valley. However, the Company has taken advantage of
its river-oriented production facilities to market via barge into more distant
locations such as the Houston, Texas and St. Louis, Missouri areas. As discussed
above, Wheeling Corrugating has acquired regional facilities to service an even
broader geographical area.
The Company's shipments historically have been concentrated within
seven major market segments: construction industry, steel service centers,
converters/processors, agriculture, container, auto, and appliances. The
Company's overall participation in the construction and the
converters/processors markets substantially exceeds the industry average and its
reliance on automotive shipments as a percentage of total shipments is
substantially less than the industry average.
Percent of Total Net Tons Shipped
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
Major Customer Category: 1992 1993 1994 1995 1996(1)
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Steel Service Centers 36% 33% 32% 29% 26%
Converters/Processors(2) 20 26 28 28 25
Construction 18 18 18 18 22
Agriculture 5 5 5 6 7
Containers(2) 9 7 6 6 7
Automotive 7 6 6 5 5
Appliances 3 3 3 4 4
Exports -- -- -- 1 1
Other 2 2 2 3 3
----------- ----------- ----------- ----------- -------------
Total 100% 100% 100% 100% 100%
=========== =========== =========== =========== =============
</TABLE>
(1) The allocation among customer categories was affected by the Strike at
eight of the Company's facilities.
(2) Products shipped to Wheeling-Nisshin and OCC are included primarily in
the Converters/Processors and Containers markets, respectively.
Set forth below is a description of the Company's major customer
categories:
Steel Service Centers. The Company's shipments to steel service centers
are heavily concentrated in the areas of hot rolled and hot dipped galvanized
coils. Due to increased in-house costs to steel companies during the 1980's for
processing services such as slitting, shearing and blanking, steel service
centers have become a major factor in the distribution of hot rolled products to
ultimate end users. In addition, steel service centers have become a significant
factor in the sale of hot dipped galvanized products to a variety of small
consumers such as mechanical contractors, who desire not to be burdened with
large steel inventories.
-44-
<PAGE>
Converters/Processors. The growth of the Company's shipments to the
converters/processors market is principally attributable to the increase in
shipments of cold rolled products to Wheeling-Nisshin, which uses cold rolled
coils as a substrate to manufacture a variety of coated products, including hot
dipped galvanized and aluminized coils for the automotive, appliance and
construction markets. As a result of the second line expansion, the Company's
shipments to Wheeling-Nisshin increased significantly beginning in 1993. The
converters/processors industry also represents a major outlet for the Company's
hot rolled products, which are converted into finished commodities such as pipe,
tubing and cold rolled strip.
Construction. The Company's shipments to the construction industry are
heavily influenced by the sales of Wheeling Corrugating. Wheeling Corrugating
services the non-residential and agricultural building and highway industries,
principally through shipments of hot dipped galvanized and painted cold rolled
products. With its acquisitions during the 1980's and early 1990's of regional
facilities, Wheeling Corrugating has doubled its shipments and has been able to
market its products into broad geographical areas. The Company expects these
acquisitions will mitigate the effects of regional economic downturns in the
construction business. In December 1996 the Company, through Wheeling
Corrugating, acquired the assets of Champion Metal Co., a rollformer, which has
three locations in Oregon.
Agriculture. The Company's shipments to the agricultural market are
principally sales of Wheeling Corrugating roll-formed, corrugated sheets which
are used as roofing and siding in the construction of barns, farm machinery
enclosures and light commercial buildings.
Containers. The vast majority of the Company's shipments to the
container market are concentrated in tin mill products, which are utilized
extensively in the manufacture of food, aerosol, beverage and general line cans.
The container industry has represented a stable market. The balance of the
Company's shipments to this market consists of cold rolled products for pails
and drums. As a result of the OCC joint venture, the Company phased out its
existing tin mill production facilities in 1996, and has begun to distribute
products produced by OCC. The Company has the right to supply up to 230,000 tons
of the substrate requirements of OCC.
Automotive. Unlike the majority of its competitors, the Company is not
heavily dependent on shipments to the automotive industry. However, the Company
has established a variety of higher value-added niches in this market,
particularly in the area of hot dipped galvanized products for deep drawn
automotive underbody parts. In addition, the Company has been a supplier of tin
mill products for automotive applications, such as oil filters and gaskets. A
third niche has been the Company's participation in painted electrogalvanized
products for auto draft stripping applications. As a result of the Strike, the
Company was unable to secure automotive contracts for 1998. The Company
anticipates it will be in a favorable position to compete for automotive
contracts in future periods.
Appliance. The Company's shipments to the appliance market are
concentrated in hot dipped galvanized, electrogalvanized and hot rolled coils.
These products are furnished directly to appliance manufacturers as well as to
blanking, drawing and stamping companies. Additional shipments are furnished to
service centers and converters/processors for ultimate appliance applications.
The Company has concentrated on niche product applications primarily used in
washer/dryer, refrigerator/freezer and range appliances. The Company anticipates
that it will retain a portion of its appliance contracts for 1998. However, due
to the Strike, the Company will not be able to secure a full level of shipments
comparable to those achieved in 1996. The Company expects to be in a favorable
position to compete for contracts to supply appliance manufacturers in 1999.
Manufacturing Process
In the Company's primary steelmaking process, iron ore pellets, coke,
limestone, sinter and other raw materials are consumed in the blast furnace to
produce hot metal. Hot metal is further converted into liquid steel through its
basic oxygen furnace ("BOF") process where impurities are removed, recycled
scrap is added and metallurgical properties for end use are determined on a
batch-by-batch (heat) basis. The Company's BOF has two vessels, each with a
steelmaking capacity of 285 tons per heat. From the BOF, the heats of steel are
sent to the ladle metallurgy facility ("LMF"), where the temperature and
chemistry of the steel are adjusted to precise tolerances. Liquid steel from the
LMF then is formed into slabs through the process of continuous casting. After
continuous
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<PAGE>
casting, slabs are reheated, reduced and finished by extensive rolling, shaping,
tempering and, in certain cases, by the application of coatings at the Company's
downstream operations. Finished products are normally shipped to customers in
the form of coils or fabricated products. The Company has linked its steelmaking
and rolling equipment with a computer based integrated manufacturing control
system to coordinate production tracking and sales activities.
Raw Materials
The Company has a 12.5% ownership interest in Empire Iron Mining
Partnership ("Empire") which operates a mine located in Palmer, Michigan. The
Company is obligated to purchase approximately 12.5% or 1.0 million gross tons
per year (at current production levels) of the mine's annual ore output.
Interest in related ore reserves as of December 31, 1996, is estimated to be
22.5 million gross tons. The Company generally consumes approximately 2.4
million gross tons of iron ore pellets in its blast furnaces. The Company's pro
rata cash operating cost of Empire currently approximates the market price of
ore. The Company obtains approximately half of its iron ore from spot and
medium-term purchase agreements at prevailing world market prices. It has
commitments for the majority of its blast furnace iron ore pellet needs through
1999 from suppliers in North America.
In November 1993, the Company sold the operating assets of its coal
company to an unrelated third party. The Company also entered into a long-term
supply agreement with such third party to provide the Company with a substantial
portion of the Company's coal requirements at competitive prices. The Company's
operations require a substantial amount of coking coal.
The Company currently produces all of its coke requirements and
typically consumes generally all of the resultant by-product coke oven gas. In
1996, approximately 1.6 million tons of coking coal were consumed in the
production of blast furnace coke by the Company. The Company may continue to
sell its excess coke and coke oven by-products to third-party trade customers.
During the Strike, the Company continued to produce coke at its Follansbee
facility. The Company has entered into a contract with a major domestic
integrated steel producer for the sale of coke produced by the Company during
the Strike.
The Company's operations require material amounts of other raw
materials, including limestone, oxygen, natural gas and electricity. These raw
materials are readily available and are purchased on the open market. The
Company is presently dependent on external steel scrap for approximately 8% of
its steel melt. The cost of these materials has been susceptible in the past to
price fluctuations, but worldwide competition in the steel industry has
frequently limited the ability of steel producers to raise finished product
prices to recover higher material costs. Certain of the Company's raw material
supply contracts provide for price adjustments in the event of increased
commodity or energy prices.
Backlog
Order backlog was 308,100 net tons at September 30, 1997, compared to
158,751 net tons at December 31, 1996 and 400,624 tons at December 31, 1995. The
low level of order backlog reflects the recently settled Strike at eight plants
in Ohio, Pennsylvania and West Virginia. The Company believes that the September
30, 1997 order backlog will be shipped by the end of the 1998 first quarter. The
Company is vigorously pursuing customers lost to competitors during the Strike
and anticipates rebuilding its order backlog to historic levels.
-46-
<PAGE>
Capital Investments
The Company believes that it must continuously strive to improve
productivity, product quality and control manufacturing costs in order to remain
competitive. Accordingly, the Company is committed to continuing to make
necessary capital investments with the objective of reducing manufacturing costs
per ton, improving the quality of steel produced and broadening the array of
products offered to the Company's served markets. The Company's capital
expenditures (including capitalized interest) for 1996 were approximately $31.2
million, including $6.8 million on environmental projects. Capital expenditures
in 1996 were lower than in recent years due to the Strike. From 1992 to 1996,
such expenditures aggregated approximately $322.9 million. This level of capital
expenditures was needed to maintain productive capacity, improve productivity
and upgrade selected facilities to meet competitive requirements and maintain
compliance with environmental laws and regulations. The capital expenditure
program has included improvements to the Company's infrastructure, blast
furnaces, steel-making facilities, 80-inch hot strip mill and finishing
operations, and has resulted in improved shape, gauge, surface and physical
characteristics for its products. In particular, the quality improvements
completed at the Allenport cold rolling facility in 1992 and the installation of
automatic gauge controls at the Yorkville tandem mill in 1993 have enhanced
productivity and improved the quality of substrate provided to Wheeling-Nisshin
and other customers. Continuous and substantial capital and maintenance
expenditures will be required to maintain operating facilities, modernize
finishing facilities to remain competitive and to comply with environmental
control requirements. The Company anticipates funding its capital expenditures
in 1997 and 1998 from cash on hand and funds generated by operations, sale of
receivables under the Receivables Facility and funds available under the
Revolving Credit Facility. During the Strike, the Company had delayed
substantially all capital expenditures at the Strike-affected plants. The
Company anticipates that capital expenditures will approximate depreciation on
average, over the next few years.
Energy Requirements
During 1996 coal constituted approximately 78% of the Company's total
energy consumption, natural gas 18% and electricity 4%. Many of the Company's
major facilities that use natural gas have been equipped to use alternative
fuels. The Company continually monitors its operations regarding potential
equipment conversion and fuel substitution to reduce energy costs.
Employment
Total active employment of the Company averaged 5,239 employees,
through the nine months ended September 30, 1996, of which 4,090 were
represented by the USWA, and 106 by other unions. The remainder consisted of 929
salaried employees and 114 non-union operating employees.
On August 12, 1997, the Company and the USWA entered into the New Labor
Agreement. Set forth below is a summary of terms of the New Labor Agreement.
Term
The contract has a five year term with no mid-term renegotiation
provisions ("reopeners").
Work Force Reduction
The Company has implemented its immediate and unilateral right to
reduce its hourly work force by 850 employees (from its pre-Strike level of
approximately 4,090). The Company has no obligation to replace workers upon
retirement. The average all-in cost per job eliminated is $55,000 per year in
wages and benefits. Based on actual wage and certain direct employee benefit
costs during the first nine months of 1996 for employees represented by the
USWA, the elimination of 850 USWA-represented employees working a standard
number of hours per year would have resulted in estimated labor cost savings of
approximately $45 million during the Twelve Month Operating Period ended
September 30, 1996.
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<PAGE>
Work Rule Modernization
The above mentioned job reductions are made possible by a dramatic
restructuring of the Company's work rules, including, among other things,
provisions for: (i) mandatory multi-crafting which requires participation of all
hourly craftsmen under the age of 55 and is expected to result in a more highly
skilled and flexible work force; (ii) a new "equipment tender" position, which
allows for craftsmen to operate, maintain and repair their own equipment and is
expected to reduce the need for dedicated maintenance crews; and (iii) enhanced
maintenance flexibility, which allows for greater freedom in assignment of
non-craft jobs and permits craftsmen to assist each other in performing
maintenance functions.
Wage and Bonus
The Company paid a bonus of $2,000 per hourly employee upon
ratification of the New Labor Agreement. In addition, the Company agreed to
increase hourly wage rates (currently averaging $17.00/hour) as follows: (i)
25(cent) per hour on June 1, of each of 1998, 1999 and 2000; and (ii) 37.5(cent)
per hour on each of June 1, 2001 and March 1, 2002.
Trust for Retiree Medical Obligations
The New Labor Agreement gives the Company the right to pay up to $11
million of retiree medical expenses using previous contributions to a trust
established for the benefit of future retirees. Such payments would otherwise be
funded out of the Company's operating cash flows. Furthermore, the Company is
relieved of its obligation to make certain future annual contributions
(aggregating $16 million) to the trust. The Company will make one payment
(estimated to be $4 million) to the trust in July 2002. Finally, the Company's
obligation to pay retiree medical costs beyond the term of its pension agreement
is limited on a per capita basis.
Pension Plan (summary of terms)
The Company agreed to provide a DB Plan for its hourly employees. The
DB Plan has an eight year term and provides for monthly cash benefits as
follows: (i) for employees who retire prior to May 31, 2003, $40 times years of
service; or (ii) for those who retire on or after May 31, 2003, $44 times years
of service.
The DB Plan has certain early retirement provisions which are either
similar to or less costly than those of the typical USWA-bargained plans. In
addition, the DB Plan provides for certain incentives to accelerate the rate of
retirement of hourly employees. The Company has offered to pay either a $25,000
lump sum, or $400 per month until age 62, to the first 818 eligible employees
who opt to retire.
The Company is no longer obliged to make contributions (which averaged
$9.2 million per year for the period from 1985 to 1996) to its Defined
Contribution Plan ("DC Plan"). The approximately $130 million in assets in the
DC Plan (as of August 31, 1997) are available to fund individuals' retirement
benefits under the new DB Plan. The actuarially determined unfunded accumulated
benefit obligation for all benefits under the DB Plan totals $162.0 million as
of September 30, 1997. Under ERISA, the Company is subject to annual minimum
cash funding requirements to satisfy its obligations under the DB Plan.
Other Provisions
The requirement to have a USWA representative on the WHX board of
directors was eliminated and the number of representatives on the WPSC board of
directors was reduced from two to one. Certain aspects of the Company's Medical
Benefit Plans were amended with the effect of encouraging employees to elect the
Company's managed care medical plan option. A new gain sharing arrangement was
implemented which supplants profit sharing under certain circumstances.
Competition
The steel industry is cyclical in nature and has been marked
historically by overcapacity, resulting in intense competition among domestic
integrated steel producers, minimills and processors. The market for flat rolled
steel in the United States is supplied principally by domestic integrated steel
producers, domestic steel minimills and
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<PAGE>
processors and foreign steel producers. Integrated producers produce steel from
a combination of iron ore, coke and steel scrap using blast furnaces and basic
oxygen furnaces.
The Company faces increasing competitive pressures from other domestic
integrated producers, minimills and processors. Processors compete with the
Company in the areas of slitting, cold rolling and coating. Minimills are
generally smaller volume steel producers that use ferrous scrap metals as their
basic raw material. Compared to integrated producers, minimills, which rely on
less capital intensive hot metal sources, have certain advantages. Since
minimills typically are not unionized, they have more flexible work rules that
have resulted in lower employment costs per net ton shipped. Since 1989,
significant flat rolled minimill capacity has been constructed and these
minimills now compete with integrated producers in product areas that
traditionally have not faced significant competition from minimills. In
addition, there is significant additional flat rolled minimill capacity under
construction or announced with various planned commissioning dates in 1997
through 1999. Near term, these minimills are expected to compete with the
Company primarily in the commodity flat rolled steel market and processors are
expected to compete with the Company in the flat rolled and cold rolled steel
market. In the long-term, such minimills may also compete with the Company in
producing value-added products. In addition, the increased competition in
commodity product markets influence certain integrated producers to increase
product offerings to compete with the Company's custom products.
As the single largest steel consuming country in the western world, the
United States has long been a favorite market of steel producers in Europe and
Japan. Steel producers from emerging economic powers such as Korea, Taiwan, and
Brazil, and non-market economies such as Russia and China, have also recognized
the United States as a target market.
Total annual steel consumption in the United States has fluctuated
between 88 million and slightly over 117 million tons since 1991. A number of
steel substitutes, including plastics, aluminum, composites and glass, have
reduced the growth of domestic steel consumption.
Steel imports of flat rolled products as a percentage of domestic
apparent consumption, excluding semi-finished steel, have been approximately 20%
in 1994, 18% in 1995, and 19% in 1996. World steel demand, world export prices,
U.S. dollar exchange rates and the international competitiveness of the domestic
steel industry have all been factors in these import levels.
Properties
The Company has one raw steel producing plant and various other
finishing and fabricating facilities. The Steubenville complex is an integrated
steel producing facility located at Steubenville and Mingo Junction, Ohio and
Follansbee, West Virginia. The Steubenville complex includes a sinter plant,
coke oven batteries that produce all coke requirements, three blast furnaces
(two operating), two basic oxygen furnaces, a two-strand continuous slab caster
with an annual slab production capacity of approximately 2.4 million tons, an
80-inch hot strip mill and pickling and coil finishing facilities. The Ohio and
West Virginia locations, which are separated by the Ohio River, are connected by
a railroad bridge owned by the Company. A pipeline is maintained for the
transfer of coke oven gas for use as fuel from the coke plant to several other
portions of the Steubenville complex. The Steubenville complex primarily
produces hot rolled products, which are either sold to third parties or shipped
to other of the Company's facilities for further processing into value-added
products.
The following table lists the other principal plants of the Company and
the annual capacity of the major products produced at each facility:
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<PAGE>
Other Major Facilities
<TABLE>
<CAPTION>
Location and Operations Capacity Tons/Year Major Products
- ------------------------------------------------------- ---------------------- -----------------------------------
<S> <C>
Allenport, Pennsylvania:
Continuous pickler, tandem mill, temper
mill and annealing 950,000 Cold rolled sheets
Beech Bottom, West Virginia:
Paint line 120,000 Painted steel in coil form
Canfield, Ohio:
Electrogalvanizing line, paint line, ribbon 65,000 Electrolytic galvanized sheet and
and oscillating rewind slitters strip
Martins Ferry, Ohio:
Temper mill, zinc coating lines and roll 750,000 Hot dipped galvanized sheets and
forming equipment coils and formed steel products
Yorkville, Ohio:
Continuous pickler, tandem mill, temper
mills and annealing lines 660,000 Black plate and cold rolled sheets
</TABLE>
Wheeling Corrugating fabricates products at Fort Payne, Alabama;
Houston, Texas; Lenexa, Kansas; Louisville, Kentucky; Minneapolis, Minnesota;
Warren, Ohio; Gary, Indiana; Wilmington, North Carolina and Klamath Falls,
Medford and Brooks, Oregon. The Fort Payne, Houston and Wilmington facilities
were acquired in 1986, 1989 and 1993, respectively. The Gary facility was
acquired in 1994. The Oregon facilities were acquired in 1996.
The Company maintains five regional sales offices for flat-rolled and
tin mill products and nine sales offices and/or warehouses for Wheeling
Corrugating products.
All of the above facilities currently owned by the Company are
regularly maintained in good operating condition. However, continuous and
substantial capital and maintenance expenditures are required to maintain the
operating facilities, to modernize finishing facilities in order to remain
competitive and to meet environmental control requirements.
All of the above facilities and substantially all of the other real
property of the Company are owned in fee by the Company (exclusive of coal lands
held by subsidiaries or corporations in which the Company has an interest) and
are subject to the first lien that secures the $9.6 million face amount (as of
September 30, 1997) of Tax Benefit Transfer Letters of Credit issued to support
the sale of tax benefits associated with the construction of the slab caster
located at the Company's Steubenville complex.
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<PAGE>
LEGAL PROCEEDINGS
Environmental Matters
The Company, as are other industrial manufacturers, is subject to
increasingly stringent standards relating to the protection of the environment.
In order to facilitate compliance with these environmental standards, the
Company has incurred capital expenditures for environmental control projects
aggregating $8.7 million, $5.9 million and $6.8 million for 1994, 1995 and 1996,
respectively. The Company anticipates spending approximately $47.2 million in
the aggregate on major environmental compliance projects through the year 2000,
estimated to be spent as follows: $15.0 million in year 1997, $11.2 million in
1998, $10.5 million in 1999 and $10.5 million in 2000. Due to the possibility of
unanticipated factual or regulatory developments, the amount and timing of
future expenditures may vary substantially from such estimates.
The Company has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund") or similar state statutes at several waste sites. The Company is
subject to joint and several liability imposed by Superfund on potentially
responsible parties. Due to the technical and regulatory complexity of remedial
activities and the difficulties attendant to identifying potentially responsible
parties and allocating or determining liability among them, the Company is
unable to reasonably estimate the ultimate cost of compliance with Superfund
laws. The Company believes, based upon information currently available, that the
Company's liability for clean up and remediation costs in connection with the
Buckeye Reclamation will be between $3.0 million and $4.0 million; at six other
sites (MIDC Glassport, United Scrap Lead, Tex-Tin, Breslube Penn, Four County
Landfill and Beazor) the Company estimates costs to aggregate up to $700,000.
The Company is currently funding its share of remediation costs. The Company has
resolved its liability at the Oak Grove Sanitary Landfill site and does not
anticipate any further costs with respect to this site. Non-current accrued
environmental liabilities totaled $7.3 million at December 31, 1995 and $7.8
million at December 31, 1996. These accruals were initially determined by the
Company in January 1991, based on all then available information. As new
information becomes available including information provided by third parties,
and changing laws and regulations, the liabilities are reviewed and the accruals
adjusted quarterly. Based upon all available information, the Company does not
anticipate that assessment and remediation costs resulting from the Company's
potentially responsible party status will have a material adverse effect on its
financial condition or results of operations.
The Clean Air Act Amendments of 1990 (the "Clean Air Act") directly
affect the operations of many of the Company's facilities, including coke ovens.
Under the Clean Air Act, coke ovens generally will be required to comply with
progressively more stringent standards which will result in an increase in
environmental capital expenditures and costs for environmental compliance. Most
of the forecasted environmental expenditures will be spent on projects relating
to compliance with these standards. Upon completion of the capital projects, the
Company anticipates that its batteries will meet the applicable Clean Air Act
standard.
In March 1993 the EPA notified the Company of Clean Air Act violations,
alleging particulate matter and hydrogen sulfide emissions in excess of
allowable concentrations, at the Company's Follansbee Coke Plant. The parties
have entered into a consent decree settling the civil penalties related to this
matter for $700,000. The Company has accrued for the cost of this settlement.
In an action brought in 1985 in the U.S. District Court for the
Northern District of West Virginia, the EPA claimed violations of the Solid
Waste Disposal Act at a surface impoundment area at the Follansbee facility. The
Company and the EPA entered into a consent decree in October 1989 whereby soil
and groundwater testing and monitoring procedures are required. The surface
impoundment has been closed, and the Company is waiting for approval from the
USEPA. Until the USEPA responds to the Company, the full extent and cost of
remediation cannot be ascertained. The Company has accrued for the estimated
cost of closing the surface impoundment.
In June of 1995 the USEPA informally requested corrective action
affecting other areas of the Follansbee facility. The USEPA is seeking to
require the Company to perform a site investigation of the Follansbee plant. The
Company has actively contested the Initial Administrative Order (formally issued
as USEPA Doc. # RCRA-III-080-CA, September 27, 1996) by invoking the Dispute
Resolution provision of the October 1989
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<PAGE>
Consent Order (Civil Action No. 85-0124-W); however, the Dispute Resolution
Petition was dismissed by the U.S. District Court for the Northern District of
West Virginia and the dismissal was affirmed by the U.S. 4th Circuit Court of
Appeals. At present, the Company lacks sufficient information to estimate the
investigation and possible remediation costs necessary to comply with the
Initial Administrative Order.
On December 20, 1995 the Department of Justice notified the Company of
its intention to bring proceedings seeking civil penalties for alleged
violations of the Clean Water Act (1991-94) and Resource Conservation and
Recovery Act ("RCRA") (1990-91) at the Company's Follansbee facility. Suit was
filed February 5, 1996 in the U.S. District Court, Eastern District of West
Virginia (Civil Action #5-96CV20). A consent decree has been entered and the
matter has been settled for $200,000.
In addition, the West Virginia Department of Environmental Protection
("WVDEP") sought civil penalties for violations of a NPDES permit at the
Company's Follansbee plant. A settlement has been proposed by the WVDEP in which
the Company would pay approximately $100,000 in settlement of this matter.
By letter dated March 15, 1994 the Ohio Attorney General advised the
Company of its intention to file suit on behalf of the Ohio EPA for alleged
hazardous waste violations at the Company's Steubenville, Mingo Junction,
Martins Ferry and Yorkville facilities. In subsequent correspondence the State
of Ohio demanded a civil penalty of approximately $300,000 in addition to
injunctive relief. The injunctive relief consists of remedial activities at each
facility aggregating less than $125,000, the initiation of a waste minimization
program at the affected facilities and a company-wide compliance assessment. The
Company is in the process of conducting settlement negotiations. The Company has
accrued an appropriate reserve for this claim.
The Company is currently operating in substantial compliance with three
consent decrees (two with the EPA and one with the Pennsylvania Department of
Environmental Resources) with respect to wastewater discharges at Allenport,
Pennsylvania and Mingo Junction, Steubenville, and Yorkville, Ohio. All of the
foregoing consent decrees are nearing expiration and petition to terminate them
will be filed in the near future.
The Company is aware of potential environmental liabilities resulting
from operations, including leaking underground and aboveground storage tanks,
and the disposal and storage of residuals on its property. Each of these
situations is being assessed and remediated in accordance with regulatory
requirements. The Company does not believe the resolution of these issues or
other litigation occurring in the normal course of business will have a material
adverse effect on the financial condition or results of operations of the
Company.
Based upon information currently available, including the Company's
prior capital expenditures, anticipated capital expenditures, consent agreements
negotiated with Federal and state agencies and information available to the
Company on pending judicial and administrative proceedings, the Company does not
expect its environmental compliance costs, including the incurrence of
additional fines and penalties, if any, relating to the operation of its
facilities, to have a material adverse effect on the financial condition or
results of operations of the Company. However, as further information comes into
the Company's possession, it will continue to reassess such evaluations.
General Litigation
The Company is a party to various litigation matters including general
liability claims covered by insurance. In the opinion of management, such claims
are not expected to have a material adverse effect on the financial condition or
results of operations of the Company.
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MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding the Company's
directors and executive officers:
Name Age Position
- ---------------------- ------------- ----------------------------------------
John R. Scheessele 50 President
Paul J. Mooney 46 Executive Vice President and Chief
Financial Officer
James T. Gibbons 46 Vice President--Mergers and Acquisitions
Thomas R. Notaro 47 Vice President--Comptroller
John W. Testa 61 Vice President, Assistant Secretary and
Treasurer
Ronald LaBow 62 Director
Robert A. Davidow 55 Director
Marvin L. Olshan 70 Director and Secretary
The business experience, principal occupations and employment as well
as the periods of service of each of the directors and executive officers of the
Company during the last five years are set forth below.
John R. Scheessele has been President of the Company, a Director and
President of WHX and Chairman of the Board, President and Chief Executive
Officer of WPSC since March 1997. Prior to such time, Mr. Scheessele was
President and Chief Executive Officer of The SKD Company from February 1996 to
February 1997. Prior to such time, Mr. Scheessele was President and Chief
Executive Officer of WCI Steel, Inc. ("WCI") from November 1994 to September
1995, Executive Vice President and Chief Financial Officer of WCI from November
1993 to November 1994 and Chief Financial Officer of WCI from October 1988 to
November 1993.
Paul J. Mooney has been Executive Vice President and Chief Financial
Officer of WHX, the Company and WPSC since November 1997. Prior to joining the
Company, Mr. Mooney was a partner with Price Waterhouse LLP where he served in a
variety of positions including National Director of Cross Border Filing Services
with the Accounting, Auditing and SEC Services department since July 1, 1996,
Accounting and Business Advisory Services Department--Pittsburgh Site Leader
since 1988 and Client Service and Engagement Partner since 1985.
James T. Gibbons has been Vice President--Mergers and Acquisitions of
the Company since October 1997, and of WPSC since February 1994; Vice
President--Planning & Development of WPSC from April 1991 to February 1994;
Director--Reorganization Planning of WPSC from July 1987 to April 1991.
Thomas R. Notaro has been Vice President--Comptroller of the Company
since October 1997, and of WPSC since March 1997; Vice President--Information
Services and Assistant to the President of WPSC from February 1995 to March
1997; Vice President--Purchasing and Information Services of WPSC from February
1994 to February 1995; Vice President--Comptroller of WPSC from May 1993 to
February 1994; Comptroller of WPSC from July 1990 to May 1993.
John W. Testa has been Vice President, Assistant Secretary and
Treasurer of the Company since October 1997, and of WPSC since February 1994;
Vice President--Treasurer of WPSC since 1980.
Ronald LaBow has been a director of the Company since 1991. Mr. LaBow
has also been President of Stonehill Investment Corp. since February 1990. Mr.
LaBow is also a director of Regency Equities Corp., a real estate company, and
is Chairman of the Board of Directors of WHX.
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<PAGE>
Robert A. Davidow has been a private investor since January 1990. Mr.
Davidow is also a director of Arden Group, Inc. and WHX.
Marvin L. Olshan has been a director and Secretary of the Company since
1991 and a partner of Olshan Grundman Frome & Rosenzweig LLP since 1956. Mr.
Olshan is also a director of WHX.
The Company anticipates adding one independent director in the near
future, who will not be affiliated with WHX. Directors do not currently receive
any compensation for serving as directors.
In addition, the following table sets forth information regarding the
officers of WPSC:
Name Age Position
- --------------------- -------- --------------------------------------------
John R. Scheessele 50 Chairman, President and Chief Executive
Officer
Paul J. Mooney 46 Chief Financial Officer
James H. Bischoff 58 Vice President--Commercial
James E. Muldoon 53 Vice President--Purchasing
James T. Gibbons 46 Vice President--Mergers and Acquisitions
Daniel C. Keaton 47 Vice President--Human Resources
Paul K. Morrison 54 Vice President--Engineering and
Environmental Controls
Thomas R. Notaro 47 Vice President--Comptroller
Tom Patrick 57 Vice President--Wheeling Corrugating Company
John W. Testa 61 Vice President, Secretary and Treasurer
The business experience, principal occupations and employment as well
as the periods of service of each of the officers of WPSC during the last five
years, who are not also officers of WPC, are set forth below.
James H. Bischoff has been Vice President--Commercial since August
1997. Mr. Bischoff was previously employed as Vice President--Sales and
Marketing for Quanex Corporation since 1993. Prior to 1993, Mr. Bischoff was
employed by Bethlehem Steel Corporation for 32 years, most recently as District
Sales Manager.
James E. Muldoon has been Vice President--Purchasing since October
1997. Mr. Muldoon was previously employed with U.S. Steel Group of USX
Corporation for 34 years most recently as General Manager of Purchasing.
Daniel C. Keaton has been Vice President--Human Resources since
February 1994; Vice President-- Employee Relations from April 1992 to February
1994; Director, Labor Relations from May 1991 to April 1992.
Paul K. Morrison has been Vice President--Engineering and Environmental
Controls since February 1990; Vice President--Engineering from February 1990 to
October 1990.
Tom Patrick has been Vice President--Wheeling Corrugating since
February 1994; Vice President-- Operations from November 1992 to February 1994;
Vice President and General Manager--Finishing Operations from March 1990 to
November 1992.
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table.
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to (i) the chief executive officer
("CEO") of the Company for the fiscal year ended December 31, 1996 (Mr. James L.
Wareham, the then President of the Company) and (ii) the four most highly
compensated executive officers of the Company other than the CEO whose salary
and bonus exceeded $100,000 with respect to the fiscal year ended December 31,
1996 and who were employed by the Company on December 31, 1996 (together with
the CEO, the "Named Executive Officers").
Summary Compensation Table(1)
Annual Compensation Long Term Compensation
<TABLE>
<CAPTION>
Other Annual Securities
Name and Principal Salary Bonus Compensation Underlying All other Compemsation
Position Year ($) ($)(2) ($)(3) Options (#) ($)(4)
---------- ---- ----- ------- -------- ----------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
James L. Wareham, 1996 400,000 -- -- -- 47,140(6)
President (5) 1995 400,000 90,000 -- -- 46,825(6)
1994 400,000 140,000 -- 80,000 44,877(6)
Frederick G. Chbosky, 1996 140,000 -- -- -- 10,272
Chief Financial Officer (7) 1995 140,000 22,384 -- -- 10,020
1994 140,000 37,622 -- -- 7,560
James D. Hesse 1996 150,000 -- -- -- 19,814
Vice President(8) 1995 150,000 23,528 -- -- 19,415
1994 147,250 43,476 -- -- 17,737
Dewayne W. Tuthill 1996 135,000 -- -- -- 9,650
Vice President(9) 1995 135,000 21,408 -- -- 8,786
1994 133,808 40,768 -- -- 7,770
James G. Bradley 1996 160,000 -- -- 10,000 2,922
Vice President 1995 40,000(10) -- -- -- --
1994 -- -- -- -- --
</TABLE>
- ----------------------------
(1) All compensation data include compensation received by such executive
officer for services rendered to the Company, WHX and WPSC. Option
data reflect options to purchase shares of WHX Common Stock.
(2) Includes bonuses paid in 1995 and 1996 for services rendered in the
prior year pursuant to the WPSC Management Incentive Program ("WPSC
Management Incentive Program") covering officers and salaried
employees of WPSC. Mr. Wareham was not eligible to participate in the
WPSC Management Incentive Program. Mr. Wareham's employment agreement
provides for an annual bonus to be awarded in the sole discretion of
the Company. Mr. Wareham was granted a bonus in 1995 and 1996 for
services rendered in the prior year. All bonus amounts have been
attributed to the year in which the services were performed.
(3) Excludes perquisites and other personal benefits unless the aggregate
amount of such compensation exceeds the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for such named
executive officer.
(4) Amounts shown, unless otherwise noted, reflect employer contributions
to WPSC Salaried Employees Pension Plan.
(5) Resigned from employment with the Company in February 1997.
(6) Includes insurance premiums paid by the Company in 1996, 1995 and 1994
of $40,000 annually.
(7) Resigned from employment with the Company in November 1997.
(8) Resigned from employment with the Company effective March 31, 1997 to
become President of Wheeling-Nisshin.
(9) Resigned from employment with the Company in April 1997.
(10) Employment with the Company commenced in October 1995.
Aggregated Option Exercises and Fiscal Year-End Option Value Table.
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1996.
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<PAGE>
Option Grants Table. The following table sets forth certain information
regarding stock option grants made to each of the Named Executive Officers
during the fiscal year ended December 31, 1996.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual Rates
of Stock Price Appreciation for
Individual Grants Option Term
--------------------------------------------------- -------------------------------
% of Total
Options
Number of Securities Granted to Exercise
Underlying Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
---- ------------ ------------- ------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Wareham 0 0% -- -- 0 0
Dewayne W. Tuthill 0 0 -- -- 0 0
James G. Bradley 10,000 43.5% 13.50 2-6-06 84,900 215,155
James D. Hesse 0 0% -- -- 0 0
Frederick G. Chbosky 0 0% -- -- 0 0
</TABLE>
- -------------------
All options are to purchase shares of WHX Common Stock and were granted
under WHX's 1991 Incentive and Nonqualified Stock Option Plan and vest ratably
over a three-year period. This period commenced February 6, 1996.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at
Options at 1996 Fiscal 1996 Fiscal Year-
Year-End(#) Exercisable/ End($)(1) Exercisable/
Unexercisable Unexercisable
Name -------------------------- ---------------------------
- ----
<S> <C> <C>
James L. Wareham 101,254/26,667 43,490/0
Frederick G. Chbosky 18,753/0 9,844/0
Dewayne W. Tuthill 23,753/0 17,969/0
James G. Bradley 0/10,000 0/0
James D. Hesse 18,753/0 9,844/0
</TABLE>
- ------------------
(1) On December 31, 1996, the last reported sales price of the Common
Stock of WHX as reported on the New York Stock Exchange Composite Tape
was $8.875.
Long-Term Incentive and Pension Plans.
The Company does not have any long-term incentive or defined benefit
pension plans.
Deferred Compensation Agreements.
Certain key employees of the Company were parties to deferred
compensation agreements and/or severance agreements. The deferred compensation
agreements generally provide that if the employee remains continuously in the
employ of the Company until the fifth anniversary of the approval of the
Company's Plan of Reorganization (the "Plan") (which Plan was approved on
January 3, 1991), or if the employee's employment is terminated within such
period by reason of permanent disability, retirement at age 65 or involuntary
termination without good cause, the employee is entitled to receive, over a
fifteen-year period commencing at the later of age 65 or termination of
employment, an amount equal to twice his base salary for the most recent
twelve-month period of his employment prior to January 3, 1996. The annual
benefits payable to Messrs. Chbosky, Tuthill and Hesse upon retirement was
$18,667, $18,000 and $20,000, respectively. Certain other deferred compensation
payments are payable by WPSC in certain circumstances, such as a demotion in job
status without good cause, death or as a result of a change of control of the
Company. Each of Messrs. Chbosky, Tuthill and Hesse is a party to a deferred
compensation agreement such as is described above. Except as described in this
paragraph, and in the next paragraph with respect to the employment agreement of
Mr. Wareham, no plan or arrangement exists which results in compensation to a
Named Executive Officer in excess of $100,000 upon such officer's future
termination of employment or upon a change-of-control.
Employment Agreements.
As of December 31, 1996, Mr. James L. Wareham was employed as President
of the Company, President of WHX and Chairman of the Board and Chief Executive
Officer of WPSC under a two-year agreement which expired April 29, 1995, but
which was automatically extended for a successive two-year period. The agreement
provided for an annual salary to Mr. Wareham of $400,000 and an annual bonus
awarded in the sole discretion of the Company. Mr. Wareham was not granted a
bonus for services rendered in 1996. In addition, the employment agreement
provided for Mr. Wareham to receive the cash surrender value of life insurance
contracts purchased by the Company upon termination of his employment. The
annual premium paid by the Company on the life insurance contracts was $40,000.
The employment agreement provided that in the event Mr. Wareham's employment was
terminated without cause or Mr. Wareham voluntarily terminated his employment
due to a material change in the nature and scope of his authorities and duties
after a change in control of the Company occurred, he would have been entitled
to receive a payment of $800,000, and other specified benefits for a period of
one year from the date of termination. Specified benefits under Mr. Wareham's
employment agreement would have been forfeited under
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<PAGE>
certain circumstances. In February 1997, Mr. Wareham resigned from his positions
with the Company and was succeeded by Mr. John R. Scheessele.
Mr. John R. Scheessele commenced employment as President of the
Company, President of WHX and President, Chairman of the Board and Chief
Executive Officer of WPSC pursuant to a three-year employment agreement, dated
as of February 7, 1997, which is automatically extended for successive
three-year periods unless earlier terminated pursuant to the provisions of such
agreement. The agreement provides for an annual salary to Mr. Scheessele of
$400,000 and an annual bonus to be awarded in the sole discretion of the
Company. The Company will consider several factors in determining whether to pay
a bonus to Mr. Scheessele including the performance of Mr. Scheessele and the
resulting benefits to the Company and the overall performance of the Company as
measured by the guidelines specified in the employment agreement that are used
to determine the bonuses of other senior executives of the Company. In addition,
the employment agreement provides for Mr. Scheessele to receive the cash
surrender value of life insurance contracts purchased by the Company upon
termination of his employment. The employment agreement provides that in the
event Mr. Scheessele's employment is terminated without cause or Mr. Scheessele
voluntarily terminates his employment due to a material change in the nature and
scope of his authorities and duties after a change in control of the Company
occurs, he will be entitled to receive a payment of $1,200,000, and other
specified benefits for a period of one year from the date of termination.
Specified benefits under Mr. Scheessele's employment agreement will be forfeited
under certain circumstances.
In November 1997, Mr. Frederick G. Chbosky resigned from his positions
as Chief Financial Officer of each of the Company, WHX and WPSC. In 1998, Mr.
Chbosky will receive from WPSC a severance payment of $128,100.
Mr. Paul J. Mooney commenced employment as Executive Vice President and
Chief Financial Officer of each of the Company, WHX and WPSC pursuant to a
three-year employment agreement, dated as of October 17, 1997, which is
automatically extended for successive three-year periods unless earlier
terminated pursuant to the provisions of such agreement. The agreement provides
for an annual salary to Mr. Mooney of $200,000 and an annual bonus to be awarded
in the sole discretion of the Company. The Company will consider several factors
in determining whether to pay a bonus to Mr. Mooney including the performance of
Mr. Mooney and the resulting benefits to the Company and the overall performance
of the Company as measured by the guidelines specified in the employment
agreement that are used to determine the bonuses of other senior executives of
the Company. In addition, the employment agreement provides for Mr. Mooney to
receive the cash surrender value of life insurance contracts purchased by the
Company upon termination of his employment. The employment agreement provides
that in the event Mr. Mooney's employment is terminated without cause or Mr.
Mooney voluntarily terminates his employment due to a material change in the
nature and scope of his authorities and duties after a change in control of the
Company occurs, he will be entitled to receive a payment of $600,000, and other
specified benefits for a period of one year from the date of termination.
Specified benefits under Mr. Mooney's employment agreement will be forfeited
under certain circumstances.
Compensation Committee Interlock and Insider Participation.
The Board of Directors of the Company is responsible for determining
compensation of the Company's executive officers. Mr. Olshan is a member of
Olshan Grundman Frome & Rosenzweig LLP, which has been retained as outside
general counsel to the Company since January 1991. Fees received from the
Company by such firm during the fiscal year ended December 31, 1996 did not
exceed 5% of the Company's or the firm's revenues.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS;
TRANSACTIONS BETWEEN THE COMPANY AND WHX
John R. Scheessele, President of the Company and WPSC and a director of
the Company and WPSC, and Akimuni Takewaka, a director of WPSC, are directors of
Wheeling-Nisshin. Mr. Takewaka is also Chairman of the Board of
Wheeling-Nisshin. James D. Hesse, a former Vice President of the Company, is
President, Chief Executive Officer and a director of Wheeling-Nisshin. The
Company currently holds a 35.7% equity interest in Wheeling-Nisshin.
Marvin L. Olshan, a director and Secretary of the Company, is a member
of Olshan Grundman Frome & Rosenzweig LLP, which firm has been retained as
outside general counsel to the Company since January 1991. Fees received from
the Company by such firm during the fiscal year ended December 31, 1996 did not
exceed 5% of the Company's revenues.
The Company and WHX and WHX's affiliates have in the past entered into
intercompany transactions and agreements incident to their respective
businesses, and the Company and WHX may enter into material transactions and
agreements from time to time in the future. In connection with the November
Offering, the Company and WHX amended certain existing agreements, and also
entered into agreements with respect to the respective obligations that will be
assumed by each party. These agreements were not the result of arm's length
negotiations between the parties. It is possible that conflicts of interest
could arise between the Company and WHX in certain circumstances.
The following is a summary of certain agreements, arrangements and
transactions between the Company and WHX.
Indemnification and Intercreditor Agreement
Pursuant to the Indemnification Agreement (as defined), the Company has
agreed to indemnify WHX and hold WHX harmless from all liabilities relating to
the operations of the Company whether relating to or arising out of occurrences
prior to, on or after the closing of the November Offering, and other
obligations assumed at the Closing. Similarly, WHX has agreed to indemnify the
Company and hold the Company harmless from all liabilities relating to the
operations of the business of WHX, other than the business of the Company,
whether relating to or arising out of occurrences prior to, on or after the
closing of the November Offering. To the extent WHX is called upon to make
payments under its guarantees of certain of the Company's indebtedness, the
Company will indemnify it in respect of such payments. To the extent the
Company's actions cause a default under the Revolving Credit Facility or the
termination of the Receivables Facility or a default under any other debt
instrument of WHX or Unimast, the Company will indemnify WHX and Unimast in
respect of any incremental costs and expenses suffered by WHX or Unimast on
account thereof. The Company's obligations under the Indemnification Agreement
will be subordinate to the Company's obligations under the Notes. To the extent
WHX's or Unimast's actions cause a default under the Revolving Credit Facility
or the termination of the Receivables Facility or a default under any other debt
instrument of the Company, WHX and Unimast will indemnify the Company in respect
of any incremental costs and expenses and damages suffered by the Company on
account thereof. See "Indemnification and Intercreditor Agreement."
Tax Sharing Agreement
The Company will be included in the consolidated federal income tax
returns filed by WHX during all periods in which it has been or will be a
wholly-owned subsidiary of WHX ("Affiliation Year"). The Company and WHX have
entered into an agreement (the "Tax Sharing Agreement") providing for the manner
of determining payments with respect to federal income tax liabilities and
benefits arising in Affiliation Years. Under the Tax Sharing Agreement, the
Company will pay to WHX an amount equal to the share of WHX's consolidated
federal income tax liability, generally determined on a separate return basis,
and WHX will pay the Company for any reduction in WHX's consolidated federal
income tax liability resulting from utilization or deemed utilization of
deductions, losses, and credits arising which are attributable to the Company,
in each case net of any amounts theretofore paid or credited by WHX or the
Company to the other with respect thereto. In the event that WHX's consolidated
federal income tax liability for any Affiliation Year is adjusted upon audit or
otherwise, the Company
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<PAGE>
will bear any additional liability or receive any refund which is attributable
to adjustments of items of income, deduction, gain, loss or credit of the
Company. WHX shall permit the Company to participate in any audits or litigation
with respect to Affiliation Years, but WHX will otherwise have exclusive and
sole responsibility and control over any such proceedings.
Advances
From time to time WHX has made advances to the Company, principally to
fund working capital needs and interest payments on debt. The Company also has
made advances to WHX, from time to time, principally to fund the payment by WHX
of dividends on its outstanding preferred stock and the working capital needs of
Unimast. As of September 30, 1997, the Company had made advances to WHX in the
net amount of $15.2 million. All advances were repayable upon demand and did not
bear interest. To the extent the Company has net outstanding advances from WHX,
the Company's obligations to repay such advances will be subordinated to the
repayment obligations on the Notes.
Management Agreement
Pursuant to a management agreement, as amended, between WHX and WPN
Corp. ("WPN"), of which Ronald LaBow, the Chairman of the Board of the Company
is the sole stockholder and an officer and director, WPN provides financial,
management, advisory and consulting services to WHX and the Company, subject to
the supervision and control of the independent directors of WHX. In 1996, WPN
received a monthly fee of $458,333.33, with total payments in 1996 of
$5,500,000. The Company has agreed to contribute $2.5 million towards the
payment of such annual fee in consideration of services to be rendered to the
Company.
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<PAGE>
DESCRIPTION OF PRINCIPAL INDEBTEDNESS
Revolving Credit Facility
WPSC has a Revolving Credit Facility with Citibank, N.A. as agent. The
Revolving Credit Facility provides for borrowing for general corporate purposes
of up to $150 million, and with a $35 million sublimit for Letters of Credit.
The Revolving Credit Facility expires May 3, 1999. Borrowings under the
Revolving Credit Facility are secured primarily by inventory of the Company,
WPSC, PCC and WCP, subsidiaries of the Company, and Unimast. The terms of the
Revolving Credit Facility contain various restrictive covenants, limiting among
other things, dividend payments or other distributions of assets, as defined in
the Revolving Credit Facility. Certain financial covenants associated with
leverage, net worth, capital spending, cash flow and interest coverage must also
be maintained. The Company, PCC, WCP and Unimast have each guaranteed all of the
obligations of WPSC under the Revolving Credit Facility. Borrowings outstanding
against the Revolving Credit Facility at September 30, 1997 totaled $97.0
million.
The Revolving Credit Facility bears interest, payable monthly in
arrears, at the Citibank prime rate plus 1.0% and/or a Eurodollar rate margin
plus 2.25%, but the margin over the prime rate and the Eurodollar rate can
fluctuate up or down based upon performance. The maximum prime rate margin is
1.00% and the maximum Eurodollar margin is 2.25%. The letter of credit fee is
2.25% and is also performance-based. The average interest rate on the Company's
borrowings, at September 30, 1997 was 8.16%.
WPSC also has a separate facility with Citibank, N.A. for letters of
credit up to $50 million. At September 30, 1997 letters of credit totaling $16.9
million were outstanding under this facility. The letters of credit are
collateralized at 105% with U.S. Government securities owned by the Company, and
are subject to an administrative charge of .4% per annum on the amount of
outstanding letters of credit.
Term Loan Agreement
The Company entered into the Term Loan Agreement with DLJ Capital
Funding, Inc., as syndication agent, Donaldson, Lufkin & Jenrette Securities
Corporation, as arranger, Citicorp USA, Inc., as documentation agent, a
financial institution to be named as administrative agent and the lenders party
thereto on November 20, 1997, pursuant to which the Company borrowed $75.0
million. The net proceeds of the Term Loan Agreement were used, together with
the net proceeds of the November Offering, to defease the Old Notes and to
reduce borrowings under the Revolving Credit Facility.
The Term Loan Agreement matures on November 15, 2006. Amounts
outstanding under the Term Loan Agreement are expected to bear interest at
either (i) the Alternate Base Rate (as defined therein) plus 2.25% or (ii) the
LIBO Rate (as defined therein) plus 3.25%, determined at the Company's option.
The Company's obligations under the Term Loan Agreement will be guaranteed by
the Company's Restricted Subsidiaries. The Company may prepay the obligations
under the Term Loan Agreement beginning on November 15, 1998, subject to a
premium of 2.0% of the principal amount thereof. Such premium declines to 1.0%
on November 15, 1999 with no premium on or after November 15, 2000.
The Term Loan Agreement contains customary representations and
warranties. Covenants and events of default under the Term Loan Agreement are
substantially similar to those described under "Description of Notes-- Certain
Covenants" and "--Events of Default and Remedies." Lenders under the Term Loan
Agreement have customary voting, participation and assignment rights.
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DESCRIPTION OF RECEIVABLES FACILITY
In August 1994 WPSC entered into an agreement to sell, up to $75
million on a revolving basis, an undivided percentage ownership in a designated
pool of accounts receivable generated by WPSC and two of its affiliates, WCP and
PCC. The agreement expires in August 1999. In July 1995, WPSC amended such
agreement to sell an additional $20 million on similar terms and conditions. In
October 1995, WPSC entered into an agreement to include the receivables
generated by Unimast, in the pool of accounts receivable sold. Accounts
receivable at December 31, 1996, exclude $45 million representing accounts
receivable sold with recourse limited to the extent of uncollectible balances.
As of September 30, 1997, fees paid by the Company ranged from 7.42% to 8.50% of
the outstanding amount of receivables sold. Based on the Company's collection
history, the Company believes that credit risk associated with the above
arrangement is immaterial. Accounts receivable sold pursuant to the Receivables
Facility at September 30, 1997 aggregated $48.5 million.
INDEMNIFICATION AND INTERCREDITOR AGREEMENT
Unimast, WHX and the Company entered into an intercreditor,
indemnification and subordination agreement (the "Indemnification Agreement")
upon the consummation of the November Offering which provides, among other
things, that Unimast and WHX will be responsible to the Company for repayment of
any of Unimast's borrowings under the Revolving Credit Facility and have agreed
to indemnify the Company if a default occurs under the Revolving Credit Facility
or if the Receivables Facility is terminated as a result of a breach of either
of such agreements by Unimast. In addition, the Company is solely responsible
for repayment of its borrowings under the Revolving Credit Facility and has
agreed to indemnify WHX and Unimast if a default occurs under the Revolving
Credit Facility or if the Receivables Facility is terminated as a result of a
breach of either of such agreements by the Company. The Company's obligations
under the Indemnification Agreement will be subordinate to the Company's
obligations under the Notes. See "Risk Factors--Cross-default Provisions."
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DESCRIPTION OF THE NEW NOTES
The Old Notes were issued under the Indenture among the Company, the
Guarantors and Bank One, N.A., as Trustee (in such capacity, the "Trustee"). The
New Notes will be issued under the Indenture, which will be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), upon the
effectiveness of the Registration Statement of which this Prospectus is a part.
The form and terms of the New Notes are the same in all material respects as the
form and terms of the Old Notes, except that the offer and sale of the New Notes
will have been registered under the Securities Act and, therefore, the New Notes
will not bear legends restricting transfer thereof. Upon the consummation of the
Exchange Offer, Holders of Notes will not be entitled to registration rights
under, or the contingent increase in interest rate provided pursuant to, the
Registration Rights Agreement. The New Notes will evidence the same debt as the
Old Notes and will be treated as a single class under the Indenture with any Old
Notes that remain outstanding.
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 as in effect
on the date of the Indenture. The Notes are subject to all such terms and
reference is made to the Indenture and the Trust Indenture Act for a statement
thereof. A copy of the Indenture has been filed with the Commission as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary, which describes certain provisions of the Indenture and the
Notes, does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Indenture and the Notes, including the
definitions therein of terms not defined herein and those terms made a part
thereof by the Trust Indenture Act. Whenever particular defined terms of the
Indenture not otherwise defined herein are referred to, such defined terms are
incorporated herein by reference.
Principal, Maturity and Interest
The Notes are or will be senior unsecured obligations of the Company,
limited in aggregate principal amount to $275,000,000 and will mature on
November 15, 2007. Interest on the Notes will accrue at the rate of 9 1/4% per
annum and will be payable semi-annually in arrears on May 15 and November 15
(each, an "Interest Payment Date"), commencing on May 15, 1998, to holders of
record on the immediately preceding May 1 and November 1. Interest on the Notes
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and interest, premium (if any) and Liquidated Damages (if any) on
the Notes will be payable at the office or agency of the Company maintained for
such purpose or, at the option of the Company, payment may be made by check
mailed to holders of the Notes at their respective addresses set forth in the
register of holders; provided, however, that all payments with respect to Notes
the holders of which have given wire transfer instructions to the Company will
be required to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof. Until otherwise designated by the
Company, the Company's office or agency will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
Ranking
The Notes are or will be unsecured obligations of the Company, ranking
senior in right of payment to all existing and future subordinated indebtedness
of the Company and pari passu with all existing and future senior unsecured
indebtedness of the Company, including borrowings under the Term Loan Agreement.
The Notes will be effectively junior to secured indebtedness of the Company to
the extent of the assets securing the indebtedness, and to secured indebtedness
of Subsidiaries of the Company, to the extent of the assets of such
subsidiaries. See "--Guarantees." At September 30, 1997, on a pro forma basis
giving effect to the November Offering, the borrowings under the Term Loan
Agreement and the use of proceeds therefrom, there would have been an aggregate
of $56.8 million of indebtedness of Subsidiaries of the Company. In addition,
the Company would have had the ability to borrow an additional approximately
$94.5 million under the Revolving Credit Facility at September 30, 1997. Except
to the extent of the Subsidiary Guarantees, holders of the Notes would have been
effectively subordinated to all such indebtedness of Subsidiaries and trade
payables of WPSC.
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Guarantees
The Company's payment obligations under the Notes are jointly and
severally guaranteed on a senior basis by all of the Company's present and
future Subsidiaries (excluding Unrestricted Subsidiaries) (the "Guarantors")
pursuant to the Subsidiary Guarantees. The Subsidiary Guarantees rank pari passu
in right of payment to all existing and future senior Indebtedness of the
Guarantors, including the Guarantors' obligations under the Revolving Credit
Facility, any successor credit facility and the Term Loan Agreement. Each
Subsidiary Guarantee is an unconditional and irrevocable guarantee of the
obligations of the Company under the Notes and the Indenture. The obligations of
each Guarantor under its Subsidiary Guarantee is limited to the maximum amount
that may be paid thereunder without resulting in such Subsidiary Guarantee being
deemed to constitute a fraudulent conveyance or a fraudulent transfer under
applicable law. See "Risk Factors--Fraudulent Conveyances; Possible Invalidity
of Subsidiary Guarantees." Each Guarantor that makes a payment or distribution
under its Subsidiary Guarantee shall be entitled to a contribution from each
other Guarantor so long as exercise of such right does not impair the rights of
holders of Notes under any Subsidiary Guarantee.
The Indenture provides that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving person) or sell all
or substantially all of its assets to, another corporation, person or entity
whether or not affiliated with such Guarantor unless (a) subject to the
provisions of the following paragraph, the person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all of the
obligations of such Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Subsidiary Guarantee
of such Guarantor and the Indenture; (b) immediately after giving effect to such
transaction, no Default or Event of Default exists; (c) such Guarantor, or any
Person formed by or surviving any such consolidation or merger, would have
Consolidated Net Worth (immediately after giving effect to such transaction),
equal to or greater than the Consolidated Net Worth of the Guarantor immediately
preceding the transaction; and (d) the Company would be permitted, immediately
after giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth
in the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock." Notwithstanding the provisions of
this paragraph, the Indenture will not prohibit the merger of two of the
Guarantors or the merger of a Guarantor into the Company.
The Indenture provides that, in the event of a sale or other
disposition of all of the capital stock of any Guarantor (including by way of
merger or consolidation) or all of the assets of such Guarantor, then such
Guarantor (in the event of a sale or other disposition of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided, however, that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture. See
"--Repurchase at the Option of Holders--Asset Sales." In addition, the Indenture
will provide that, in the event the Board of Directors of the Company designates
a Guarantor to be an Unrestricted Subsidiary, then such Guarantor will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided, however, that such designation is conducted in accordance with the
applicable provisions of the Indenture.
Optional Redemption
The Notes will not be redeemable at the Company's option prior to
November 15, 2002. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30 or
more than 60 days' notice to each holder of Notes to be redeemed, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the applicable redemption date, if redeemed during the 12-month period
beginning on November 15 of the years indicated below:
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Year Percentage
---- ----------
2002...................... 104.625%
2003...................... 103.083%
2004...................... 101.542%
2005 and thereafter....... 100.000%
Notwithstanding the foregoing, on or prior to November 15, 2000, the
Company may redeem up to 35% of the aggregate principal amount of Notes
originally issued at a redemption price (expressed as a percentage of principal
amount) of 109.25% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings; provided, however,
that (a) at least 65% of the aggregate principal amount of Notes initially
issued remains outstanding immediately after the occurrence of each such
redemption and (b) such redemption occurs no later than 30 days following the
date of the consummation of such Public Equity Offering.
At any time prior to November 15, 2002, the Notes may also be redeemed
as a whole but not in part at the option of the Company, upon not less than 30
nor more than 60 days prior notice mailed by first-class mail to each Holder's
registered address, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium, accrued interest and Liquidated Damages, if
any, thereon to the redemption date (subject to the right of Holders of record
on the relevant record date to receive interest due on the relevant interest
payment date).
"Applicable Premium" means, with respect to a Note at any redemption
date, the greater of (i) 1.0% of the principal amount of such Note and (ii) the
excess of (A) the present value at such time of (1) the redemption price of such
Note at November 15, 2002 plus (2) all required interest payments due on such
Note through November 15, 2002, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the then outstanding principal
amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which 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 or similar market data)) most nearly equal to the
period from the redemption date to November 15, 2002; provided, however, that if
the period from the redemption date to November 15, 2002 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to November 15, 2002
is less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
Selection and Notice
In the event that less than all of the Notes are to be redeemed at any
time, selection of 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 so listed, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided, however, that no Note shall be redeemed in a principal
amount that is less than $1,000. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each holder of Notes to be redeemed at its registered address. If any Note is to
be redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed and a new
Note in principal amount equal to the unredeemed portion of the original Note
shall be issued in the name of the holder thereof upon cancellation of the
original Note. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
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Mandatory Redemption
Except as set forth below under "--Repurchase at the Option of
Holders," the Company is not required to make any mandatory redemption of or
sinking fund payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, the Company will be
required to make an offer (a "Change of Control Offer") to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each holder's Notes at
an offer price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date of repurchase (the "Change of Control Payment"). Within 30 days following a
Change of Control, the Company will mail a notice to each holder of Notes
describing the transaction that constitutes the Change of Control and offering
to repurchase Notes on the date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice. The Company will comply
with the requirements of 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 connection with the repurchase of Notes as a
result of a Change of Control.
On or before the Change of Control Payment Date, the Company will, to
the extent lawful, (a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (b) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an officer's certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided, however, that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction. In addition, the Company
could enter into certain transactions, including acquisitions, refinancings or
other recapitalizations, that could affect the Company's capital structure or
the value of the Notes, but that would not constitute a Change of Control. The
Company's ability to repurchase Notes following a Change of Control may also be
limited by the Company's then existing financial resources.
The Company will not be required to make a Change of Control Offer
following a Change of Control if a third party makes the Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
set forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
A "Change of Control" will be deemed to have occurred upon the
occurrence of any of the following: (a) the sale, lease, 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 assets of the
Company and its Restricted Subsidiaries, taken as a whole, to any person (as
such term in used in Section 13(d)(3) of the Exchange Act), (b) the adoption of
a plan relating to the liquidation or dissolution of the Company, (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d)(3) of the Exchange Act) other than WHX or an
underwriter or group of underwriters in an underwritten public offering becomes
the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly through one or more
intermediaries, of at least 50% of the voting power of the outstanding voting
stock of the Company, (d) the merger or consolidation
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of the Company with or into another corporation with the effect that the then
existing stockholders of the Company hold less than 50% of the combined voting
power of the then outstanding voting securities of the surviving corporation of
such merger or the corporation resulting from such consolidation or (e) the
first day on which more than a majority of the members of the Board of Directors
of the Company are not Continuing Directors.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (a) was a member of the
Board of Directors of the Company on the date of original issuance of the Notes
or (b) was nominated for election to the Board of Directors of the Company with
the approval of, or whose election to the Board of Directors of the Company was
ratified by, at least a majority of the Continuing Directors who were members of
the Board of Directors of the Company at the time of such nomination or election
or by WHX so long as WHX owns a majority of the Capital Stock of the Company.
Asset Sales
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (a) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors of the Company set
forth in an officer's certificate delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (b) at least 80% of
the consideration therefor received by the Company or such Restricted Subsidiary
is in the form of cash; provided, however, that the amount of (i) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or such Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (ii) any securities,
notes or other obligations received by the Company or such Restricted Subsidiary
from such transferee that are converted by the Company or such Restricted
Subsidiary within 30 days of receipt into cash (to the extent of the cash
received) shall be deemed to be cash for purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or any such Restricted Subsidiary shall apply such Net
Proceeds to reduce Indebtedness under the Revolving Credit Facility or other
pari passu Indebtedness (and, in the case of such other pari passu Indebtedness,
to correspondingly reduce commitments with respect thereto). To the extent such
Net Proceeds are not utilized as contemplated in the preceding sentence, such
Net Proceeds may, within 270 days after receipt thereof, be utilized to acquire
Replacement Assets. Pending the final application of any such Net Proceeds, the
Company or any such Restricted Subsidiary may otherwise invest such Net Proceeds
in any manner that is not prohibited by the Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in this paragraph will
be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $20 million, the
Company will be required to make an offer to all holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Note Pro Rata Share of Excess Proceeds at an offer price in
cash in an amount equal to 100% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the amount that the Company is required to repurchase, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate amount of Notes surrendered by holders thereof exceeds the amount
that the Company is required to repurchase, the Trustee shall select the Notes
to be purchased on a pro rata basis. Upon completion of such offer to purchase,
the amount of Excess Proceeds shall be reset at zero.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or
pay any dividend or make any other payment or distribution on account of
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the Company's or any of its Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company); (b) purchase, redeem or otherwise acquire or retire for value
(including without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company (other than any such
Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary
of the Company); (c) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value, any Indebtedness that
is subordinated in right of payment to the Notes, except a payment of interest
or principal at Stated Maturity; or (d) make any Restricted Investment (all such
payments and other actions set forth in clauses (a) through (d) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(ii) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Consolidated Interest Coverage Ratio test set forth in
the first paragraph of the covenant described under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(iii) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture, is less than
the sum of (A) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) commencing April 1, 1998 to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus (B) 100% of the
aggregate Net Cash Proceeds received by the Company from the issue or
sale since the date of the Indenture of Equity Interests of the Company
(other than Disqualified Stock) or of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than any such Equity Interests, Disqualified Stock or
convertible debt securities sold to a Restricted Subsidiary of the
Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (C)
to the extent that any Restricted Investment that was made after the
date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the sum of (x) the initial amount of such Restricted
Investment and (y) 50% of the aggregate Net Proceeds received by the
Company or any Restricted Subsidiary in excess of the initial amount of
such Restricted Investment, plus (D) $10 million.
The foregoing provisions do not prohibit (a) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (b) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such Net Cash Proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (iii) (B) of the preceding paragraph; (c) the defeasance, redemption,
repurchase, retirement or other acquisition of subordinated Indebtedness with
the Net Cash Proceeds from an incurrence of, or in exchange for, Permitted
Refinancing Indebtedness; (d) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (e) so long as no Default or Event of Default shall have occurred and be
continuing, the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company held by any member of the Company's
or any of its Restricted Subsidiaries' management upon the death, disability or
termination of employment of such member of management; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $500,000 in any calendar year and $2.5 million
in the aggregate; (f) loans or advances to Unimast by the Company or WPSC prior
to the first anniversary of the date of the Indenture of amounts borrowed by
WPSC under the Revolving Credit Facility provided (i) such loans or advances do
not exceed $40 million at any time outstanding, (ii) Unimast pays interest
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to WPSC on such loans or advances in an amount equal to the interest payable by
WPSC on such amounts pursuant to the Revolving Credit Facility and (iii) such
loans and advances are repaid in full on or prior to the first anniversary of
the date of the Indenture; (g) the payment by the Company of management fees to
WHX not to exceed $2.5 million in any calendar year, in exchange for services
provided to it by WPN Corp. pursuant to the management agreement between WHX and
WPN Corp.; and (h) payments permitted under the WHX Agreements.
In determining the amount of Restricted Payments permissible under
clause (iii) of the first paragraph of this covenant, amounts expended pursuant
to clauses (a) and (e) of the immediately preceding paragraph shall be included
as Restricted Payments for purposes of such clause (iii).
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation. All such outstanding Investments will
be deemed to constitute Investments in an amount equal to the greater of (a) the
net book value of such Investments at the time of such designation and (b) the
fair market value of such Investments at the time of such designation. Such
designation will be permitted only if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors of the Company whose resolution with respect thereto
shall be delivered to the Trustee. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an officer's
certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant described in this
section were computed.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Indebtedness) and that the Company will not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness if the
Consolidated Interest Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
would have been at least 2.00 to 1, on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred at the beginning of such four-quarter period.
Notwithstanding the foregoing, the Company and, to the extent set forth
below, its Restricted Subsidiaries may incur the following (each of which shall
be given independent effect):
(a) Indebtedness of the Company under the Notes and the
Indenture;
(b) Permitted Working Capital Indebtedness of the Company and
its Restricted Subsidiaries;
(c) Existing Indebtedness (other than Permitted Working
Capital Indebtedness and Indebtedness under the Letter of Credit
Facility);
(d) Indebtedness of the Company and its Restricted
Subsidiaries under the Letter of Credit Facility;
(e) Capital Expenditure Indebtedness, Capitalized Lease
Obligations and purchase money Indebtedness of the Company and its
Restricted Subsidiaries in an aggregate principal amount not to exceed
$50 million at any time outstanding;
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(f) (i) Hedging Obligations of the Company and its Restricted
Subsidiaries covering Indebtedness of the Company or such Restricted
Subsidiary (which Indebtedness is otherwise permitted to be incurred
under this covenant) to the extent the notional principal amount of any
such Hedging Obligation does not exceed the principal amount of the
Indebtedness to which such Hedging Obligation relates; or (ii)
repurchase agreements, reverse repurchase agreements or similar
agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by
any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition; provided that the terms of such agreements comply with the
guidelines set forth in Federal--Financial Agreements of Depository
Institutions with Securities and Others (or any successor guidelines),
as adopted by the Comptroller of the Currency;
(g) Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $30 million
at any time outstanding;
(h) Indebtedness of the Company representing guarantees of
Indebtedness incurred by one of its Restricted Subsidiaries pursuant
to, and in compliance with, another provision of this covenant;
(i) Indebtedness of the Company or any of its Restricted
Subsidiaries representing guarantees of a portion of the Indebtedness
of Wheeling-Nisshin which is not greater than the Company's or such
Restricted Subsidiary's pro rata ownership of the outstanding Equity
Interests in Wheeling-Nisshin; provided, however, that (i) such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the Notes and (ii) at the time
of incurrence and after giving effect to the Indebtedness of
Wheeling-Nisshin which is being guaranteed, the Consolidated Interest
Coverage Ratio of Wheeling-Nisshin for its most recently ended four
full fiscal quarters for which internal financial statements are
available would have been at least 2.00 to 1, determined on a pro forma
basis as if any additional Indebtedness had been incurred at the
beginning of such four quarter period;
(j) Indebtedness of the Company or its Restricted Subsidiaries
representing guarantees of Indebtedness of Wheeling-Nisshin required to
be made pursuant to the Letter of Undertaking not to exceed $10
million;
(k) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Restricted Subsidiaries; provided, however,
that (i) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the Notes and (ii) (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Wholly Owned Restricted Subsidiary and (B) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or
a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(l) Indebtedness under the Term Loan Agreement; and
(m) any Permitted Refinancing Indebtedness representing a
replacement, renewal, refinancing or extension of Indebtedness
permitted under the first paragraph and clauses (c) and (l) of this
covenant.
Liens
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired,
or any income or profits therefrom or assign or convey any right to receive
income therefrom, without making effective provision for all payments due under
the Indenture and the Notes and the Subsidiary Guarantees to be directly secured
on an equal and ratable basis with the obligations so secured or, in the event
such Indebtedness is subordinate in right of payment to the Notes or the
Subsidiary Guarantees, prior to such Indebtedness, in each case until such time
as such obligations are no longer secured by a Lien.
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Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may create, incur, assume or suffer to exist (each of which shall
be given independent effect):
(a) Permitted Liens;
(b) Liens to secure the payment of Capital Expenditure
Indebtedness and Capitalized Lease Obligations, provided that (i) the
aggregate principal amount of Indebtedness secured by such Liens shall
not exceed the lesser of cost or Fair Market Value of the assets or
property acquired, constructed or improved with the proceeds of such
Indebtedness and (ii) such Liens shall not encumber any other assets or
property of the company and its Subsidiaries;
(c) Liens secured by the Capital Stock or assets of
Wheeling-Nisshin or Ohio Coatings Company to the extent required under
agreements as existing on the date of the Indenture; and
(d) Liens on accounts receivable, inventory, intangibles
necessary or useful for the sale of such inventory, and other current
assets of the Company or any Restricted Subsidiary or on Capital Stock
of Subsidiaries, in each case incurred to secure Permitted Working
Capital Indebtedness.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) (i) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries on its Capital Stock or with respect to any other interest or
participation in, or measured by, its profits, or (ii) pay any indebtedness owed
to the Company or any of its Restricted Subsidiaries, (b) make loans or advances
to the Company or any of its Restricted Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (1)
Existing Indebtedness as in effect on the date of the Indenture including,
without limitation, restrictions under the Revolving Credit Facility, as in
effect on the date of the Indenture and any refinancings, amendments,
restatements, renewals or replacements thereof; provided, however, that the
agreements governing such contain restrictions that are not more restrictive,
taken as a whole, than those contained in the agreement governing the
Indebtedness being so refinanced, amended, restated, renewed or replaced (2) the
Indenture, the Notes and the Subsidiary Guarantees, (3) applicable law, (4) any
instrument governing Indebtedness or Capital Stock of a person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any person, or the properties or assets of any person,
other than the person, or the property or assets of the person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (5) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (6) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (c) above on the property so acquired, (7) customary
provisions in bona fide contracts for the sale of property or assets, or (8)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are not more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, person or entity unless (a) the Company is the surviving
corporation or the entity or the person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia, (b) the entity or person formed
by or surviving any
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such consolidation or merger (if other than the Company) or the entity or person
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, (c) immediately after such transaction no Default
or Event of Default exists and (d) except in the case of a merger of the Company
with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or
the entity or person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Interest Coverage Ratio test set forth
in the first paragraph of the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate or any officer, director or employee of the Company
(each of the foregoing, an "Affiliate Transaction"), unless (a) such Affiliate
Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated person or, if there is no such comparable transaction, on terms that
are fair and reasonable to the Company, and (b) the Company delivers to the
Trustee (i) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $2.0
million, either (A) a resolution of the Board of Directors of the Company set
forth in an officer's certificate certifying that such Affiliate Transaction
complies with clause (a) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors of
the Company or (B) if there are no disinterested members of the Board of
Directors of the Company, an opinion as to the fairness to the Company of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing and (ii) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Company of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing; provided, however, that the following shall be deemed not to
be Affiliate Transactions: (v) customary directors' fees, indemnification or
similar arrangements or any employment agreement or other compensation plan or
arrangement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary; (w) transactions between or among the
Company and/or its Wholly-Owned Restricted Subsidiaries; (x) transactions
pursuant to the WHX Agreements or agreements with or applicable to any of
Wheeling-Nisshin, Ohio Coatings Company, the Empire-Iron Mining Partnership or
W-P Coal Company, in each case as in effect on the date of the Indenture; (y)
the purchase of accounts receivable from Unimast for immediate resale on the
same terms pursuant to the Receivables Facility; and (z) Restricted Payments
that are permitted pursuant to clauses (e), (f), (g) and (h) of the second
paragraph of the covenant described under the heading "--Restricted Payments"
and Indebtedness permitted to be incurred pursuant to clauses (i) and (j) of the
second paragraph of the covenant described under the heading "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided, however, that the Company may enter into a sale and
leaseback transaction if (a) the Company could have (i) incurred Indebtedness in
an amount equal to the Attributable Indebtedness relating to such sale and
leaseback transaction pursuant to the Consolidated Interest Coverage Ratio test
set forth in the first paragraph of the covenant described under the heading
"--Incurrence of Indebtedness and Issuance of Preferred Stock" and (ii) incurred
a Lien to secure such Indebtedness pursuant to the covenant described
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above under the heading "--Liens," (b) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as determined
in good faith by the Board of Directors of the Company and set forth in an
officer's certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (c) the transfer of assets in
such sale and leaseback transaction is permitted by, and the Company applies the
Net Cash Proceeds of such transaction in compliance with, the covenant described
under the heading "--Repurchase at the Option of Holders--Asset Sales."
Issuances and Sales of Capital Stock of Subsidiaries
The Indenture provides that the Company (a) will not permit any Wholly
Owned Restricted Subsidiary of the Company to issue any of its Equity Interests
to any person other than to the Company or a Wholly Owned Restricted Subsidiary
of the Company, and (b) will not, and will not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary
of the Company to any person (other than the Company or any Wholly Owned
Restricted Subsidiary of the Company) unless (i) such transfer, conveyance,
sale, lease or other disposition is of all of the Capital Stock of such Wholly
Owned Restricted Subsidiary and (ii) the Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
covenant described under the caption "--Repurchase at the Option of
Holders--Asset Sales"; provided that this clause (b) shall not apply to any
pledge of Capital Stock of any Wholly Owned Restricted Subsidiary of the Company
permitted pursuant to clause (d) of the covenant described under the caption
"--Liens."
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall, after the date of the Indenture, acquire, create or
designate another Restricted Subsidiary, then such newly acquired, created or
designated Restricted Subsidiary shall execute a Subsidiary Guarantee and
deliver an opinion of counsel in accordance with the terms of the Indenture.
Payment for Consent
The Indenture provides that neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any holder
of any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all holders of the Notes that
consent, waive or agree to amend in the timeframe set forth in the solicitation
statement documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not the Company is required to
do so by the rules and regulations of the Commission, the Company will file with
the Commission (unless the Commission will not accept such a filing) and, within
15 days of filing, or attempting to file, the same with the Commission, furnish
to the holders of the Notes (a) all quarterly and annual financial and other
information with respect to the Company and its Subsidiaries that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants, and (b) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, the Company and the Guarantors will
furnish to the holders of the Notes, prospective purchasers of the Notes and
securities analysts, upon their request, the information, if any, required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event
of Default: (a) default in the payment when due of interest or Liquidated
Damages on the Notes and such default continues for 30 days; (b) default in
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payment when due of the principal of or premium (if any) on the Notes; (c)
failure by the Company to comply with the provisions described under the
captions "--Repurchase at the Option of Holders--Change of Control," "--Asset
Sales," "--Certain Covenants--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock" or "--Merger, Consolidation or
Sale of Assets"; (d) failure by the Company for 30 days after notice to comply
with any of its other agreements in the Indenture or the Notes; (e) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists or is created after the date of the
Indenture, which default (i) is caused by a failure to pay principal of or
premium (if any) or interest on such Indebtedness prior to the expiration of any
grace period provided in such Indebtedness (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10.0 million or more; (f) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $10.0 million,
which judgments are not paid, discharged or stayed for a period of 60 days; (g)
failure by any Guarantor to perform any covenant set forth in its Subsidiary
Guarantee, or the repudiation by any Guarantor of its obligations under its
Subsidiary Guarantee or the unenforceability of any Subsidiary Guarantee against
a Guarantor for any reason, unless, in each such case, such Guarantor and its
Subsidiaries have no Indebtedness outstanding at such time or at any time
thereafter; and (h) certain events of bankruptcy or insolvency with respect to
the Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to the Company, any Significant Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
November 15, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
The holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of the principal of or interest or Liquidated Damages on the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may
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not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (a) the rights of holders of outstanding Notes to
receive payments in respect of the principal of and interest, premium (if any)
and Liquidated Damages (if any) on such Notes when such payments are due from
the trust referred to below, (b) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (c) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (d) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "--Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of and interest, premium (if any) and
Liquidated Damages (if any) on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date, (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred, (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred, (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit), (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Company or any of its Restricted Subsidiaries
is a party or by which the Company or any of its Restricted Subsidiaries is
bound, (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, (vii) the Company must deliver to the Trustee an
officer's certificate stating that the deposit was not made by the Company with
the intent of preferring the holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others and (viii) the Company must deliver to the
Trustee an officer's certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Transfer and Exchange
A holder of Notes may transfer or exchange Notes in accordance with the
Indenture. The registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The
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Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided below, the Indenture or the Notes may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (a) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver, (b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (including
as described under the caption "--Repurchase at the Option of Holders"), (c)
reduce the rate of or change the time for payment of interest on any Note, (d)
waive a Default or Event of Default in the payment of principal of or interest,
premium (if any) or Liquidated Damages (if any) on the Notes (except a
rescission of acceleration of the Notes by the holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment default that
resulted from such acceleration), (e) make any Note payable in money other than
that stated in the Notes, (f) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of holders of Notes to
receive payments of principal of or interest, premium (if any) or Liquidated
Damages (if any) on the Notes, (g) waive a redemption payment with respect to
any Note (including a payment as described under the caption "--Repurchase of
the Option of Holders"), (h) make any change in the foregoing amendment and
waiver provisions, (i) modify the ranking or priority of the Notes or the
Subsidiary Guarantees in any manner adverse to the Holders or (j) except as
provided in the Indenture, release any Guarantor from its obligations under its
Subsidiary Guarantee, or change any Subsidiary Guarantee in any manner that
would adversely affect the Holders.
Notwithstanding the foregoing, without the consent of any holder of
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to holders of Notes in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such holder, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days and apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any holder of Notes, unless such holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
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Additional Information
Anyone who receives this Prospectus may obtain a copy of the form of
Indenture and Registration Rights Agreement without charge by writing to
Wheeling-Pittsburgh Corporation, attention: Treasurer.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Indebtedness" means, with respect to any specified person,
(i) Indebtedness of any other person existing at the time such other person is
merged with or into or became a Restricted Subsidiary of such specified person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other person merging with or into or becoming a
Restricted Subsidiary of such specified person, and (ii) Indebtedness secured by
a Lien encumbering an asset acquired by such specified person at the time such
asset is acquired by such specified person.
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of a
person shall be deemed to be control, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means the sale, lease, conveyance, disposition or other
transfer (a "disposition") of any properties, assets or rights (including,
without limitation, a sale and leaseback transaction or the issuance, sale or
transfer by the Company of Equity Interests of a Restricted Subsidiary) whether
in a single transaction or a series of related transactions; provided, however,
that the following transactions will be deemed not to be Asset Sales: (a) sales
of inventory in the ordinary course of business; (b) a disposition of assets by
the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company; (c) a disposition of Equity Interests by a
Wholly Owned Restricted Subsidiary of the Company to the Company or to another
Wholly Owned Restricted Subsidiary of the Company; (d) a Permitted Investment or
Restricted Payment that is permitted by the Indenture; (e) the issuance by the
Company of Equity Interests; (f) the disposition of properties, assets or rights
in any fiscal year the aggregate Net Proceeds of which are less than $1 million;
and (g) the sale of accounts receivable pursuant to the Receivables Facility.
"Attributable Indebtedness" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Capital Expenditure Indebtedness" means Indebtedness incurred by any
Person to finance the purchase or construction of any property or assets
acquired or constructed by such Person which have a useful life of more than one
year so long as (a) the purchase or construction price for such property or
assets is included in "addition to property, plant or equipment" in accordance
with GAAP, (b) the acquisition or construction of such property or assets is not
part of any acquisition of a Person or line of business and (c) such
Indebtedness is incurred within 90 days of the acquisition or completion of
construction of such property or assets.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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"Capital Stock" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
person.
"Cash Equivalents" means (a) United States dollars, (b) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (c) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million, (d) repurchase obligations
with a term of not more than thirty days for underlying securities of the types
described in clauses (b) and (c) above entered into with any financial
institution meeting the qualifications specified in clause (c) above, (d)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Rating Service and in each case maturing
within six months after the date of acquisition and (e) money market mutual
funds substantially all of the assets of which are invested primarily of the
type described in the foregoing clauses (a) through (d).
"Consolidated Cash Flow" means, with respect to any person for any
period, the Consolidated Net Income of such person for such period plus, without
duplication (a) provision for taxes based on income or profits of such person
and its Restricted Subsidiaries, to the extent that such provision for taxes was
included in computing Consolidated Net Income, plus (b) Consolidated Interest
Expense of such person and its Restricted Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing Consolidated Net Income, plus (c) depreciation and
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid, outside of the
ordinary course of business, in a prior period) and other non-cash charges of
such person and its Restricted Subsidiaries for such period, to the extent that
such depreciation, amortization and other non-cash charges were deducted in
computing Consolidated Net Income, minus (d) non-cash items increasing
consolidated revenues in determining Consolidated Net Income for such period to
the extent not already reflected as an expense in computing Consolidated Net
Income, minus (e) all cash payments during such period relating to non-cash
charges and other non-cash items that were or would have been added back in
determining Consolidated Cash Flow for any prior period, in each case, on a
consolidated basis and determined in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means with respect to any person
for any period, the ratio of the Consolidated Cash Flow of such person for such
period to the Consolidated Interest Expense of such person for such period;
provided, however, that the Consolidated Interest Coverage Ratio shall be
calculated giving pro forma effect to each of the following transactions as if
each such transaction had occurred at the beginning of the applicable
four-quarter reference period: (a) any incurrence, assumption, guarantee or
redemption by the Company or any of its Restricted Subsidiaries of any
Indebtedness (including revolving credit borrowings based on the average daily
balance outstanding during the relevant period) subsequent to the commencement
of the period for which the Consolidated Interest Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Consolidated Interest Coverage Ratio is made (the "Calculation Date"); (b)
any acquisition that has been made by the Company or any of its Restricted
Subsidiaries, or approved and expected to be consummated within 30 days of the
Calculation Date, including, in each case, through a merger or consolidation,
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date (in which case Consolidated Cash Flow for such reference period
shall be calculated to include the Consolidated Cash Flow of the acquired
entities and without giving effect to clause (c) of the proviso set forth in the
definition of Consolidated Net Income); and (c) any other transaction that may
be given pro forma effect in accordance with Article 11 of Regulation S-X as in
effect from time to time; and provided, further, that (i) the Consolidated Cash
Flow attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded and (ii) the
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Consolidated Interest Expense attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Consolidated Interest Expense will not be
obligations of the referent person or any of its Restricted Subsidiaries
following the Calculation Date.
"Consolidated Interest Expense" means, with respect to any person for
any period, the sum, without duplication, of (a) the consolidated interest
expense of such person and its Restricted Subsidiaries for such period, whether
paid or accrued (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (b) any interest expense on Indebtedness of another person that is
guaranteed by such person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such person or one of its Restricted Subsidiaries (whether or
not such guarantee of Lien is called upon), (c) the consolidated interest
expense of such person and its Restricted Subsidiaries that was capitalized
during such period and (d) the product of (i) all cash dividend payments on any
series of preferred stock of such person, times (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rates of such person, expressed
as a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person for any
period, the aggregate of the Net Income of such person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (a) the Net Income (but not loss) of any person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent person or a Wholly Owned Restricted
Subsidiary thereof, (b) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (c) the Net Income of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (d) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any person as of any
date, the sum of (a) the consolidated equity of the common stockholders of such
person and its consolidated Restricted Subsidiaries as of such date plus (b) the
respective amounts reported on such person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
person upon issuance of such preferred stock, less (i) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such person or a consolidated Restricted Subsidiary of such
person, (ii) all investments as of such date in unconsolidated Restricted
Subsidiaries and in persons that are not Subsidiaries and (iii) all unamortized
debt discount and expense and unamortized deferred charges as of such date, in
each case determined in accordance with GAAP; provided, however, that any
changes after the date of the Indenture in the liabilities of such person and
its Restricted Subsidiaries in respect of other post-retirement employee
benefits or pension benefits that would be reflected on a consolidated balance
sheet of such person and its Restricted Subsidiaries in accordance with GAAP
shall be excluded.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (excluding any
maturity as a result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or
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prior to the date that is 91 days after the date on which the Notes mature or
are redeemed or retired in full; provided, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof (or of any
security into which it is convertible or for which it is exchangeable) have the
right to require the issuer to repurchase such Capital Stock (or such security
into which it is convertible or for which it is exchangeable) upon the
occurrence of an Asset Sale or a Change of Control shall not constitute
Disqualified Stock if such Capital Stock (and all such securities into which it
is convertible or for which it is exchangeable) provides that the issuer thereof
will not repurchase or redeem any such Capital Stock (or any such security into
which it is convertible or for which it is exchangeable) pursuant to such
provisions prior to compliance by the Company with the provisions of the
Indenture described under the caption "--Repurchase at the Option of
Holders--Change of Control" or "--Asset Sales," as the case may be.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the date of the Indenture, including,
without limitation, the Obligations of the Company and its Restricted
Subsidiaries under (i) the Close Corporation and Shareholders Agreement of Ohio
Coatings Company as existing on the date of the Indenture and the guarantee by
the Company or any Restricted Subsidiary of up to $20 million of Indebtedness of
Ohio Coatings Company under the Credit Agreement between Ohio Coatings Company
and National City Bank, Northeast, or (ii) the Keepwell Agreement, dated
December 28, 1995, between the Company, WPSC, WHX and the lenders party thereto
as existing on the date of the Indenture to the extent permitted by the WHX
Agreements, until such amounts are repaid.
"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 from time to time.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any person, the
obligations of such person under interest rate swap agreements, interest rate
cap agreements, interest rate collar agreements and other agreements or
arrangements designed to protect such person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any person, any indebtedness of
such person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such person prepared in accordance with GAAP, as well as Indebtedness of
others secured by a Lien on any asset of such person (whether or not such
Indebtedness is assumed by such person) and, to the extent not otherwise
included, the guarantee by such person of any Indebtedness of any other person.
The amount of any Indebtedness outstanding as of any data shall be (a) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest and (b) the principal amount thereof, in the case
of any other Indebtedness.
"Investments" means, with respect to any person, all investments by
such person in other persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees by the referent person of, and Liens on any
assets of the referent person securing, Indebtedness or other obligations of
other persons), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in
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accordance with GAAP. If the Company or any Restricted Subsidiary of the Company
sells or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such person is no longer a Restricted Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Equity
Interests of such Restricted Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Certain Covenants--Restricted Payments."
"Letter of Credit Facility" means the Letter of Credit Agreement, dated
as of August 22, 1994, among WPSC and Citibank, N.A., as the same may be
amended, supplemented or otherwise modified including any refinancing,
refunding, replacement or extension thereof and whether by the same or any other
lender or group of lenders, provided, that the aggregate amount of letters of
credit available may not exceed $50,000,000.
"Letter of Undertaking" means that certain letter of undertaking dated
July 21, 1997 from WHX to The Sanwa Bank, Limited, as existing on the date of
the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Cash Proceeds" means, with respect to any issuance or sale of
common stock of the Company, means the cash proceeds of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' fees, broker's
commissions and consultant and any other fees actually incurred in connection
with such issuance or sale.
"Net Income" means, with respect to any person, the net income (loss)
of such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (ii)
the disposition of any securities by such person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such person or any of
its Restricted Subsidiaries and (b) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
(without duplication) (a) the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
sales commissions, recording fees, title transfer fees, title insurance
premiums, appraiser fees and costs incurred in connection with preparing such
asset for sale) and any relocation expenses incurred as a result thereof, (b)
taxes paid or estimated to be payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), (c) amounts required to be applied to the repayment of
Indebtedness (other than Permitted Working Capital Indebtedness) secured by a
Lien on the asset or assets that were the subject of such Asset Sale, (d) any
reserve established in accordance with GAAP or any amount placed in escrow, in
either case for adjustment in respect of the sale price of such asset or assets,
until such time as such reserve is reversed or such escrow arrangement is
terminated, in which case Net Proceeds shall include only the amount of the
reserve so reversed or the amount returned to the Company or its Restricted
Subsidiaries from such escrow arrangement, as the case may be.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender, and (ii) with respect to which no
default (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other
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Indebtedness of the Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Note Pro Rata Share" means with respect to Excess Proceeds, the amount
equal to the product of (a) Excess Proceeds and (b) the fraction determined by
dividing (i) the aggregate principal amount of Notes then outstanding by (ii)
the sum of the aggregate principal amount of Notes then outstanding and the
aggregate amount of borrowings under the Term Loan Agreement then outstanding.
"Obligations" means any principal, interest, penalties, fees,
indemnification, reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company, (b) any Investment in Cash
Equivalents, (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a person that is engaged in the same line of business as the
Company and its Restricted Subsidiaries were engaged in on the date of the
Indenture or a line of business or manufacturing or fabricating operation
reasonably related thereto (including any downstream steel manufacturing or
processing operation or manufacturing or fabricating operation in the
construction products business) if as a result of such Investment (i) such
person becomes a Wholly Owned Restricted Subsidiary of the Company and a
Guarantor or (ii) such person is merged, consolidated or amalgamated with or
into, or transfers of conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company, (d) any Investment made as a result of the receipt of non-cash
consideration from (i) an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the Option
of Holders-- Asset Sales" or (ii) a disposition of assets that does not
constitute an Asset Sale, (e) any Investment acquired solely in exchange for
Equity Interests (other than Disqualified Stock) of the Company, (f) Investments
existing as of the date of the Indenture and (g) other Investments in any person
that is engaged in the same line of business as the Company and its Restricted
Subsidiaries were engaged in on the date of the Indenture or a line of business
or manufacturing or fabricating operation reasonably related thereto (including
any downstream steel manufacturing or processing operation or manufacturing or
fabricating operation in the construction products business) which Investment
has a fair market value (as determined by a resolution of the Board of Directors
of the Company and set forth in an officer's certificate delivered to the
Trustee), when taken together with all other investments made pursuant to this
clause (g) that are at the time outstanding, not to exceed $10.0 million.
"Permitted Liens" means (a) Liens existing as of the date of the
Indenture; (b) Liens in favor of the Company and its Subsidiaries; (c) Liens on
property of a person existing at the time such person is merged into or
consolidated with the Company or any Subsidiary of the Company, provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the person
merged into or consolidated with the Company or any of its Subsidiaries; (d)
Liens on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company, provided that such Liens were in existence prior
to the contemplation of such acquisition; (e) pledges or deposits under
workmen's compensation laws, unemployment insurance laws or similar legislation,
or good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such person is a party, or
deposits to secure public statutory obligations of such person or deposits of
cash or United States Government bonds to secure surety or appeal bonds to which
such person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent in each case incurred in the ordinary course
of business (f) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently pursued, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (g) Liens incurred in the
ordinary course of business of the Company or any Restricted Subsidiary of the
Company with respect to obligations that do not exceed $10.0 million at any one
time outstanding and that (1) are not incurred in connection with the borrowing
of money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (2) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (h) Liens
securing Permitted Refinancing Indebtedness, provided that the Company was
permitted to incur such Liens with respect to the Indebtedness so refinanced;
and (i) minor encroachments, encumbrances, easements or reservations of, or
rights of others for, rights-of-way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other
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restrictions as to the use of real properties all of which do not materially
impair the value or utility for its intended purposes of the real property to
which they relate or Liens incidental to the conduct of the business of such
Person or to the ownership of its properties.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Indebtedness under the Revolving Credit
Agreement) of the Company or any of its Restricted Subsidiaries; provided that
(a) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus premium, if any, and accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith), (b)
such Permitted Refinancing Indebtedness has a final maturity date no earlier
than the final maturity date of, and has a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (c) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness is subordinated in right of payment to the
Notes on terms at least as favorable, taken as a whole, to the holders of Notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded and such
Indebtedness shall not have any scheduled principal payment prior to the 91st
day after the final maturity date of the Notes and (d) such Indebtedness is
incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; provided, however, that a Restricted Subsidiary may
guarantee Permitted Refinancing Indebtedness incurred by the Company, whether or
not such Restricted Subsidiary was an obligor or guarantor of the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and
provided, further, that if such Permitted Refinancing Indebtedness is
subordinated to the Notes, such guarantee shall be subordinated to such
Restricted Subsidiary's Subsidiary Guarantee to at least the same extent.
"Permitted Working Capital Indebtedness" means Indebtedness of the
Company and its Restricted Subsidiaries under the Revolving Credit Facility and
under any other agreement, instrument, facility or arrangement that is intended
to provide working capital financing or financing for general corporate purposes
(including any asset securitization facility involving the sale of accounts
receivable); provided that the aggregate outstanding amount of such Indebtedness
of the Company and its Restricted Subsidiaries, at the time of incurrence, shall
not exceed greater of (a) the sum of (i) 50% of the net aggregate book value of
all inventory of the Company and its Restricted Subsidiaries at such time and
(ii) 80% of the net aggregate book value of all accounts receivable (net of bad
debt expense) of the Company and its Restricted Subsidiaries at such time and
(b) $175 million.
"Public Equity Offering" means an underwritten offering of common stock
of the Company meeting the registration requirements of the Securities Act.
"Receivables Facility" means the program for the issuance and placement
from time to time of trade receivable backed adjustable rate securities, all as
contemplated by that certain Pooling and Servicing Agreement, dated as of August
1, 1994, between Wheeling-Pittsburgh Funding, Inc., WPSC, Bank One, Columbus,
N.A. and Wheeling-Pittsburgh Trade Receivable Master Trust and that certain
Receivables Purchase Agreement, dated as of August 1, 1994, between WPSC and
Wheeling-Pittsburgh Funding, Inc., as each may be amended, supplemented or
otherwise modified including any refunding, replacement or extension thereof.
"Replacement Assets" means (x) properties and assets (other than cash
or any Capital Stock or other security) that will be used in a business of the
Company and its Subsidiaries conducted on the date of the Indenture or in a line
of business or manufacturing or fabricating operation reasonably related thereto
(including any downstream steel processing or manufacturing operation or
manufacturing or fabricating operation in the construction products business) or
(y) Capital Stock of any person that will become on the date of the acquisition
thereof a Wholly Owned Restricted Subsidiary of the Company as a result of such
acquisition.
"Restricted Investment" means an Investment other than a Permitted
Investment.
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"Restricted Subsidiary" of a person means any Subsidiary of such person
that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the Second Amended and Restated
Credit Agreement, dated as of December 28, 1995, among WPSC, the lenders party
thereto and Citibank, N.A. as agent, as the same may be amended, supplemented or
otherwise modified including any refinancing, refunding, replacement or
extension thereof and whether by the same or any other lender or groups of
lenders.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
person or one or more of the other Subsidiaries of that person (or a combination
thereof) and (b) any partnership (i) the sole general partner or the managing
general partner of which is such person or a Subsidiary of such person or (ii)
the only general partners of which are such person or of one or more
Subsidiaries of such person (or any combination thereof).
"Tax Sharing Agreement" means the Tax Sharing Agreement between the
Company and WHX as in effect on the date of the Indenture.
"Term Loan Agreement" means the Term Loan Agreement dated as of the
date of the Indenture, between the Company, DLJ Capital Funding, Inc., as
syndication agent, Donaldson, Lufkin & Jenrette Securities Corporation, as
arranger, Citicorp USA, Inc., as documentation agent, a financial institution to
be determined as administrative agent and the lenders party thereto.
"Unimast" means Unimast, Inc., an Ohio corporation.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to
a resolution of the Board of Directors of the Company, but only to the extent
that such Subsidiary (a) has no Indebtedness other than Non-Recourse Debt, (b)
is not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless such agreement,
contract, arrangement or understanding does not violate the terms of the
Indenture described under the caption "--Certain Covenants--Transactions with
Affiliates," (c) is a person with respect to which neither the Company nor any
of its Restricted Subsidiaries has any direct or indirect obligation (i) to
subscribe for additional Equity Interests or (ii) to maintain or preserve such
person's financial condition or to cause such person to achieve any specified
levels of operating results, in each case, except to the extent otherwise
permitted by the Indenture. Any such designation by the Board of Directors of
the Company shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock," the Company shall be in default
of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any
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outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (A) such Indebtedness is permitted under the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (B) no
Default or Event of Default would be in existence following such designation.
"U.S. Government Obligations" means direct, fixed-rate obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged, which are not callable and which mature (or may be put to the issuer
by the holder at no less than par) no later than the maturity date of the Notes.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wheeling-Nisshin" means Wheeling-Nisshin, Inc., a Delaware
corporation.
"Wholly Owned Restricted Subsidiary" of any person means a Restricted
Subsidiary of such person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such person or by one or more Wholly Owned Restricted
Subsidiaries of such person.
"WHX" means WHX Corporation, a Delaware corporation.
"WHX Agreements" mean (i) the Intercreditor, Indemnification and
Subordination Agreement by and among the Company, WHX, WPSC and Unimast and (ii)
the Tax Sharing Agreement, in each case as in effect on the date of this
Indenture.
Book-Entry; Delivery and Form
The certificates representing the Notes are issued in fully registered
form without interest coupons. Notes sold in offshore transactions in reliance
on Regulation S under the Securities Act will initially be represented by one or
more temporary global Notes in definitive, fully registered form without
interest coupons (each a "Temporary Regulation S Global Note") and will be
deposited with the Trustee as custodian for, and registered in the name of a
nominee of, DTC for the accounts of Euroclear and Cedel Bank. The Temporary
Regulation S Global Note will be exchangeable for one or more permanent global
Notes (each a "Permanent Regulation S Global Note"; and together with the
Temporary Regulation S Global Notes, the "Regulation S Global Note") on or after
the 40th day following the Closing Date upon certification that the beneficial
interests in such global Note are owned by non-U.S. persons. Prior to the 40th
day after the Closing Date, beneficial interests in the Temporary Regulation S
Global Note may be held only through Euroclear or Cedel Bank and any resale or
other transfer of such interests to U.S. persons shall not be permitted during
such period unless such resale or transfer is made pursuant to Rule 144A or
Regulation S and in accordance with the requirements described below.
Notes sold in reliance on Rule 144A will be represented by one or more
permanent global Notes in definitive, fully registered form without interest
coupons (each a "Restricted Global Note"; and together with the Regulation S
Global Note, the "Global Notes") and will be deposited with the Trustee as
custodian for, and registered in the name of a nominee of, DTC.
Each Global Note (and any Notes issued for exchange therefor) will be
subject to certain restrictions on transfer set forth therein as described under
"Transfer Restrictions."
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Notes originally purchased by or transferred to Institutional
Accredited Investors who are not qualified institutional buyers ("Non-Global
Purchasers") will be issued Notes in registered form without interest coupons
("Certificated Notes"). Upon the transfer of Certificated Notes initially issued
to a Non-Global Purchaser to a qualified institutional buyer or in accordance
with Regulation S, such Certificated Notes will, unless the relevant Global Note
has previously been exchanged in whole for Certificated Notes, be exchanged for
an interest in a Global Note. For a description of the restrictions on the
transfer of Certificated Notes, see "Transfer Restrictions."
The Global Notes. Ownership of beneficial interests in a Global Note
will be limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. Ownership of beneficial
interests in a Global Note will be shown on, and the transfer of that ownership
will be effected only through, records maintained by DTC or its nominee (with
respect to interests of participants) and the records of participants (with
respect to interests of persons other than participants). Qualified
institutional buyers may hold their interests in a Restricted Global Note
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system.
Investors may hold their interests in a Regulation S Global Note
directly through Cedel Bank or Euroclear, if they are participants in such
systems, or indirectly through organizations that are participants in such
system. Cedel Bank and Euroclear will hold interests in the Regulation S Global
Notes on behalf of their participants through DTC.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with the applicable procedures of DTC, in addition to those provided for under
the Indenture and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, a Global Note will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Issuer, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Issuer expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Issuer also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
Transfers between participants in Euroclear and Cedel Bank will be effected in
the ordinary way in accordance with their respective rules and operating
procedures.
The Issuer expects that DTC will take any action permitted to be taken
by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the applicable Global
Note for Certificated Notes, which it will distribute to its participants and
which may be legended as set forth under the heading "Transfer Restrictions."
The Issuer understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing
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Agency" registered pursuant to the provisions of Section 17A under the Exchange
Act. DTC was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC, Euroclear and Cedel Bank are expected to follow the
foregoing procedures in order to facilitate transfers of interests in a Global
Note among participants of DTC, Euroclear and Cedel Bank, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Issuer nor the Trustee
will have any responsibility for the performance by DTC, Euroclear or Cedel Bank
or their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
FOR NON-U.S. HOLDERS
The discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereunder, and such authorities may
be repealed, revoked or modified so as to result in U.S. federal income tax
consequences different from those discussed below. The following discussion is
limited to the U.S. federal income tax consequences relevant to a holder of a
Note that is not (i) a citizen or resident of the United States, (ii) a
corporation organized under the laws of the United States or any political
subdivision thereof or therein, (iii) an estate, the income of which is subject
to U.S. federal income tax regardless of the source, or (iv) a trust if a court
within the United States is able to exercise primary supervision of the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust (a "Non-U.S. Holder").
The discussion does not consider all aspects of U.S. federal income and
estate taxation that may be relevant to the purchase, ownership or disposition
of the Notes by a particular Non-U.S. Holder in light of such Holder's personal
circumstances, including holding the Notes through a partnership. For example,
persons who are partners in foreign partnerships and beneficiaries of foreign
trusts or estates who are subject to U.S. federal income tax because of their
own status, such as United States residents or foreign persons engaged in a
trade or business in the United States, may be subject to U.S. federal income
tax even though the entity is not subject to income tax on the disposition of
its Note.
For purposes of the following discussion, interest and gain on the
sale, exchange or other disposition of a Note will be considered "U.S. trade or
business income" if such income or gain is (i) effectively connected with the
conduct of a U.S. trade or business or (ii) in the case of a treaty resident,
attributable to a U.S. permanent establishment (or to a fixed base) in the
United States.
Persons considering the purchase of Notes should consult their own tax
advisors concerning the application of United States federal income tax laws, as
well as the laws of any state, local, or other taxing jurisdiction applicable to
their particular situations.
Stated Interest
Generally, any interest paid to a Non-U.S. Holder of a Note that is not
U.S. trade or business income will not be subject to United States tax if the
interest qualified as "portfolio interest." Generally, interest on the Notes
will qualify as portfolio interest if (i) the Non-U.S. Holder does not actually
or constructively own 10% or more of the total voting power of all voting stock
of the Company and is not a "controlled foreign corporation" with respect to
which the Company is a "related person" within the meaning of the Code, (ii) the
beneficial owner, under penalty of perjury, certifies that the beneficial owner
is not a United States person and such certificate provides the beneficial
owner's name and address on Form W-8 or, at the option of the withholding agent,
on a substitute form substantially similar to Form W-8, and (iii) the Non-U.S.
Holder is not a bank receiving interest on an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of its trade or
business. A holder must notify the Company in writing on a timely basis of any
change affecting the validity of the Form W-8.
The gross amount of payments to a Non-U.S. Holder of interest that do
not qualify for the portfolio interest exception and that are not U.S. trade or
business income will be subject to U.S. federal income tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding. U.S.
trade or business income will be taxed on a net basis at regular U.S. rates
rather than the 30% gross rate. To claim the benefit of a tax treaty or to claim
exemption from withholding because the income is U.S. trade or business income,
the Non-U.S. Holder must provide a properly executed Internal Revenue Service
Form 1001 or 4224 (or such successor forms as the United States Internal Revenue
Service designates), as applicable, prior to the payment of interest. These
forms must be periodically updated. Recently adopted Treasury Regulations which
are not yet in effect (the "Final Regulations") would alter the foregoing rules
in certain respects. In general, the Final Regulations are effective January 1,
1999. Under the Final Regulations, a Non-U.S. Holder that is seeking an
exemption from withholding tax on account of a treaty or on account of the Notes
being held in connection with a U.S. trade or business generally would be
required to provide Internal Revenue Service Form W-8. If the Notes are not
actively traded, the Non-U.S. Holder
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also would be required to provide a taxpayer identification number, and may be
required to provide other documentary evidence of foreign status. The Final
Regulations also contain rules concerning payments through intermediaries.
Non-U.S. Holders should consult their tax advisors concerning the application of
the Final Regulations in light of their own circumstances.
Sale, Exchange or Redemption of Notes
Except as described below and subject to the discussion concerning
backup withholding, any gain realized by a Non-U.S. Holder on the sale, exchange
or redemption of a Note generally will not be subject to U.S. federal income
tax, unless (i) such gain is U.S. trade or business income, (ii) subject to
certain exceptions, the Non-U.S. Holder is an individual who holds the Note as a
capital asset and is present in the United States for 183 days or more in the
taxable year of the disposition, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
Federal Estate Tax
Notes held (or treated as held) by an individual who is a Non-U.S.
Holder at the time of his or her death will not be subject to U.S. federal
estate tax, provided that the individual does not actually or constructively own
10% or more of the total voting power of all voting stock of the Company and
income on the Notes was not U.S.
trade or business income.
Information Reporting and Backup Withholding
The Company must report annually to the United States Internal Revenue
Service and to each Non-U.S. Holder any interest that is subject to withholding
or that is exempt from U.S. withholding tax pursuant to a tax treaty or the
portfolio interest exception. Copies of these information returns may also be
made available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the Non-U.S. Holder resides.
Under certain circumstances, the United States Internal Revenue Service
requires information reporting and backup withholding of United States federal
income tax at a rate of 31% with respect to payments to certain non-corporate
Non-U.S. Holders (including individuals). Information reporting and backup
withholding will apply unless such non-corporate Non-U.S. Holders certify to the
withholding agent that the beneficial owner of the Note is not a U.S. Holder.
This certification requirement will generally be satisfied by the certification
provided to avoid the 30% withholding tax (described above).
The payment of the proceeds of a disposition of a Note by a Non-U.S.
Holder to or through the United States office of a broker or through a
non-United States branch of a United States broker generally will be subject to
information reporting and backup withholding at a rate equal to 31% of the gross
proceeds unless the Non-U.S. Holder certifies on Internal Revenue Service Form
W-8 that the beneficial owner of the Note is not a U.S. Holder or otherwise
establishes an exemption. The payment of the proceeds of a disposition of a Note
by a Non-U.S. Holder to or through a non-United States office of a non-United
States broker will not be subject to backup withholding or information reporting
unless the non-United States broker has certain United States relationships or
connections.
In the case of the payment of proceeds from the disposition of Notes to
or through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. person).
Any amount withheld under the backup withholding rules from a payment
to a Non-U.S. Holder will be allowed as a refund or a credit against such
Non-U.S. Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
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PLAN OF DISTRIBUTION
Except as described below, (i) a broker-dealer may not participate in
the Exchange Offer in connection with a distribution of the New Notes, (ii) such
broker-dealer would be deemed an underwriter in connection with such
distribution and (iii) such broker-dealer would be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions. A broker-dealer may, however,
receive New Notes for its own account pursuant to the Exchange Offer in exchange
for Old Notes when such Old Notes were acquired as a result of market-making
activities or other trading activities. Each such broker-dealer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer (other than an "affiliate" of the Company) in
connection with resales of such New Notes. The Company has agreed that for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any such broker-dealer for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in a Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer other than commissions or concessions of any brokers or
dealers and transfer taxes and will indemnify the Holders of the Old Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The Initial Purchasers have indicated to the Company that they intend
to effect offers and sales of the New Notes in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale, but
is not obligated to do so and such market-making activities may be discontinued
at any time. The Initial Purchasers may act as principal or agent in such
transactions. There can be no assurance that an active market for the New Notes
will develop.
LEGAL MATTERS
Certain legal matters in connection with the Notes offered hereby will
be passed upon for the Company by Olshan Grundman Frome & Rosenzweig LLP, New
York, New York. Marvin L. Olshan, a member of Olshan Grundman Frome & Rosenzweig
LLP, is a director and Secretary of the Company.
EXPERTS
The consolidated financial statements of Wheeling-Pittsburgh
Corporation and its subsidiaries as of December 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1996, included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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The financial statements of Wheeling-Nisshin as of December 31, 1996
and 1995, and for each of the three years ended December 31, 1996 included in
this Prospectus have been audited by Coopers & Lybrand LLP, independent
accountants, as stated in their report appearing herein.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Report of Price Waterhouse LLP, Independent Accountants.........................................................F-2
Consolidated Statements of Income of WPC for the years ended December 31,
1996, 1995 and 1994........................................................................................F-3
Consolidated Balance Sheets of WPC as of December 31, 1996 and 1995.............................................F-4
Consolidated Statements of Cash Flows of WPC for the years ended December 31,
1996, 1995 and 1994........................................................................................F-5
Notes to Consolidated Financial Statements of WPC...............................................................F-6
Consolidated Statements of Income of WPC for the Nine-Month Periods Ended
September 30, 1997 and 1996 (unaudited)...................................................................F-19
Consolidated Balance Sheets of WPC as of September 30, 1997 and 1996
(unaudited)...............................................................................................F-20
Consolidated Statements of Cash Flows of WPC for the Nine-Month
Periods Ended September 30, 1997 and 1996 (unaudited).....................................................F-21
Notes to Consolidated Statements of WPC (unaudited)............................................................F-22
Report of Coopers & Lybrand LLP, Independent Accountants.......................................................F-25
Financial Statements of Wheeling-Nisshin, Inc..................................................................F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Wheeling-Pittsburgh Corporation
(a wholly-owned subsidiary of WHX Corporation)
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and of cash flows present fairly, in
all material respects, the financial position of Wheeling-Pittsburgh Corporation
and its subsidiaries (the "Company") at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and the significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note A to the consolidated financial statements, a
Corporate Reorganization was effected in 1994.
As discussed in Note B to the consolidated financial statements, in
1994 the Company adopted Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Postemployment Benefits."
PRICE WATERHOUSE LLP
Pittsburgh, Pennsylvania
February 10, 1997, except for Notes M and N
which are as of August 12, 1997 and
November 20, 1997,
respectively.
F-2
<PAGE>
<TABLE>
<CAPTION>
WHEELING-PITTSBURGH CORPORATION
(a wholly-owned subsidiary of WHX Corporation)
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31,
----------------------------------------------------
1994 1995 1996
(Dollars in thousands)
----------------------------------------------------
Revenues:
<S> <C> <C> <C>
Net sales..................................................... $ 1,193,878 $ 1,267,869 $ 1,110,684
Cost and expenses:
Cost of products sold, excluding
depreciation and profit sharing............................. 980,044 1,059,622 988,161
Depreciation.................................................. 61,094 65,760 66,125
Profit sharing................................................ 9,257 6,718 --
Selling, administrative and general expense................... 60,832 55,023 54,903
----------------- ----------------- -----------------
1,111,227 1,187,123 1,109,189
----------------- ----------------- -----------------
Operating income (loss)....................................... 82,651 80,746 1,495
Interest expense on debt...................................... 22,581 22,431 25,885
Other income.................................................. 6,731 3,234 11,598
B & LE settlement............................................. 36,091 -- --
----------------- ----------------- -----------------
Income (loss) before taxes, change in
accounting method and extraordinary item.................... 102,892 61,549 (12,792)
Tax provision (benefit)....................................... 21,173 3,030 (7,509)
----------------- ----------------- -----------------
Income (loss) before change in accounting
method and extraordinary item............................... 81,719 58,519 (5,283)
Extraordinary charge--net of tax.............................. -- (3,043) --
Cumulative effect on prior years of
accounting change--net of tax............................... (9,984) -- --
----------------- ----------------- -----------------
Net income (loss)............................................. 71,735 55,476 (5,283)
Dividend requirement for preferred stock...................... 5,688 -- --
----------------- ----------------- -----------------
Net income (loss) applicable to common stock.................. $ 66,047 $ 55,476 $ (5,283)
================= ================= =================
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
WHEELING-PITTSBURGH CORPORATION
(a wholly-owned subsidiary of WHX Corporation)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
------------
1995 1996
---- ----
(Dollars in thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents..................................................... $ 42,826 $ 35,950
Trade receivables, less allowances for doubtful 52,850 24,789
accounts of $1,169 and $1,149...............................................
Inventories................................................................... 266,576 193,329
Prepaid expenses and deferred charges......................................... 17,399 13,366
--------------- ---------------
Total current assets.................................................... 379,651 267,434
Investment in associated companies.............................................. 41,063 65,297
Property, plant and equipment, at cost less
accumulated depreciation and amortization..................................... 748,999 710,999
Deferred income taxes........................................................... 103,099 100,157
Due from affiliates............................................................. 22,857 58,522
Deferred charges and other assets............................................... 44,366 43,483
--------------- ---------------
$ 1,340,035 $ 1,245,892
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current liabilities:
Trade payables................................................................ $ 100,221 $ 51,500
Payroll and employee benefits................................................. 72,869 57,094
Federal, state and local taxes................................................ 4,501 9,083
Deferred income taxes--current................................................ 39,645 30,649
Interest and other............................................................ 10,894 8,067
Long-term debt due in one year................................................ 3,722 2,019
--------------- ---------------
Total current liabilities............................................... 231,852 158,412
Long-term debt.................................................................. 285,018 267,395
Employee benefit liabilities.................................................... 434,216 435,502
Other liabilities............................................................... 45,179 46,096
--------------- ---------------
996,265 907,405
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
STOCKHOLDER'S EQUITY:
<S> <C> <C>
Common stock $0.01 par value; authorized
60,000,000 shares; issued and outstanding 100 shares........................ -- --
Additional paid-in capital...................................................... 265,387 265,387
Accumulated earnings............................................................ 78,383 73,100
--------------- ---------------
343,770 338,487
--------------- ---------------
$ 1,340,035 $ 1,245,892
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
WHEELING-PITTSBURGH CORPORATION
(a wholly-owned subsidiary of WHX Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------
1994 1995 1996
---- ---- ----
(Dollars in thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss)............................................. $ 71,735 $ 55,476 $ (5,283)
Items not affecting cash from operating activities:
Depreciation and amortization............................... 61,094 65,760 66,125
Other postretirement benefits............................... 13,651 5,522 3,505
Coal retirees' medical benefits (net of tax)................ -- 3,043 --
Cumulative effect of accounting change (net of tax)......... 9,984 -- --
Income taxes................................................ 19,788 (5,530) (6,572)
Equity (income) in affiliated companies..................... (5,341) (4,845) (9,495)
Decrease (increase) in working capital elements:
Trade receivables........................................... (27,559) 33,365 50,061
Inventories................................................. (21,599) (5,412) 73,247
Trade payables.............................................. (2,634) (10,736) (48,721)
Other current assets........................................ (2,128) (6,311) 4,033
Other current liabilities................................... (4,655) (10,060) (13,973)
Other items--net.............................................. 5,264 4,297 1,355
--------------- --------------- ---------------
Net cash flow provided by operating activities................ 117,600 124,569 114,282
--------------- --------------- ---------------
Cash flows from investing activities:
Plant additions and improvements............................ (69,139) (81,554) (31,188)
Investments in affiliates................................... -- (7,353) (17,240)
Proceeds from sales of assets............................... -- -- 1,425
Dividends from affiliated companies......................... 2,500 2,500 2,500
--------------- --------------- ---------------
Net cash used in investing activities......................... (66,639) (86,407) (44,503)
--------------- --------------- ---------------
Cash flows from financing activities:
Long-term debt retirement................................... (57,454) (4,085) (15,153)
Receivables securitization proceeds (payments).............. 45,000 22,000 (22,000)
Letter of credit collateralization.......................... (28,278) 1,094 384
Receivables from affiliates................................. -- (27,123) (39,886)
Preferred stock dividends................................... (5,688) -- --
Proceeds from warrants/options.............................. 2,241 -- --
--------------- --------------- ---------------
Net cash used in financing activities......................... (44,179) (8,114) (76,655)
--------------- --------------- -----------------
Increase (decrease) in cash and cash equivalents.............. 6,782 30,048 (6,876)
Cash and cash equivalents at beginning of year................ 5,996 12,778 42,826
--------------- --------------- ---------------
Cash and cash equivalents at end of year...................... $ 12,778 $ 42,826 $ 35,950
=============== =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
The accounting policies presented below have been followed in preparing
the accompanying consolidated financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiary companies. All significant intercompany accounts and transactions are
eliminated in consolidation. The Company uses the equity method of accounting
for investments in unconsolidated companies owned 20% or more.
Earnings Per Share
Presentation of earnings per share is not meaningful since the Company
is a wholly owned subsidiary of WHX Corporation. See Note A--Corporate
Reorganization.
Business Segment
The Company is primarily engaged in one line of business and has one
industry segment, which is the making, processing and fabricating of steel and
steel products. The Company's products include hot rolled and cold rolled sheet,
and coated products such as galvanized, prepainted and tin mill sheet. The
Company also manufactures a variety of fabricated steel products including roll
formed corrugated roofing, roof deck, form deck, floor deck, bridge form and
other products used primarily by the construction, highway and agricultural
markets.
Through an extensive mix of products, the Company markets to a wide
range of manufacturers, converters and processors. The Company's 10 largest
customers (including Wheeling-Nisshin) accounted for approximately 40.4% of its
net sales in 1994, 35.4% in 1995 and 34.9% in 1996. Wheeling-Nisshin was the
only customer to account for more than 10% of net sales. Wheeling-Nisshin
accounted for 15.2%, 15.2% and 12.7% of net sales in 1994, 1995, and 1996,
respectively. Geographically, the majority of the Company's customers are
located within a 350-mile radius of the Ohio Valley.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit and
highly liquid debt instruments with original maturities of three months or less.
Inventories
Inventories are stated at cost which is lower than market. Cost is
determined by the last-in first-out ("LIFO") method for substantially all
inventories.
Property, Plant and Equipment
Depreciation is computed on the straight line and the modified units of
production methods for financial statement purposes and accelerated methods for
income tax purposes. Interest cost is capitalized for qualifying assets during
the assets' acquisition period. Capitalized interest cost is amortized on the
same basis as the related depreciation.
F-6
<PAGE>
Maintenance and repairs are charged to income. Renewals and betterments
made through replacements are capitalized. Profit or loss on property
dispositions is credited or charged to income.
Pensions, Other Postretirement and Postemployment Plans
The Company has tax qualified defined contribution pension plans
covering substantially all employees. The programs provide for contributions
based on a percentage of compensation for salaried employees and a rate per hour
worked for hourly employees. Costs for these programs are being funded
currently.
The Company sponsors medical and life insurance programs for
substantially all employees. Similar group medical programs extend to pensioners
and dependents. The management plan has provided basic medical and major medical
benefits on a non-contributory basis through age 65. The Company accounts for
these benefits in accordance with Statement of Financial Accounting Standards
No. 106 ("SFAS 106"), Employers' Accounting for Postretirement Benefits Other
than Pensions. The Company accounts for Postemployment Benefits in accordance
with Statement of Financial Accounting Standards No. 112 ("SFAS 112"),
"Employers' Accounting for Postemployment Benefits". When accounts are
reasonably determinable, they are calculated at their net present value.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. Recognition is given in the accounts for the income tax effect of
temporary differences in reporting transactions for financial and tax purposes
using the deferred liability method. Tax provisions and the related tax payments
or refunds have been reflected in the Company's financial statements in
accordance with a tax sharing agreement between WHX and the Company.
Environmental Matters
The Company provides for remediation costs and penalties associated
with environmental non-compliance when the responsibility of costs is probable
and the amount is estimable. Generally, remediation accruals are recorded when a
feasibility study of plan of action has been determined.
NOTE A--Corporate Reorganization
Formation of WHX Corporation
On July 26, 1994 the Company and its subsidiaries were reorganized and
a new holding company, WHX Corporation ("WHX"), was formed. Upon effectiveness
of the merger each share of WPC Common Stock, WPC Series A Preferred Stock and
each WPC Warrant were converted into a share of WHX Common Stock, WHX Series A
Preferred Stock and a WHX Warrant, respectively. WHX also assumed the obligation
to purchase the Redeemable Common Stock of the ESOP and guaranteed substantially
all of the Company's outstanding indebtedness. See Note G.
The merger was accounted for as a reorganization of entities under
common control whereby the basis of assets and liabilities were unchanged.
Pursuant to the merger agreement the Company contributed the capital stock of
the following subsidiaries to WHX: WPC Land Company, Wheeling-Pittsburgh Radio
Corporation (and its subsidiaries) and Wheeling-Pittsburgh Capital Corporation.
Additionally, the Company contributed the cash and marketable securities and
certain real property and leasehold interests to WHX. WPC retained the capital
stock of the remaining steel-related subsidiaries and equity investments.
At December 31, 1995 and 1996, amounts due from affiliates totaled
$22.9 million and $58.5 million, respectively. These amounts reflect cash
advances between affiliates, dividends paid by WPC on behalf of WHX,
intercompany tax allocations and Unimast working capital advances.
F-7
<PAGE>
NOTE B--Pensions, Other Postretirement and Postemployment Benefits
Pension Programs
The Company provides defined contribution pension programs for both
hourly and salaried employees. Tax qualified defined contribution plans provide,
in the case of hourly employees, an increasing Company contribution per hour
worked based on the age of its employees. A similar tax qualified plan for
salaried employees provides defined Company contributions based on years of
service.
As of December 31, 1996, $117.6 million of fully vested funds are held
in trust for benefits earned under the hourly defined contribution pension plans
and $28.6 million is held in trust for fully vested benefits earned under the
salaried employees defined contribution plans. As of December 31, 1996,
approximately 43% of the assets of the hourly pension plans was in fixed income
investments and 57% in equity investments; approximately 47% of the assets of
the salaried pension plan was in fixed income investments and 53% in equity
investments. All plan assets are invested by professional investment managers.
Pension provisions charged against income were $10.5 million, $10.8 million and
$9.3 million in 1994, 1995, and 1996 respectively.
Effective January 1, 1994 the Company began matching salaried employee
contributions to the 401(K) plan with shares of the Company's Common Stock. The
Company matches 50% of the employees contributions. The employer contribution is
limited to a maximum of 3% of an employee's salary. At December 31, 1994, 1995
and 1996, the 401(K) plan held 32,851 shares, 115,151 shares and 190,111 shares
of WHX Common Stock, respectively. See Note A--Corporate Reorganization. See
Note M--Subsequent Event--New Collective Bargaining Agreement.
Postemployment Benefits
The Company adopted SFAS 112 as of January 1, 1994. SFAS 112
establishes accounting standards for employers who provide benefits to former or
inactive employees after employment but before retirement. Those benefits
include, among others, disability, severance and workers' compensation. The
Company recorded a charge of $12.2 million ($10.0 million net of tax) in 1994 as
a result of the cumulative effect on prior years of adoption of SFAS 112. The
assumed discount rate used to measure the benefit liability was 7.5% at December
31, 1995 and 1996.
Other Postretirement Benefits
The Company sponsors postretirement benefit plans that cover both
management and hourly retirees and dependents. The plans provide medical
benefits including hospital, physicians' services and major medical expense
benefits and a life insurance benefit. The hourly employees' plans provide
non-contributory basic medical and a supplement to Medicare benefits, and major
medical coverage to which the Company contributes 50% of the insurance premium
cost. The management plan has provided basic medical and major medical benefits
on a non-contributory basis through age 65.
The Company accounts for these benefits in accordance with SFAS No.
106. The cost of postretirement medical and life benefits for eligible employees
are accrued during the employee's service period through the date the employee
reaches full benefit eligibility. The Company defers and amortizes recognition
of changes to the unfunded obligation that arise from the effects of current
actuarial gains and losses and the effects of changes in assumptions. The
Company funds the plans as current benefit obligations are paid. Additionally,
in 1994 the Company began funding a qualified trust in accordance with the
collective bargaining agreement effective March 1, 1994. The following table
sets forth the reconciliation of the Accumulated Postretirement Benefit
Obligation ("APBO") to the accrued obligation included in the Company's
consolidated balance sheet at December 31, 1995 and 1996.
F-8
<PAGE>
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1996
---- ----
(Dollars in thousands)
<S> <C> <C>
Active employees not eligible for retirement.................................... $ 90,428 $ 85,030
Active employees eligible to retire............................................. 66,581 68,300
Retirees and beneficiaries...................................................... 230,788 208,011
--------------- ---------------
Accumulated postretirement benefit obligation................................... 387,797 361,341
Plan assets at fair market value................................................ 9,046 13,010
--------------- ---------------
Obligations in excess of plan assets............................................ 378,751 348,331
Unrecognized prior service cost................................................. 2,060 1,806
Unamortized gain................................................................ 33,482 64,303
--------------- ---------------
Accrued postretirement benefit obligation....................................... $ 414,293 $ 414,440
=============== ===============
</TABLE>
At December 31, 1995 and December 31, 1996 plan assets consisted
primarily of short term corporate notes.
The following table sets forth the components of the recorded net
periodic postretirement benefit costs.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------
1994 1995 1996
---- ---- ----
(Dollars in thousands)
Net periodic postretirement benefit cost:
<S> <C> <C> <C>
Service cost.................................................. $ 5,322 $ 3,563 $ 3,953
Interest cost................................................. 27,991 26,757 23,982
Other......................................................... (500) (3,570) (3,888)
-------------- -------------- --------------
Total......................................................... $ 32,813 $ 26,750 $ 24,047
============== ============== ==============
Assumptions:
Discount rate................................................. 8.0% 7.0% 7.0%
Health care cost trend rate................................... 10.5% 10.0% 9.5%
Return on assets.............................................. 8.0% 8.0% 8.0%
</TABLE>
For measurement purposes, medical costs are assumed to increase at
annual rates as stated above and declining gradually to 4.5% in 2004 and beyond.
The health care cost trend rate assumption has significant effect on the costs
and obligation reported. A 1% increase in the health care cost trend rate in
each year would result in approximate increases in the accumulated
postretirement benefit obligation of $47.7 million, and net periodic benefit
cost of $4.3 million. See Note M--Subsequent Event--New Collective Bargaining
Agreement.
Coal Industry Retiree Health Benefit Act
The Coal Industry Retiree Health Benefit Act of 1992 (the "Act")
created a new United Mine Workers of America postretirement medical and death
benefit plan to replace two existing plans which had developed significant
deficits. The Act assigns companies the remaining benefit obligations for former
employees and beneficiaries, and a pro rata allocation of benefits related to
unassigned beneficiaries ("orphans"). The Company's obligation under the Act
related to its previous and present ownership of coal mining operations had been
estimated at $14.3 million (based on preliminary assignment of retirees by the
Social Security Administration ("SSA")) and recorded as an extraordinary charge
in 1993. The Company reduced this liability in 1994 by $2.4 million to reflect
current premium payments, reductions in the number of assigned former employees
and beneficiaries and a lower anticipated health care cost trend rate.
F-9
<PAGE>
In 1995 the SSA assigned an additional 379 retirees and 130 orphans to
the Company. The Company's obligation under the Act had been estimated as an
additional $18.2 million. Based on the information obtained over the past three
years the Company believed the liability had been reasonably determined and
valued the liability at its net present value using a 7.5% discount rate. After
discounting the liability to present value, the net charge to income in 1995
totaled $3.0 million. At December 31, 1996 the actuarially determined accrued
liability totaled $10.9 million, covering 572 assigned retirees and dependents.
NOTE C--Income Taxes
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------
1994 1995 1996
---- ---- ----
(Dollars in thousands)
Income Taxes Before Extraordinary Items
Current
<S> <C> <C> <C>
Federal tax provision....................................... $ 21,035 $ 7,810 $ (1,317)
State tax provision......................................... 1,100 750 380
--------------- --------------- ---------------
Total income taxes current.................................... 22,135 8,560 (937)
--------------- --------------- ---------------
Deferred
Federal tax provision (benefit)............................. (20,750) (35,684) (6,572)
Pre-reorganization tax benefits 19,788 30,154 --
recorded directly to equity............................... --------------- --------------- ---------------
Income tax provision (benefit)................................ $ 21,173 $ 3,030 $ (7,509)
=============== =============== ===============
Total Income Taxes
Current
Federal tax provision....................................... $ 21,035 $ 7,810 $ (1,317)
State tax provision......................................... 1,100 750 380
--------------- --------------- ---------------
Total income taxes current.................................... 22,135 8,560 (937)
--------------- --------------- ---------------
Deferred
Federal tax provision (benefit)............................. (20,750) (37,322) (6,572)
Pre-reorganization tax benefits 17,596 30,154 --
recorded directly to equity............................... --------------- --------------- ---------------
Income tax provision (benefit)................................ $ 18,981 $ 1,392 $ (7,509)
=============== =============== ===============
Components of Total Income Taxes
Operations.................................................... $ 21,173 $ 3,030 $ (7,509)
Extraordinary items........................................... (2,192) (1,638) --
--------------- --------------- ---------------
Income tax provision (benefit)................................ $ 18,981 $ 1,392 $ (7,509)
=============== =============== ===============
</TABLE>
F-10
<PAGE>
Deferred income taxes result from temporary differences in the
financial basis and tax basis of assets and liabilities. Deferred taxes for the
consolidated group are recorded on the books of WPC. Deferred tax assets and/or
liabilities attributable to WHX are not material for the periods presented. The
type of differences that give rise to deferred income tax liabilities or assets
are shown in the following table:
Deferred Income Tax Sources
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1996
---- ----
(Dollars in millions)
Assets
<S> <C> <C>
Postretirement and postemployment employee benefits............................. $ 147.9 $ 147.1
Operating loss carryforward (expiring in 2005 to 2008).......................... 9.8 8.0
Minimum tax credit carryforwards (indefinite carryforward)...................... 47.1 49.5
Provision for expenses and losses............................................... 38.1 43.3
Leasing activities.............................................................. 26.4 25.2
State income taxes.............................................................. 6.0 6.0
Miscellaneous other............................................................. 10.8 7.7
--------------- ---------------
Deferred tax assets........................................................ 286.1 286.8
--------------- ---------------
Liabilities
Property plant and equipment.................................................... (153.0) (157.1)
Inventory....................................................................... (44.1) (34.4)
State income taxes.............................................................. (4.9) (4.9)
Miscellaneous other............................................................. (.7) (.9)
--------------- ---------------
Deferred tax liability..................................................... (202.7) (197.3)
Valuation allowance............................................................. (20.0) (20.0)
--------------- ----------------
Deferred income tax asset--net.................................................. $ 63.4 $ 69.5
=============== ===============
</TABLE>
As of December 31, 1996, for financial statement reporting purposes a
balance of approximately $29 million of prereorganization tax benefits exist.
These benefits will be reported as a direct addition to equity as they are
recognized. In 1995 tax benefits of $42.1 million were recognized as a direct
addition to equity of which $30.2 million was recognized by the Company and
$11.9 million was recognized by the common parent of the consolidated group.
This $11.9 million was charged to the common parent pursuant to the tax sharing
agreement. The decrease in the valuation allowance in 1995 reflects the
recognition of these tax benefits. No prereorganization tax benefits were
recognized in 1996.
During 1994, the Company experienced an ownership change as defined by
Section 382 of the Internal Revenue Code. As the result of this event, the
Company will be limited in its ability to use net operating loss carryforwards
and certain other tax attributes to reduce subsequent tax liabilities. The
amount of taxable income that can be offset by pre-change tax attributes in any
annual period is limited to approximately $32 million.
A tax sharing agreement between the Company and WHX determines the tax
provision and related tax payments or refunds allocated to the Company in years
in which they are combined in a consolidated federal income tax return. The tax
sharing agreement stipulates that WPSC shall be deemed to have succeeded to the
portion of the net operating loss and credit carryovers attributable to the
steel group on December 31, 1990.
Total federal and state income taxes paid in 1994, 1995 and 1996 were
$1.8 million, $18.0 million and $3.5 million, respectively.
F-11
<PAGE>
Federal tax returns have been examined by the Internal Revenue Service
("IRS") through 1987. The statute of limitations has expired for years through
1992; however, the IRS can review prior years to adjust any NOL's incurred in
such years and carried forward to offset income in subsequent open years.
Management believes it has adequately provided for all taxes on income.
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate to
pretax income as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1994 1995 1996
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Income (loss) before taxes, extraordinary
item and accounting change.................................. $ 102,892 $ 61,549 $ (12,792)
=============== =============== ===============
Tax provision (benefit) at statutory rate..................... $ 36,012 $ 21,542 $ (4,477)
Increase (reduction) in tax due to:
Percentage depletion........................................ (673) (973) (1,027)
Equity earnings............................................. (1,423) (1,288) (2,408)
State income tax net of federal effect...................... 2,787 1,624 260
Alternative minimum tax rate differential................... (13,756) -- --
Reduction in valuation allowance net of
equity adjustment......................................... -- (16,300) --
Other miscellaneous......................................... (1,774) (1,575) 143
----------------- ----------------- ---------------
Tax provision (benefit)....................................... $ 21,173 $ 3,030 $ (7,509)
=============== =============== ===============
</TABLE>
F-12
<PAGE>
NOTE D--Inventories
December 31,
----------------------------------
1995 1996
---- ----
(Dollars in millions)
Finished products..................... $ 49,830 $ 44,621
In-process............................ 119,302 59,984
Raw materials......................... 75,837 80,147
Other materials and supplies.......... 29,823 19,476
--------------- ---------------
274,792 204,228
LIFO reserve.......................... (8,216) (10,899)
--------------- ---------------
$ 266,576 $ 193,329
=============== ===============
During 1995 and 1996, certain inventory quantities were reduced,
resulting in liquidations of LIFO inventories, the effect of which increased
income by approximately $.8 million in 1995, and decreased income by
approximately $1.2 million in 1996.
Note E--Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1996
---- ----
(Dollars in millions)
<S> <C> <C>
Land and mineral properties...................... $ 7,183 $ 7,121
Buildings, machinery and equipment............... 997,903 1,021,435
Construction in progress......................... 20,612 18,023
--------------- ---------------
1,025,698 1,046,579
Accumulated depreciation and amortization........ 276,699 335,580
--------------- ---------------
$ 748,999 $ 710,999
=============== ===============
</TABLE>
The Company utilizes the modified units of production method of
depreciation which recognizes that the depreciation of steelmaking machinery is
related to the physical wear of the equipment as well as a time factor. The
modified units of production method provides for straight line depreciation
charges modified (adjusted) by the level of raw steel production. In 1995 and
1996 depreciation under the modified units of production method was $4.9 million
or 9.6% and $7.6 million or 13.4%, respectively, less than straight line
depreciation. The 1995 reduction reflects the effect of a blast furnace outage
for relining, and the 1996 reduction in depreciation primarily reflects the work
stoppage which began October 1, 1996 and continued through year end.
F-13
<PAGE>
NOTE F--Long-Term Debt
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1996
---- ----
(Dollars in millions)
<S> <C> <C>
Senior Unsecured Notes due 2003, 9 3/8%(1)........... $ 270,328 $ 266,155
First Mortgage Notes due 2000, 12 1/4%(1)............ 9,458 --
IRS pension tax note due 1997, 8%:(1)................ 3,667 1,833
Obligation to PBGC due 1997, 8%(1)................... 3,565 --
Other................................................ 1,722 1,426
--------------- ---------------
288,740 269,414
Less portion due within one year..................... 3,722 2,019
--------------- ---------------
Total Long-Term Debt(2)......................... $ 285,018 $ 267,395
=============== ===============
</TABLE>
(1) WPC debt guaranteed by WHX. See Note A.
(2) The fair value of long-term debt at December 31, 1995 and December 31,
1996 was $276.6 million and $269.1 million, respectively. Fair value of
long-term debt is estimated based on trading in the public market.
Long-term debt maturing in each of the next five years is as follows:
1997, $2,019; 1998, $212; 1999, $219; 2000, $217 and 2001, $233.
A summary of the financial agreements at December 31, 1996 follows:
Revolving Credit Facility:
On December 28, 1995, WPSC entered into a Second Amended and Restated
Revolving Credit Facility ("RCF") with Citibank, N.A. as agent. The RCF provides
for borrowings for general corporate purposes up to $125 million and a $35
million sub-limit for Letters of Credit.
The Credit Agreement expires May 3, 1999. Initial interest rates are
based on the Citibank prime rate plus .50% and/or a Eurodollar rate plus 1.75%,
however, the margin over the prime rate and the Eurodollar rate can fluctuate up
or down based upon performance. The maximum prime rate margin is 1.00% and the
maximum Eurodollar margin is 2.25%. The initial letter of credit fee is 1.75%
and is also performance based with a maximum rate of 2.25%.
Borrowings are secured primarily by 100% of the eligible inventory of
WPSC, Pittsburgh-Canfield Corporation, Wheeling Construction Products, Inc. and
Unimast, and the terms of the RCF contain various restrictive covenants,
limiting among other things dividend payments or other distribution of assets,
as defined in the RCF. Certain financial covenants associated with leverage, net
worth, capital spending, cash flow and interest coverage must be maintained.
There are no borrowings or letters of credit outstanding against the RCF at
December 31, 1996. Due to the prolonged work stoppage by the USWA, the Company
negotiated an amendment to certain of the RCF's covenants to provide the Company
with additional flexibility during the current business situation.
In August 1994 WPSC entered into a separate facility for letters of
credit up to $50 million. At December 31, 1996 letters of credit totaling $25.5
million were outstanding under this facility. The letters of credit are
collateralized at 105% with U.S. Government securities owned by the Company, and
are subject to an administrative charge of .4% per annum on the amount of
outstanding letters of credit.
F-14
<PAGE>
First Mortgage Notes:
In November 1991 the Company completed an offering of $175.0 million of
12 1/4% First Mortgage Notes. The First Mortgage Notes were redeemable, in whole
or in part, at the option of the Company, on or after November 15, 1996, at
specified redemption prices plus accrued interest. Pursuant to an October 1993
offer to repurchase by the Company, $165.5 million aggregate principal amount of
First Mortgage Notes were tendered and accepted for payment by the Company. In
November 1996 the Company redeemed the remaining $8.1 million First Mortgage
Notes outstanding.
9 3/8% Senior Notes Due 2003:
On November 23, 1993 WPC issued $325.0 million of 9 3/8% Senior Notes.
Interest on the Senior Notes is payable semiannually on May 15 and November 15
of each year, commencing May 15, 1994. The Senior Notes mature on November 15,
2003. During 1994, the Company repurchased $54.3 million of its outstanding 9
3/8% Senior Notes at an average price of 94% of the related outstanding
principal amount.
During 1996, $4.2 million of the Senior Notes were retired on behalf of
the Company by WHX Corporation via the issuance by WHX Corporation of shares of
its common stock pursuant to the terms of the Senior Notes Indenture agreement.
The Senior Notes are redeemable at the option of WPC, in whole or in
part, at any time on or after November 15, 2000 at specified redemption prices,
plus accrued interest to the date of redemption.
Upon a Change of Control (as defined), WPC will have the option to
redeem the Senior Notes, in whole or in part, at a redemption price equal to the
principal amount thereof plus the Applicable Premium (as defined) and, upon a
Change of Control Triggering Event (as defined), each holder of Senior Notes
will have the right to require WPC to repurchase such holder's Senior Notes at
101% of the principal amount thereof, together, in each case, with accrued
interest to the date of redemption or repurchase.
The Senior Notes are unsecured obligations of WPC ranking senior in
right of payment to WPC's subordinated indebtedness, if any, and pari passu with
all other senior indebtedness of WPC. Pursuant to the Company's reorganization
in 1994, WHX guaranteed the payment of the Senior Notes.
The Indenture contains certain covenants, including but not limited to,
covenants with respect to the following matters: (i) the incurrence of
additional indebtedness by WPC and its subsidiaries; (ii) the incurrence of
certain liens by WPC and its subsidiaries; (iii) the making of certain
sale-leaseback transactions; (iv) the disposition by WPC and its subsidiaries of
the proceeds of certain asset sales; (v) the making by WPC and its subsidiaries
of certain dividends and other restricted payments; (vi) the entry into certain
transactions with affiliates of WPC and (vii) the ability of WPC to engage in
certain mergers, consolidations or asset sales.
Interest Cost
Aggregate interest costs on long-term debt and amounts capitalized
during the three years ended December 31, 1996, are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Aggregate interest expense on long-term debt............. $30,957 $28,793 $28,385
Less: Capitalized interest............................... 8,376 6,362 2,500
------------- ------------- -------------
Interest expense......................................... $22,581 $22,431 $25,885
============= ============= ==============
Interest Paid............................................ $28,906 $27,873 $27,660
============= ============= =============
</TABLE>
F-15
<PAGE>
NOTE G--Stockholder's Equity
Prior to the Corporate Reorganization discussed in Note A, the
authorized capital stock of WPC consisted of 60,000,000 shares of Common Stock,
$.01 par value and 10,000,000 shares of Preferred Stock, $0.10 par value.
Pursuant to a reorganization of the Company effective on July 26, 1994, WPC
became a wholly-owned subsidiary of WHX. WHX, a new holding company, became the
publicly held issuer for all of the outstanding Common and Preferred Stock and
outstanding warrants of WPC and assumed WPC's rights and obligations with
respect to WPC's option plans, all as described below.
Changes in capital accounts are as follows:
<TABLE>
<CAPTION>
Convertible
Common Stock Preferred Accumulated Capital in
Earnings Excess of Par
Shares Amount Shares Amount (Deficit) Value
------------ ------------ -------- ---------- ------------- -------------
(dollars and shares in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993........ 26,541 $ 265 3,000 $ 300 $(39,854) $471,572
----------- ---------- ------- --------- ----------- ------------
EIP shares sold in public market. 80 1 -- -- -- 2,169
Stock options exercised.......... 120 2 -- -- -- 889
Warrants exercised............... 213 2 -- -- -- 1,352
Corporate reorganization--See Note
A--Corporate Reorganization... (26,954) (270) (3,000) (300) (3,286) (270,291)
Pre-reorg. tax benefits.......... -- -- -- -- -- 17,596
Preferred dividends.............. -- -- -- -- (5,688) --
Net income....................... -- -- -- -- 71,735 --
----------- ---------- ------- --------- ------------ ------------
Balance December 31, 1994........ 0 0 0 0 22,907 223,287
----------- ---------- ------- --------- ------------ ------------
Pre-reorg. tax benefits.......... -- -- -- -- -- 42,100
Net income....................... -- -- -- -- 55,476 --
----------- ---------- ------- --------- ------------ ------------
Balance December 31, 1995........ 0 0 0 0 78,383 265,387
----------- ---------- ------- --------- ------------ ------------
Net income (loss)................ -- -- -- -- (5,283) --
----------- ---------- ------- --------- ----------- ------------
Balance December 31, 1996........ 0 $ 0 0 $ 0 $ 73,100 $265,387
=========== ========== ======= ========= ============ ============
</TABLE>
Pursuant to a corporate reorganization of the Company effective July
26, 1994, WHX assumed the rights and obligations of WPC under WPC's stock option
plans and WHX Common Stock is issuable in lieu of each share of WPC Common Stock
required by the plans.
NOTE H--Commitments and Contingencies
Environmental Matters
The Company, as well as other steel companies, is subject to demanding
environmental standards imposed by Federal, state and local environmental laws
and regulations. For 1994, 1995, and 1996 aggregate capital expenditures for
environmental control projects totaled approximately $8.7 million, $5.9 million
and $6.8 million, respectively. In 1994, 1995 and 1996 the Company paid $.6
million, $.1 million and $.5 million, respectively, in civil penalties from
previously established reserves. Based upon the Company's prior capital
expenditures, anticipated capital expenditures, consent agreements negotiated
with Federal and state agencies and information available to the Company on
pending judicial and administrative proceedings, the Company does not expect its
environmental compliance costs, including the incurrence of any additional fines
and penalties relating to the operation of its facilities, to have a material
adverse effect on the financial condition or results of operations of the
Company.
The Company is currently funding its share of remediation costs of
certain hazardous wastes sites. The Company believes that these remediation
costs are not significant and will not be significant in the foreseeable future.
The Company has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act
("Superfund") or similar state statues at seven waste sites. The Company is
subject to joint and several liability imposed by Superfund on potentially
responsible parties. Due to the technical
F-16
<PAGE>
and regulatory complexity of remedial activities and the difficulties attendant
to identifying potentially responsible parties and allocating or determining
liability among them, the Company is unable to reasonably estimate the ultimate
cost of compliance with Superfund laws. The Company believes, based upon
information currently available, that the Company's liability for clean up and
remediation costs in connection with one of these sites will be between $1
million and $4 million. At four other sites the costs are estimated to aggregate
up to $700,000. The Company lacks sufficient information regarding the remaining
sites to form an estimate. The Company is currently funding its share of
remediation costs. Based upon all available information, the Company does not
anticipate that assessment and remediation costs resulting from the Company
being a potentially responsible party will have a material adverse effect on its
financial condition or results of operations. Non-current accrued environmental
liabilities totaled $7.3 million and $7.8 million at December 31, 1995 and
December 31, 1996, respectively. These accruals were first determined by the
Company when the Company reorganized under the federal bankruptcy laws in
January 1991, based on all available information, including information provided
by third parties, and existing laws and regulations then in effect, and are
reviewed and adjusted quarterly as new information becomes available. However,
as further information comes into the Company's possession, it will continue to
reassess such evaluations.
NOTE I--Other Income
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------
1994 1995 1996
----------------- ------------------- -------------------
(Dollars in thousands)
<S> <C> <C> <C>
Interest and investment income............. $ 1,727 $ 3,106 $ 3,688
Equity income.............................. 5,341 4,845 9,495
Receivables securitization fees............ (1,301) (4,283) (4,934)
Other, net................................. 964 (434) 3,349
-------------- -------------- ----------------
$ 6,731 $ 3,234 $11,598
============== =============== ================
</TABLE>
NOTE J--Sale of Receivables
In August 1994 Wheeling-Pittsburgh Funding, Inc. a special purpose
wholly-owned subsidiary ("Funding") of WPSC, entered into an agreement to sell
(up to $75 million on a revolving basis) an undivided percentage ownership in a
designated pool of accounts receivable generated by WPSC, Wheeling Construction
Products, Inc. and Pittsburgh-Canfield Corporation. The agreement expires in
August 1999. In July 1995 WPSC amended such agreement to sell an additional $20
million on similar terms and conditions. In October 1995 WPSC entered into an
agreement to include the receivable generated by Unimast, in the pool of
accounts receivable sold. Accounts receivable at December 31, 1995 and 1996
exclude $67 million and $45 million, respectively, representing uncollected
accounts receivable sold with recourse limited to the extent of uncollectible
balances. Fees of $4.3 million paid by the Company under this agreement were
based upon a fixed rate set on the date the initial $45 million of receivables
were sold and variable rates on subsequent sales that range from 5.76% to 8.25%
of the outstanding amount of receivables sold. Based on the Company's collection
history, the Company believes that credit risk associated with the above
arrangement is immaterial. However, if the strike by the USWA continues the
Company may not be able to generate sufficient trade accounts receivable to
maintain the receivables securitization agreements. If the securitization
agreements are terminated, collection of the sold receivables would be used to
pay off the investors.
In June 1996, the Financial Accounting Standards Board (FASB) approved
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities." SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities, and supersedes SFAS 77, "Reporting by Transferors for Transfers of
Receivables with Recourse" which the Company had previously followed. SFAS 125
is effective after December 31, 1996. Based on the provisions of SFAS 125, the
Company does not currently believe the effects of adoption of SFAS 125 will be
material to its financial conditions or results of operations.
F-17
<PAGE>
NOTE K--Separate Financial Statements of Subsidiaries not consolidated and 50
percent or less owned persons.
The Company owns 35.7% of Wheeling-Nisshin. Wheeling-Nisshin had total
debt outstanding at December 31, 1995 and 1996 of approximately $36.7 millions
and $25.3 million, respectively. The Company derived approximately 15.2%, 15.2%
and 12.7% of its revenues from sale of steel to Wheeling-Nisshin in 1994, 1995
and 1996, respectively. The Company received dividends of $2.5 million annually
from Wheeling-Nisshin from 1994 through 1996. Audited financial statements of
Wheeling-Nisshin are presented at page F-25 because it is considered a
significant subsidiary of the Company.
NOTE L--Quarterly Information (Unaudited)
Financial results by quarter for the two fiscal years ended December
31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
Earnings (Loss)
Per Share Before Earnings
Gross Profit Extraordinary Extraordinary (Loss) Per
Net Sales (Loss) Charge (Loss) Net Income Charge Share
----------- ----------- ----------------- ------------ ----------------- -----------
(Dollars in thousands)
1995:
<S> <C> <C> <C> <C> <C> <C>
1st Quarter............... $324,187 $ 63,293 -- $ 19,884 * *
2nd Quarter............... 332,180 49,072 -- 16,778
3rd Quarter............... 305,976 52,994 -- 11,834
4th Quarter............... 305,526 42,888 (3,043) 6,980
1996:
1st Quarter............... 287,846 38,720 -- 1,389 * *
2nd Quarter............... 328,457 55,342 -- 11,020
3rd Quarter............... 359,906 57,986 -- 13,223
4th Quarter............... 134,475 (29,525) -- (30,915)
</TABLE>
* Earnings per share are not meaningful because the Company is a
wholly-owned subsidiary of WHX Corporation and has 100 shares of Common
Stock outstanding.
NOTE M--Subsequent Event--New Collective Bargaining Agreement
On August 12, 1997, the Company and the USWA entered into a new
collective bargaining agreement which settled a ten month strike. The new labor
agreement provides for the adoption of a defined benefit pension plan to replace
the previous defined contribution pension plan, wage increases totaling $1.50
per hour over the life of the contract, various short-term bonus and special
assistance payments, the immediate elimination of 850 jobs made possible by the
elimination of numerous restrictive work practices and mandatory multicraft
training. The new labor agreement also limits increases in health care costs for
retirees beginning in 2005.
NOTE N--Subsequent Event--Issuance of New Senior Notes
On November 20, 1997, the Company issued $275.0 million of 9 1/4%
Senior Notes due 2007 for gross proceeds of $274.0 million. Concurrently with
the consummation of the offering of the 9 1/4% Senior Notes, the Company entered
into a $75.0 million floating rate term loan agreement with various lenders (the
"Term Loan Agreement"). The initial floating interest rate is set at a LIBO rate
plus 3.25%. The net proceeds of the Senior Notes together with the net proceeds
of the Term Loan Agreement will be primarily used to defease the Company's 9
3/8% Senior Notes due 2003 pursuant to the terms of the Indenture under which
the 9 3/8% Senior Notes were issued, to pay related fees and expenses, and for
the reduction of borrowings under the RCF. In connection with the defeasance of
the Company's 9 3/8% Senior Notes, the Company anticipates recognizing an
extraordinary loss of approximately $23.9 million, net of an estimated $12.8
million income tax benefit.
The 9 1/4% Senior Notes and the Term Loan Agreement are guaranteed by
all the operating subsidiaries of WPC. With the exception of the Company's
investments in Wheeling-Nisshin and Ohio Coatings Company,
F-18
<PAGE>
which are reflected in "Investments in Associated Companies" on the Company's
Balance Sheet, and the related equity earnings (losses), which are reflected in
the Company's Statement of Income, the consolidated statements of the Company
reflect the financial position, results of operations and cash flows of all the
guaranteeing subsidiaries.
F-19
<PAGE>
WHEELING-PITTSBURGH CORPORATION
(a wholly-owned subsidiary of WHX Corporation)
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------------------
1996 1997
----------------- -----------------
(Dollars in thousands)
Revenues:
<S> <C> <C>
Net sales....................................................................... $ 976,209 $ 270,109
Cost and expenses:
Cost of products sold, excluding depreciation and
profit sharing ............................................................... 824,161 356,694
Depreciation.................................................................... 56,498 29,927
Profit sharing.................................................................. 2,990 --
Selling, administrative and general expense..................................... 42,237 38,676
Special charge.................................................................. -- 88,910
--------------- ---------------
925,886 514,207
--------------- ---------------
Operating income (loss)......................................................... 50,323 (244,098)
Interest expense on debt........................................................ 19,684 19,658
Other income (loss)............................................................. 4,773 (214)
--------------- ---------------
Income (loss) before taxes, change in accounting
method and extraordinary item................................................. 35,412 (263,970)
Tax provision (benefit)......................................................... 9,780 (92,350)
--------------- ---------------
Net income (loss)............................................................... $ 25,632 $ (171,620)
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
F-20
<PAGE>
WHEELING-PITTSBURGH CORPORATION
(a wholly-owned subsidiary of WHX Corporation)
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
----------------------------------
1996 1997
----------------- -----------------
(Dollars in thousands)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents..................................................... $ 7,529 $ --
Trade receivables, less allowances for doubtful
accounts of $1,632 and $1,405............................................... 113,378 24,805
Inventories................................................................... 245,540 256,333
Prepaid expenses and deferred changes......................................... 10,652 10,082
--------------- ---------------
Total current assets.................................................... 377,099 291,220
Investment in associated companies.............................................. 61,647 67,056
Property, plant and equipment, at cost less
accumulated depreciation and amortization..................................... 721,202 696,134
Deferred income taxes........................................................... 96,098 191,081
Due from affiliates............................................................. 51,978 15,187
Intangible asset-pension........................................................ -- 77,180
Deferred charges and other assets............................................... 44,117 37,836
--------------- ---------------
$ 1,352,141 $ 1,375,694
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade payables................................................................ $ 83,260 $ 90,228
Short term-borrowings......................................................... -- 97,000
Payroll and employee benefits................................................. 72,119 81,593
Federal, state and local taxes................................................ 11,516 8,522
Deferred income taxes--current................................................ 39,645 32,806
Interest and other............................................................ 15,826 14,292
Long-term debt due in one year................................................ 3,870 199
--------------- ---------------
Total current liabilities............................................... 226,236 324,640
Long-term debt.................................................................. 275,591 267,287
Pension liability............................................................... -- 156,446
Other employee benefit liabilities.............................................. 435,266 414,619
Other liabilities............................................................... 45,346 45,835
--------------- ---------------
982,439 1,208,827
--------------- ---------------
STOCKHOLDER'S EQUITY:
Common stock $0.01 par value; authorized
60,000,000 shares; issued and outstanding
100 shares.................................................................. -- --
Additional paid-in capital.................................................... 265,687 265,387
Accumulated earnings (deficit)................................................ 104,015 (98,520)
--------------- ---------------
369,702 166,867
--------------- ---------------
$ 1,352,141 $ 1,375,694
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
F-21
<PAGE>
WHEELING-PITTSBURGH CORPORATION
(a wholly-owned subsidiary of WHX Corporation)
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------------------
1996 1997
----------------- -----------------
(Dollars in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss)............................................................... $ 25,632 $ (171,620)
Items not affecting cash from operating activities:
Depreciation.................................................................. 56,498 29,927
Other postretirement benefits................................................. 4,100 (1,390)
Loss on disposition of assets................................................. -- 835
Special charges, net of current portion....................................... -- 57,459
Income taxes.................................................................. 7,300 (88,246)
Equity loss (income) in affiliated companies.................................. (5,844) 1,191
Other non cash items.......................................................... -- 3,655
Decrease (increase) in working capital elements:
Trade receivables............................................................. (58,528) (3,516)
Inventories................................................................... 21,036 (63,004)
Trade payables................................................................ (16,961) 38,728
Other current assets.......................................................... 6,747 3,284
Other current liabilities..................................................... 11,245 29,808
Other items--net................................................................ (2,476) (4,257)
--------------- ---------------
Net cash flow provided by operating activities.................................. 48,749 (167,146)
--------------- ---------------
Cash flows from investing activities:
Plant additions and improvements.............................................. (28,742) (17,977)
Investments in affiliates..................................................... (17,240) (5,450)
Proceeds from sales of assets................................................. -- 1,217
Dividends from affiliated companies........................................... 2,500 2,500
--------------- ---------------
(43,482) (19,710)
Net cash used in investing activities........................................... --------------- ---------------
Cash flows from financing activities:
Long-term debt retirement..................................................... (5,106) (1,928)
Short-term borrowings......................................................... -- 97,000
Receivables securitization proceeds (payments)................................ (2,000) 3,500
Letter of credit collateralization............................................ (116) 8,999
Receivables from affiliates................................................... (33,342) 43,335
--------------- ---------------
(40,564) 150,906
Net cash provided by (used in) financing activities............................. --------------- ---------------
Decrease in cash and cash equivalents........................................... (35,297) (35,950)
Cash and cash equivalents at beginning of period................................ 42,826 35,950
--------------- ---------------
Cash and cash equivalents at end of period...................................... $ 7,529 $ --
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements
F-22
<PAGE>
WPC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
General
The consolidated balance sheets as of September 30, 1997 and 1996, the
consolidated statement of income for the three and nine month periods ended
September 30, 1997 and 1996, and the consolidated statement of cash flow for the
nine month periods ended September 30, 1997 and 1996 have been prepared by the
Company without audit. In the opinion of management, all normal recurring
adjustments necessary to present fairly the consolidated financial position at
September 30, 1997 and the results of operations and changes in cash flow for
the periods presented have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
These nine month financial statements should be read in conjunction
with the Company's audited consolidated financial statements for the year ended
December 31, 1996. The results of operations for the period ended September 30,
1997 are not necessarily indicative of the operating results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates. Due
to uncertainty involved in estimating, it is reasonably possible that a change
in estimates may occur in the near term as more information becomes available.
Business Segment
The Company is primarily engaged in one line of business and has one
industry segment, which is the making, processing and fabricating of steel and
steel products. The Company's products include hot rolled and cold rolled sheet,
and coated products such as galvanized, prepainted and tin mill sheet. The
Company also manufactures a variety of fabricated steel products including roll
formed corrugated roofing, roof deck, form deck, floor deck, bridge form and
other products used primarily by the construction, highway and agricultural
markets.
NOTE 1--Collective Bargaining Agreement
The Company's labor agreement with the USWA expired on October 1, 1996.
On August 1, 1997 the Company and the USWA announced that they had reached a
tentative agreement on the terms of a new collective bargaining agreement. The
tentative agreement was ratified on August 12, 1997 by USWA-represented
employees. The new collective bargaining agreement provides for a defined
benefit pension plan, a retirement enhancement program, short-term bonuses and
special assistance payments for employees not immediately recalled to work and
$1.50 in hourly wage increases over its term of not less than five years. It
also provides for the reduction of 850 jobs, mandatory multicrafting as well as
modification of certain work practices.
NOTE 2--Special Charge
The Company recorded a special charge of $88.9 million in the third
quarter of 1997. The special charge is related to certain benefits included in
its new collective bargaining agreement which was ratified by USWA-represented
employees on August 12, 1997.
The agreement provided for a defined benefit pension plan, retirement
enhancements for up to 850 employees and various short-term bonuses and special
assistance payments.
F-23
<PAGE>
The special charge included enhanced retirement benefits to be paid
under the defined benefit pension program which totaled $66.7 million which were
recorded under the provisions of Statement of Financial Accounting Standard No.
88, Employers' Accounting For Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits, and various other charges which
totaled $22.2 million. Of this special charge $12.4 million were paid in the
third quarter of 1997.
The Company also recorded an additional pension liability of $77.2
million under the provisions of Statement of Financial Accounting Standard No.
87, Employers' Accounting for Pensions with an offsetting debit to an intangible
pension asset. The company's unfunded accumulated pension benefit obligation
totaled $162.0 million as of September 30, 1997.
NOTE 3--Sales of Receivables
In 1994 a special purpose wholly-owned subsidiary of
Wheeling-Pittsburgh Steel Corporation ("WPSC"), entered into an agreement to
sell (up to $75 million on a revolving basis) an undivided percentage ownership
in a designated pool of accounts receivable generated by WPSC, Wheeling
Construction Products, Inc. and Pittsburgh-Canfield Corporation. The agreement
expires in August 1999. In July 1995 WPSC amended such agreement to sell an
additional $20 million on similar terms and conditions. In October 1995 WPSC
entered into an agreement to include the receivables generated by Unimast in the
pool of accounts receivable sold. Accounts receivable at September 30, 1997 and
1996 exclude $48.5 million and $65 million, respectively, representing
uncollected accounts receivable sold with recourse limited to the extent of
uncollectible balances. Fees paid by the Company under this agreement range from
7.42% to 8.5% of the outstanding amount of receivables sold. Based on the
Company's collection history, the Company believes that credit risk associated
with the above arrangement is immaterial.
NOTE 4--Revolving Credit Facility
In December 1995 Wheeling-Pittsburgh Steel Corporation entered into a
Second Amended and Restated Revolving Credit Facility ("RCF") with Citibank,
N.A. as agent. The RCF, as amended, provides for borrowings for general
corporate purposes up to $150 million and a $35 million sub-limit for Letters of
Credit.
The RCF expires on May 3, 1999. Interest rates are based on the
Citibank prime rate plus 1.0% and/or a Eurodollar rate plus 2.25%, but the
margin over the prime rate and the Eurodollar rate can fluctuate based upon
performance. The letter of credit fee is 2.25% and is also performance based.
Borrowings are secured primarily by 100% of the eligible inventory of
Wheeling-Pittsburgh Steel Corporation, Pittsburgh-Canfield Corporation, Wheeling
Construction Products, Inc. and Unimast, and the terms of the RCF contain
various restrictive covenants, limiting among other things dividend payments or
other distributions of assets, as defined in the RCF. Certain financial
covenants associated with leverage, net worth, capital spending, cash flow and
interest coverage must be maintained. Borrowings outstanding against the RCF at
September 30, 1997 totaled $97.0 million. No letters of credit were outstanding
under the RCF.
In August 1994 WPSC entered into a separate facility for letters of
credit up to $50 million. At September 30, 1997 letters of credit totaling $16.9
million were outstanding under this facility. The letters of credit are
collateralized at 105% with U.S. Government securities owned by the Company, and
are subject to an administrative charge of .4% per annum on the amount of
outstanding letters of credit.
F-24
<PAGE>
NOTE 5--Contingencies
Environmental Matters
The Company has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability Act
("Superfund") or similar state statutes at seven waste disposal sites. The
Company is subject to joint and several liability imposed by Superfund on
potentially responsible parties. Due to the technical and regulatory complexity
of remedial activities and the difficulties attendant to identifying potentially
responsible parties and allocating or determining liability among them, the
Company is unable to reasonably estimate the ultimate cost of compliance with
Superfund laws. The Company believes, based upon information currently
available, that the Company's liability for clean up and remediation costs in
connection with one of these sites will be between $3 million and $4 million. At
four other sites the costs are estimated to aggregate up to $700,000. The
Company lacks sufficient information regarding the remaining sites to form an
estimate. Non-current accrued environmental liabilities totaled $7.4 million at
September 30, 1997 and $7.5 million at September 30, 1996. These liabilities
were determined by the Company, based on all available information, including
information provided by third parties, and existing laws and regulations then in
effect, and are reviewed and adjusted quarterly as new information becomes
available. Based upon all available information, the Company does not anticipate
that assessment and remediation costs resulting from the Company being a
potentially responsible party will have a material adverse effect on the
financial condition or results of operations of the Company. However, as further
information becomes available, the Company will reassess such evaluations.
The Company, as well as other steel companies, is subject to demanding
environmental standards imposed by federal, state and local environmental laws
and regulations. For the nine months ended September 30, 1997 and years 1996 and
1995 aggregate capital expenditures for environmental control projects totaled
approximately $1.8 million, $6.8 million and $5.9 million, respectively. The
Company is currently funding its share of remediation costs. The Company
believes that these remediation costs are not significant and will not be
significant in the forseeable future.
Based upon the Company's prior capital expenditures, anticipated
capital expenditures, consent agreements negotiated with federal and state
agencies and information available to the Company on pending judicial and
administrative proceedings, the Company does not expect its environmental
compliance costs, including the incurrence of any additional fines and
penalties, relating to the operation of its facilities, to have a material
adverse effect on its consolidated financial condition or results of operations.
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Wheeling-Nisshin, Inc.:
We have audited the accompanying balance sheets of Wheeling-Nisshin,
Inc. (the Company) as of December 31, 1996 and 1995, and the related statements
of income, shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Wheeling-Nisshin,
Inc. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
Pittsburgh, Pennsylvania
February 14, 1997
F-26
<PAGE>
WHEELING-NISSHIN, INC.
BALANCE SHEETS
December 31, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents................................... $ 15,910 $ 19,017
Investments................................................. -- 19,900
Trade accounts receivable, net of allowance for
bad debts of $250 in 1995 and 1996........................ 19,035 19,765
Inventories (Note 3)........................................ 18,766 22,233
Deferred income taxes (Note 6).............................. 4,507 2,337
Other current assets........................................ 183 819
--------------- ---------------
Total current assets.................................. 58,401 84,071
Property, plant and equipment, net (Notes 4 and 5)............ 145,716 134,174
Debt issuance costs, net of accumulated amortization
of $1,533 in 1995 and $1,617 in 1996........................ 368 284
Other assets.................................................. 1,004 851
--------------- ---------------
Total assets.......................................... $ 205,489 $ 219,380
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
<S> <C> <C>
Accounts payable............................................ $ 8,380 $ 21,226
Due to affiliates (Note 8).................................. 6,036 --
Accrued interest............................................ 670 497
Accrued income taxes........................................ 767 3,183
Other accrued liabilities................................... 3,402 3,388
Accrued profit sharing...................................... 5,546 6,505
Current portion of long-term debt........................... 11,361 6,828
--------------- ---------------
Total current liabilities............................. 36,162 41,627
Long-term debt, less current portion (Note 5)................. 25,315 18,487
Deferred income taxes (Note 6)................................ 23,423 24,116
--------------- ---------------
Total liabilities..................................... 84,900 84,230
--------------- ---------------
Contingencies (Note 9)........................................
Shareholders' equity:
Common stock, no par value; authorized, issued
and outstanding, 7,000 shares............................. 71,588 71,588
Retained earnings........................................... 49,001 63,562
--------------- ---------------
Total shareholders' equity................................ 120,589 135,150
--------------- ---------------
Total liabilities and shareholders' equity............ $ 205,489 $ 219,380
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
WHEELING-NISSHIN, INC.
STATEMENT OF INCOME
For the years ended December 31, 1994, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1995 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Sales......................................................... $ 374,615 $ 391,577 $ 377,500
Cost of goods sold (Note 8)................................... 345,160 349,429 335,071
--------------- --------------- ---------------
Gross profit.............................................. 29,455 42,148 42,429
Selling, general and administrative expenses.................. 8,478 10,549 8,388
--------------- --------------- ---------------
Operating profit.......................................... 20,977 31,599 34,041
--------------- --------------- ---------------
Other income (expense):
Interest and other income................................... 1,200 1,717 2,539
Interest expense............................................ (4,596) (3,729) (1,909)
--------------- --------------- ---------------
(3,396) (2,012) 630
--------------- --------------- ---------------
Income before income taxes................................ 17,581 29,587 34,671
Provision for income taxes (Note 6)........................... 7,160 11,538 13,110
Net income................................................ $ 10,421 $ 18,049 $ 21,561
=============== =============== ===============
Earnings per share............................................ $ 1.49 $ 2.58 $ 3.08
=============== =============== ===============
</TABLE>
The accompanying notes are a integral part of the financial statements.
F-28
<PAGE>
WHEELING-NISSHIN, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1994, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
----------------- ----------------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1993.................................. $ 71,588 $ 34,531 $ 106,119
Net income.................................................... -- 10,421 10,421
Cash dividends ($1 per share)................................. -- (7,000) (7,000)
--------------- --------------- ---------------
Balance at December 31, 1994.................................. 71,588 37,952 109,540
Net income.................................................... -- 18,049 18,049
Cash dividends ($1 per share)................................. -- (7,000) (7,000)
--------------- --------------- ---------------
Balance at December 31, 1995.................................. 71,588 49,001 120,589
Net income.................................................... -- 21,561 21,561
Cash dividends ($1 per share)................................. -- (7,000) (7,000)
--------------- --------------- ---------------
Balance at December 31, 1996.................................. $ 71,588 $ 63,562 $ 135,150
=============== =============== ===============
</TABLE>
The accompanying notes are a integral part of the financial statements.
F-29
<PAGE>
WHEELING-NISSHIN, INC.
STATEMENT OF CASH FLOWS
For the years ended December 31, 1994, 1995 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1995 1996
----------------- ----------------- -----------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income.................................................. $ 10,421 $ 18,049 $ 21,561
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization............................. 14,666 16,210 12,952
Loss on disposal of assets................................ 12 -- --
Deferred income taxes..................................... 4,300 5,449 5,330
Net change in operating assets and liabilities:
Increase in trade accounts receivable................... (2,053) (602) (730)
(Increase) decrease in inventories...................... 7,433 5,161 (3,467)
(Increase) decrease in prepaid and accrued
income taxes ......................................... 2,585 1,368 (51)
Decrease (increase) in other assets..................... (388) 42 (636)
Increase in accounts payable............................ 1,350 179 12,846
(Decrease) increase in due to affiliates................ 2,497 (25,233) (6,036)
(Decrease) increase in accrued interest................. 165 (312) (173)
Increase in other accrued liabilities................... 733 4,843 945
----------------- ----------------- -----------------
Net cash provided by operating activities............. 41,721 25,154 42,541
----------------- ----------------- -----------------
Cash flows from investing activities:
Capital expenditures, net................................... (780) (1,029) (1,173)
Purchase of investments, net................................ -- -- (19,900)
----------------- ----------------- -----------------
Net cash used in investing activities................. (780) (1,029) (21,073)
----------------- ----------------- -----------------
Cash flows from financing activities:
Payments on long-term debt.................................. (27,034) (32,145) (11,361)
Payment of dividends........................................ (7,000) (7,000) (7,000)
----------------- ----------------- -----------------
Net cash used in financing activities................. (34,034) (39,145) (18,361)
----------------- ----------------- -----------------
Net increase (decrease) in cash and
cash equivalents............................................ 6,907 (15,020) 3,107
Cash and cash equivalents:
Beginning of the year....................................... 24,023 30,930 15,910
----------------- ----------------- -----------------
End of year................................................. $ 30,930 $ 15,910 $ 19,017
================= ================= =================
Supplemental cash flow disclosures:
Cash paid during the year for:
Interest.................................................. $ 4,431 $ 4,041 $ 2,082
================= ================= =================
Income taxes.............................................. $ 3,148 $ 4,968 $ 7,831
================= ================= =================
Supplemental schedule of noncash investing
and financing activities:
Acquisition of property, plant and
equipment under capital lease obligations................. -- $ 290 --
================= ================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
1. Description of Business
Wheeling-Nisshin, Inc. (the Company) is engaged in the production and
marketing of galvanized and aluminized steel products at a manufacturing
facility in Follansbee, West Virginia. Principally all of the Company's sales
are to ten trading companies located primarily in the United States. The capital
contribution for the formation of the Company was made by Nisshin Steel Co.,
Ltd. (Nisshin) and Wheeling-Pittsburgh Corporation (Wheeling-Pittsburgh). At
December 31, 1996, Nisshin and Wheeling-Pittsburgh owned 64.3% and 35.7% of the
outstanding common stock of the Company, respectively.
2. Summary of Significant Accounting Policies
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
Cash and cash equivalents consist of general cash accounts and highly
liquid debt instruments with maturities of three months or less when purchased.
Substantially all of the Company's cash and cash equivalents are maintained at
one financial institution. No collateral or other security is provided on these
deposits, other than $100 of deposits insured by the Federal Deposit Insurance
Corporation.
Investments:
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." This statement requires that securities be classified as
trading, held-to-maturity, or available-for-sale. The Company's investments,
which consist of certificates of deposits and commercial paper, are classified
as held-to-maturity and are recorded at cost which approximates fair value. The
certificates of deposit amounted to $15,000 at December 31, 1996 and are
maintained at one financial institution. The commercial paper amounted to $4,900
at December 31, 1996. The Company had no investments at December 31, 1995.
Inventories:
Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method.
Property, Plant and Equipment:
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization.
Major renewals and improvements are charged to the property accounts,
while replacements, maintenance and repairs which do not improve or extend the
useful lives of the respective assets are expensed. Upon disposition or
retirement of property, plant and equipment, the cost and the related
accumulated depreciation or amortization are removed from the accounts. Gains or
losses on sales are reflected in earnings.
F-31
<PAGE>
Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the assets.
Deferred Pre-Operating Costs:
Certain costs directly related and incremental to the Company's second
production line were deferred until commencement of commercial operations in
March 1993. These costs, which were an integral part of the process of bringing
the new line into commercial production and, therefore, benefited future
periods, were being amortized using the straight-line method over a three-year
period. In 1995, management determined that they had fully recovered the
deferred pre-operating costs related to the new production line. Accordingly,
the remaining unamortized cost at December 31, 1995 of $390 was charged to
operations in 1995.
Debt Issuance Costs:
Debt issuance costs associated with long-term debt secured to finance
the construction of the Company's original manufacturing facility and the second
production line were capitalized and are being amortized using the effective
interest method over the term of the related debt.
Income Taxes:
The Company uses SFAS 109, "Accounting for Income Taxes" to recognize
deferred tax liabilities and assets for the difference between the financial
statement carrying amounts and the tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
Earnings Per Share:
Earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding during each period.
3. Inventories
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
<S> <C> <C>
Raw materials................................................................... $ 6,753 $ 10,645
Finished goods.................................................................. 12,013 11,588
----------------- -----------------
$ 18,766 $ 22,233
================= =================
</TABLE>
Had the Company used the first-in, first-out (FIFO) method to value
inventories, the cost of inventories would have been approximately $850 lower
than the LIFO value at December 31, 1995 and $12 lower than the LIFO value at
December 31, 1996.
F-32
<PAGE>
4. Property, Plant and Equipment
Property, plant and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
<S> <C> <C>
Buildings.......................................$ 34,631 $ 34,665
Land improvements............................... 3,098 3,097
Machinery and equipment......................... 160,804 161,723
Office equipment................................ 3,215 3,436
----------------- -----------------
201,748 202,921
Less accumulated depreciation and amortization.. (57,064) (69,779)
----------------- -----------------
144,684 133,142
Land............................................ 1,032 1,032
----------------- -----------------
$ 145,716 $ 134,174
================= =================
</TABLE>
Depreciation expense was approximately $12,765, $13,651 and $12,715 in
1994, 1995, and 1996, respectively.
5. Long-Term Debt
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---------------- -----------------
<S> <C> <C>
Industrial revenue bonds for the original production facility, which accrued
interest at 5/8% over the LIBOR rate, as adjusted for periods ranging from
three months to one year, as elected by the Company. The bonds, which were
payable in semi-annual installments of $3,309 plus interest,
were paid-off in September 1996...............................................$ 4,544 --
Industrial revenue bonds for the second production line accruing interest at
1/2% over the LIBOR rate, as adjusted for periods ranging from three months to
one year, as elected by the Company. The interest rate on the bonds at
December 31, 1996 was 6.468%. The bonds are payable in 17 equal semi-annual
installments of $3,353 plus
interest through March 2000.................................................... 31,647 $ 24,941
West Virginia Economic Development Authority (WVEDA) loan accruing interest at
4%, payable in monthly installments of $2 including interest
through January 2001.......................................................... 106 90
Capital lease obligations accruing interest at rates
ranging from 10% to 13.8%, payable in monthly
installments through January 2000............................................. 379 284
----------------- -----------------
36,676 25,315
11,361
Less current portion............................................................ 11,361 6,828
----------------- -----------------
$ 25,315 $ 18,487
================= -----------------
</TABLE>
F-33
<PAGE>
Based on the interest rates currently available, management believes
that the carrying amount of long-term debt is a reasonable estimation of fair
value.
The industrial revenue bonds are collateralized by substantially all
property, plant and equipment and are guaranteed by Nisshin. In addition, the
industrial revenue bonds provide that dividends may not be declared or paid
without the prior written consent of the lender. Such approval was obtained for
the dividends paid in years 1994, 1995 and 1996.
The approximate annual maturities on all long-term debt for each of the
five years ending December 31 are: $6,828 in 1997; $6,835 in 1998; $6,784 in
1999; $4,848 in 2000 and $20 in 2001.
6. Income Taxes
The provision for income taxes for the years ended December 31 consist
of:
<TABLE>
<CAPTION>
1994 1995 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Current:
U.S. Federal................................................ $ 2,597 $ 5,838 $ 7,366
State....................................................... 263 251 414
Deferred...................................................... 4,300 5,449 5,330
----------------- ----------------- -----------------
$ 7,160 $ 11,538 $ 13,110
================= ================= =================
</TABLE>
Reconciliation of the federal statutory and effective tax rates for
1994, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Federal statutory rate........................................ 35.0% 35.0% 35.0%
State income taxes............................................ 1.5 0.8 1.2
Other, net.................................................... 4.2 3.2 1.6
----------------- ----------------- -----------------
40.7% 39.0% 37.8%
================= ================= =================
</TABLE>
The deferred tax assets and liabilities recorded on the balance sheets
as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
<S> <C>
Deferred tax assets:
Federal AMT credit carryforwards.............................................. $ 2,670 --
Accrued expenses.............................................................. 1,060 $ 1,376
Other......................................................................... 777 961
----------------- -----------------
4,507 2,337
----------------- -----------------
Deferred tax liabilities:
Depreciation and amortization................................................. 22,504 22,491
Other......................................................................... 919 1,625
----------------- -----------------
23,423 24,116
----------------- -----------------
$ 18,916 $ 21,779
================= =================
</TABLE>
The Company has available tax credit carryforwards of approximately
$60,000 which may be used to offset up to 80% of future West Virginia state tax
liabilities through 2008. A valuation allowance for the entire amount of the
credit has been recognized in the accompanying financial statements.
Accordingly, as the credit is utilized, a benefit is recognized through a
reduction of the current state income tax provision. Such benefit amounted to
approximately $20 in 1994, $640 in 1995 and $998 in 1996.
F-34
<PAGE>
7. Employee Benefit Plans
Retirement Plan:
The Company has a noncontributory, defined contribution plan which
covers eligible employees. The plan provides for Company contributions ranging
from 2% to 6% of the participant's annual compensation based on their years of
service. The Company's contribution to the plan was approximately $226 in 1994,
$266 in 1995 and $336 in 1996.
Profit-Sharing Plan:
The Company has a nonqualified profit-sharing plan for eligible
employees, providing for cash distributions to the participants in years when
income before income taxes is in excess of $500. These contributions are based
on an escalating scale from 5% to 15% of income before income taxes.
Profit-sharing expense was approximately $2,862 in 1994, $5,546 in 1995 and
$6,505 in 1996.
Postretirement Benefits:
In December 1996, the Company adopted a defined benefit postretirement
plan which covers eligible employees. Generally, the plan calls for a stated
percentage of medical expenses reduced by deductibles and other coverages. The
plan is currently unfunded. The postretirement benefit expense for 1996 totaled
$68.
8. Related Party Transactions
The Company has an agreement with Wheeling-Pittsburgh under which the
Company has agreed to purchase a specified portion of its required raw materials
through the year 2013. The Company purchased approximately $180,719, $187,548
and $161,380 of raw materials and processing services from Wheeling-Pittsburgh
in 1994, 1995 and 1996, respectively. The amounts due Wheeling-Pittsburgh for
such purchases are included in Due To Affiliates in the accompanying balance
sheets.
During 1996, the Company sold products to Wheeling-Pittsburgh. Such
sales totaled $6,511 in 1996 of which $901 remained unpaid and is included in
Trade Accounts Receivable in the accompanying balance sheet at December 31,
1996. The Company also sells product to Unimast, Inc., an affiliate of
Wheeling-Pittsburgh. Such sales totaled $1,537 in 1996 and $1,389 in 1995, of
which $358 remained unpaid and was included in Trade Accounts Receivable in the
accompanying balance sheet at December 31, 1995.
9. Legal Matters
The Company is a party to a dispute for final settlement of charges
related to the construction of its second production line. The Company had
claims asserted against it in the amount of approximately $6,900 emerging from
civil actions alleging delays on the project. In connection with the dispute,
the Company filed a separate claim for alleged damages that it has sustained in
the amount of approximately $400.
The claims were litigated in the Court of Common Pleas of Allegheny
County, Pennsylvania in a jury trial, which commenced on January 5, 1996. A
verdict in the amount of $6,700 plus interest of $1,900 was entered against the
Company on October 2, 1996. After the verdict, the plaintiffs requested the
trial court to award counsel fees in the amount of $2,422 against the Company as
a result of its refusal to resolve their claims amicably prior to the trial.
This motion for counsel fees is pending before the court.
The Company filed for a motion for a new trial, which was not addressed
by the trial court, and filed an appeal to the Superior Court of Pennsylvania on
February 14, 1997. Concurrent with this filing, the Company posted a bond
approximating $10,000 that will be held by the court pending the appeal.
Management also intends to oppose the motion by the plaintiffs for counsel fees.
Although the Company has been advised by its Special Counsel that it has various
legal bases for relief, litigation is subject to many uncertainties and, as
such, the Company is presently unable to predict the outcome of its motion for
post-trial relief, its appeal and its opposition
F-35
<PAGE>
to the plaintiffs' motion for counsel fees. No liability has been recorded by
the Company related to this litigation in the accompanying financial statements
at December 31, 1996. If the Company is unsuccessful in these motions, the
ultimate resolution of these matters may have a material effect on the Company's
results of operations and cash flows in the year of final determination.
10. Fair Value of Financial Investments
The estimated fair values and the methods used to estimate those values
are disclosed below:
Investments:
The fair values of commercial paper approximates its carrying values
and were determined based on quoted market prices.
Long-Term Debt:
Based on borrowing rates currently available to the Company for bank
loans with similar terms and maturities, fair value approximates the carrying
value.
11. Significant Risks
Approximately 66% of the Company's employees are covered by a
collective bargaining agreement which expires during 1997.
F-36
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The General Corporation Law of the State of Delaware (the "Delaware
Law") permits indemnification of directors, employees and agents of corporations
under certain conditions and subject to certain limitations. Pursuant to the
Delaware Law, the Company has included in its Certificate of Incorporation and
bylaws a provision to eliminate the personal liability of its directors for
monetary damages for breach or alleged breach of their duty of care to the
fullest extent permitted by the Delaware Law and to provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
the Delaware Law.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following is a complete list of Exhibits filed as a part of this
Registration Statement, which are incorporated herein:
1 Purchase Agreement dated November 20, 1997, by and among
the Company, and the Initial Purchasers.
*3.1 Certificate of Incorporation of the Company.
*3.2 By-laws of the Company.
*4.1 Indenture dated as of November 26, 1997, by and among the
Company and Bank One, N.A.
*5 Opinion of Olshan Grundman Frome & Rosenzweig LLP.
*8 Opinion of Olshan Grundman Frome & Rosenzweig LLP
(included in Exhibit 5 to this Registration Statement).
23.1 Consent by Price Waterhouse LLP.
23.2 Consent by Coopers & Lybrand LLP.
*23.4 Consent of Olshan Grundman Frome & Rosenzweig LLP
(included in Exhibit 5 to this Registration Statement).
*25 Statement of eligibility of trustee.
*99.1 Registration Rights Agreement dated November 26, 1997, by
and among the Company and the Initial Purchasers.
99.3 Form of Letter of Transmittal for Tender of all
outstanding 9 1/4% Senior Notes Due 2007 in exchange for 9
1/4% Senior Exchange Notes Due 2007 of the Company.
99.4 Form of Tender for all outstanding 9 1/4% Senior Notes Due
2007 in exchange for 9 1/4% Senior Exchange Notes Due 2007
of the Company.
99.5 Form of Instruction to Registered Holder from Beneficial
Owner of 9 1/4% Senior Notes due 2007 of the Company.
99.6 Form of Notice of Guaranteed Delivery for outstanding 9
1/4% Senior Notes Due 2007 in exchange for 9 1/4% Senior
Exchange Notes Due 2007 of the Company.
- --------------------------
* To be filed by amendment.
II-1
<PAGE>
Item 22. Undertakings.
(a) The undersigned registrants hereby undertake:
(1) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) under the Securities Act of 1933, as amended (the
"Securities Act"), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415 under the Securities Act, will be filed as a part
of an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
enforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrants of expenses incurred or
paid by a director, officer or controlling person of the registrants in the
successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of the
registrants' annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Wheeling-Pittsburgh Corporation has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Wheeling, State of West Virginia on December 31, 1997.
WHEELING-PITTSBURGH CORPORATION
By:/s/ John R. Scheessele
----------------------------------
John R. Scheessele
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints John
R. Scheessle and Paul J. Mooney, and each of them singly, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him, and his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) and supplements to this
Registration Statement, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as full to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ John R. Scheessele President and Chief Executive December 31, 1997
- --------------------------- Officer (Principal Executive Officer)
John R. Scheessele
/s/ Paul J. Mooney Executive Vice President and Chief December 31, 1997
- --------------------------- Financial Officer (Principal Financial
Paul J. Mooney Officer)
/s/ Ronald LaBow
- --------------------------- Director December 31, 1997
Ronald LaBow
/s/ Robert A. Davidow
- --------------------------- Director December 31, 1997
Robert A. Davidow
/s/ Marvin L. Olshan
- --------------------------- Director December 31, 1997
Marvin L. Olshan
</TABLE>
II-3
WHEELING-PITTSBURGH CORPORATION WHEELING-PITTSBURGH
STEEL CORPORATION CONSUMERS MINING COMPANY
WHEELING-EMPIRE COMPANY MINGO OXYGEN COMPANY
PITTSBURGH-CANFIELD CORPORATION WHEELING CONSTRUCTION
PRODUCTS, INC. WP STEEL VENTURE CORPORATION CHAMPION
METAL PRODUCTS, INC.
$275,000,000
9 1/4% Series A Senior Notes due 2007
Purchase Agreement
November 20, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CITICORP SECURITIES, INC.
<PAGE>
$275,000,000
9 1/4% Series A Senior Notes due 2007
of
WHEELING-PITTSBURGH CORPORATION
PURCHASE AGREEMENT
November 20, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CITICORP SECURITIES, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Wheeling-Pittsburgh Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and Citicorp Securities, Inc. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers") an aggregate of
$275,000,000 in principal amount of its 9 1/4% Series A Senior Notes due 2007
(the "Series A Notes"), subject to the terms and conditions set forth herein.
The Series A Notes are to be issued pursuant to the provisions of an indenture
(the "Indenture"), to be dated as of the Closing Date (as defined below), among
the Company, the Guarantors (as defined below) and Bank One, N.A., as trustee
(the "Trustee"). The Series A Notes and the Series B Notes (as defined below)
issuable in exchange therefor are collectively referred to herein as the
"Notes." The Notes will be guaranteed (the "Subsidiary Guarantees") by each of
the entities listed on Schedule A, hereto (each, a "Guarantor" and collectively
the "Guarantors"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.
1
<PAGE>
1. Offering Memorandum. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company and the Guarantors have prepared a preliminary offering
memorandum, dated November 3, 1997 (the "Preliminary Offering Memorandum") and a
final offering memorandum, dated November 20, 1997 (the "Offering Memorandum"),
relating to the Series A Notes and the Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture, the Series A Notes (and
all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE
HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB") OR
(B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE
2
<PAGE>
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF
THE FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amounts
of Series A Notes set forth opposite the name of such Initial Purchaser on
Schedule B hereto at a purchase price equal to 97.246% of the principal amount
thereof (the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs") and (ii) to persons permitted to purchase
the Series A Notes in offshore transactions in reliance upon Regulation S under
the Act (each, a "Regulation S Purchaser") (such persons specified in clauses
(i) and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 99.621% of the principal amount thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated the Closing Date,
in substantially the form of Exhibit A hereto, for so long as such Series A
Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company and the Guarantors will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
therein, (i) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to the Company's 9 1/4% Series B Senior Notes
due 2007 (the "Series B Notes"), to be offered in exchange for the Series A
Notes (such offer to exchange being referred to as the "Exchange Offer") and the
Subsidiary Guarantees thereof and (ii) a shelf registration statement pursuant
to Rule 415 under the Act (the "Shelf Registration Statement" and, together with
the Exchange Offer Registration Statement, the "Registration Statements")
relating to the resale by certain holders of the Series
3
<PAGE>
A Notes and to use its best efforts to cause such Registration Statements to be
declared and remain effective and usable for the periods specified in the
Registration Rights Agreement and to consummate the Exchange Offer. This
Agreement, the Indenture, the Notes, the Subsidiary Guarantees the Offering
Memorandum, the Preliminary Offering Memorandum and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price
for, the Series A Notes shall be made at the offices of Weil, Gotshal & Manges
LLP or such other location as may be mutually acceptable. Such delivery and
payment shall be made at 9:00 a.m. New York City time, on November 26, 1997 or
at such other time as shall be agreed upon by the Initial Purchasers and the
Company. The time and date of such delivery and the payment are herein called
the "Closing Date."
(b) One or more of the Series A Notes in definitive
global form, registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes (collectively, the "Global
Note"), shall be delivered by the Company to the Initial Purchasers (or as the
Initial Purchasers direct) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchasers of the Purchase
Price thereof by wire transfer in same day funds to the order of the Company.
The Global Note shall be made available to the Initial Purchasers for inspection
not later than 9:30 a.m., New York City time, on the business day immediately
preceding the Closing Date.
5. Agreements of the Company and the Guarantors. Each of the
Company and the Guarantors hereby agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Series A Notes for offering
or sale in any jurisdiction designated by the Initial Purchasers pursuant to
Section 5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not mis-
4
<PAGE>
leading. The Company shall use its best efforts to prevent the issuance of any
stop order or order suspending the qualification or exemption of any Series A
Notes under any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority shall issue
an order suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those
persons identified by the Initial Purchasers to the Company as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may reasonably
request for the time period specified in Section 5(c). Subject to the Initial
Purchasers' compliance with its representations and warranties and agreements
set forth in Section 7 hereof, the Company consents to the use of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
and supplements thereto required pursuant hereto, by the Initial Purchasers in
connection with Exempt Resales.
(c) During such period as in the opinion of counsel
for the Initial Purchasers an Offering Memorandum is required by law to be
delivered in connection with Exempt Resales by the Initial Purchasers and in
connection with market-making activities of the Initial Purchasers for so long
as any Series A Notes are outstanding, (i) not to make any amendment or
supplement to the Offering Memorandum of which the Initial Purchasers shall not
previously have been advised or to which the Initial Purchasers shall reasonably
object after being so advised and (ii) to prepare promptly upon the Initial
Purchasers' reasonable request, any amendment or supplement to the Offering
Memorandum which may be necessary or advisable in connection with such Exempt
Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c)
above, any event shall occur or condition shall exist as a result of which, in
the opinion of counsel to the Initial Purchasers, it becomes necessary to amend
or supplement the Offering Memorandum in order to make the statements therein,
in the light of the circumstances when such Offering Memorandum is delivered to
an Eligible Purchaser, not misleading, or if, in the opinion of counsel to the
Initial Purchasers, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such Offering
Memorandum will comply in all material respects with applicable law.
5
<PAGE>
(e) Prior to the sale of all Series A Notes pursuant
to Exempt Resales as contemplated hereby, to cooperate in all material respects
with the Initial Purchasers and counsel to the Initial Purchasers in connection
with the registration or qualification of the Series A Notes for offer and sale
to the Initial Purchasers and pursuant to Exempt Resales under the securities or
Blue Sky laws of such jurisdictions as the Initial Purchasers may request and to
continue such registration or qualification in effect so long as required for
Exempt Resales and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification; provided, however, that neither the Company nor any Guarantor
shall be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Preliminary Offering Memorandum,
the Offering Memorandum or Exempt Resales, in any jurisdiction in which it is
not now so subject.
(f) So long as the Notes are outstanding, (i) to mail
and make generally available as soon as practicable after the end of each fiscal
year to the record holders of the Notes a financial report of the Company and
its subsidiaries on a consolidated basis, all such financial reports to include
a consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish
to the Initial Purchasers as soon as available copies of all reports or other
communications furnished by the Company or any of the Guarantors to its security
holders or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company or any of the
Guarantors is listed and such other publicly available information concerning
the Company and/or its subsidiaries as the Initial Purchasers may reasonably
request.
(h) So long as any of the Series A Notes remain
outstanding and during any period in which the Company and the Guarantors are
not subject to Section 13 or
6
<PAGE>
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to make available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such holder,
the information ("Rule 144A Information") required by Rule 144A(d)(4) under the
Act.
(i) Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, to pay or cause
to be paid all expenses incident to the performance of the obligations of the
Company and the Guarantors under this Agreement, including: (i) the fees,
disbursements and expenses of counsel to the Company and the Guarantors and
accountants of the Company and the Guarantors in connection with the sale and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, and all other fees and expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the foregoing
(including financial statements), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by it in the quantities
specified herein, (ii) all costs and expenses related to the transfer and
delivery of the Series A Notes to the Initial Purchasers and pursuant to Exempt
Resales, including any transfer or other taxes payable thereon, (iii) all costs
of printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Subsidiary
Guarantees for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchasers in
connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing certificates representing the Series A Notes
and the Subsidiary Guarantees, (vi) all expenses and listing fees in connection
with the application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation System -
PORTAL ("PORTAL"), (vii) the fees and expenses of the Trustee and the Trustee's
counsel in connection with the Indenture, the Notes and the Subsidiary
Guarantees, (viii) the costs and charges of any transfer agent, registrar and/or
depositary (including DTC), (ix) any fees charged by rating agencies for the
rating of the Notes, (x) all costs and expenses of the Exchange Offer and any
Registration Statement, as set forth in the Registration Rights Agreement, and
(xi) and all other costs and expenses incident to the performance of the
obligations of the Company and the Guarantors hereunder for which provision is
not otherwise made in this Section.
7
<PAGE>
(j) To use its best efforts to effect the inclusion
of the Series A Notes in PORTAL and to maintain the listing of the Series A
Notes on PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry"
transfer of the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantors to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof
and continuing to and including the Closing Date, not to offer, sell, contract
to sell or otherwise transfer or dispose of any debt securities of the Company
or any Guarantor or any warrants, rights or options to purchase or otherwise
acquire debt securities of the Company or any Guarantor substantially similar to
the Notes and the Subsidiary Guarantees (other than the Notes and the Subsidiary
Guarantees), without the prior written consent of the Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively resist
any attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(o) To cause the Exchange Offer to be made in the
appropriate form to permit Series B Notes and guarantees thereof by the
Guarantors registered pursuant to the Act to be offered in exchange for the
Series A Notes and the Subsidiary Guarantees and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set forth in
the Registration Rights Agreement.
(q) To use its best efforts to do and perform all
things required or necessary to be done and performed under this Agreement by it
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Series A Notes and the Subsidiary Guarantees.
8
<PAGE>
6. Representations, Warranties and Agreements of the Company
and the Guarantors. As of the date hereof, each of the Company and the
Guarantors, jointly and severally, represents and warrants to, and agrees with,
the Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the
Offering Memorandum (which will be sent with the confirmation of sales) do not,
and any supplement or amendment to them will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this paragraph (a) shall not apply
to statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. To the knowledge of
the Company, no stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement thereto,
or any order asserting that any of the transactions contemplated by this
Agreement are subject to the registration requirements of the Act, has been
issued.
(b) Each of the Company and its subsidiaries has been
duly incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified or licensed and is in good standing as a
foreign corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires such
qualification or license, except where the failure to be so qualified or
licensed would not have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights.
(d) The entities listed on Schedule C-1 hereto are
the only subsidiaries, direct or indirect, of the Company. All of the
outstanding shares of capital stock of each of the Company's subsidiaries have
been duly authorized and validly issued and are fully paid and non-assessable,
and are owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature, except as set forth on Schedule C-3 hereto
(each, a "Lien").
9
<PAGE>
The entities listed on Schedule C-2 hereto are the only other entities in which
the Company has a direct or indirect equity interest. The number of shares or
other equity interests owned by the Company representing the percentage
interests each as listed across from each entity on Schedule C-2 have been duly
authorized and validly issued and are fully paid and non-assessable, and are
owned by the Company, directly or indirectly through one or more subsidiaries
free and clear of any Liens.
(e) This Agreement has been duly authorized, executed
and delivered by the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the
Company and each of the Guarantors and, on the Closing Date, will have been
validly executed and delivered by the Company and each of the Guarantors. When
the Indenture has been duly executed and delivered by the Company, each of the
Guarantors and all other parties thereto, the Indenture will be a valid and
binding agreement of the Company and each Guarantor, enforceable against the
Company and each Guarantor in accordance with its terms except as (i) the
enforceability thereof may be limited by the effect of applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii) rights
of acceleration, if applicable, and the availability of equitable or other
remedies may be limited by equitable principles of general applicability. On the
Closing Date, the Indenture will conform in all material respects to the
requirements of the Trust Indenture Act of 1939, as amended (the "TIA" or "Trust
Indenture Act"), and the rules and regulations of the Commission applicable to
an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized and,
on the Closing Date, will have been validly executed and delivered by the
Company. When the Series A Notes have been issued, executed and authenticated in
accordance with the provisions of the Indenture and delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement, the
Series A Notes will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company, enforceable in accordance with
their terms except as (i) the enforceability thereof may be limited by the
effect of applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration, if applicable, and the
availability of equitable or other remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Series A Notes
will conform in all material respects as to legal matters to the description
thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have
been duly authorized by the Company. When the Series B Notes are issued,
executed and authenticated
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in accordance with the terms of the Exchange Offer and the Indenture, the Series
B Notes will be entitled to the benefits of the Indenture and will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as (i) the enforceability thereof may be
limited by the effect of applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration, if
applicable, and the availability of equitable or other remedies may be limited
by equitable or other principles of general applicability.
(i) The Subsidiary Guarantee to be endorsed on the
Series A Notes by each Guarantor has been duly authorized by such Guarantor and,
on the Closing Date, will have been duly executed and delivered by each such
Guarantor. When the Series A Notes have been issued, executed and authenticated
in accordance with the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Subsidiary
Guarantee of each Guarantor endorsed thereon will be entitled to the benefits of
the Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as (i)
the enforceability thereof may be limited by the effect of applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration, if applicable, and the availability of equitable or
other remedies may be limited by equitable or other principles of general
applicability. On the Closing Date, the Subsidiary Guarantees to be endorsed on
the Series A Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on the
Series B Notes by each Guarantor has been duly authorized by such Guarantor and,
when issued, will have been duly executed and delivered by each such Guarantor.
When the Series B Notes have been issued, executed and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, the
Subsidiary Guarantee of each Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms,
except as (i) the enforceability thereof may be limited by the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the availability
of equitable or other remedies may be limited by equitable principles of general
applicability. When the Series B Notes are issued, authenticated and delivered,
the Subsidiary Guarantees to be endorsed on the Series B Notes will conform as
to legal matters to the description thereof in the Offering Memorandum.
(k) The Registration Rights Agreement has been duly
authorized by the Company and each of the Guarantors and, on the Closing Date,
will have been duly executed and delivered by the Company and each of the
Guarantors. When the Registration
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Rights Agreement has been duly executed and delivered, the Registration Rights
Agreement will be a valid and binding agreement of the Company and each of the
Guarantors, enforceable against the Company and each Guarantor in accordance
with its terms except as (i) the enforceability thereof may be limited by the
effect of applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) rights of acceleration, if applicable, and the
availability of equitable or other remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Registration
Rights Agreement will conform in all material respects as to legal matters to
the description thereof in the Offering Memorandum.
(l) The Term Loan Agreement among the Company, DLJ
Capital Funding, Inc., as syndication agent, and the lenders party thereto (the
"Term Loan Agreement") has been duly authorized by the Company and, on the
Closing Date, will have been duly executed and delivered by the Company and each
of the Guarantors. When the Term Loan Agreement has been duly executed and
delivered, the Term Loan Agreement will be a valid and binding agreement of the
Company, enforceable against the Company and each Guarantor in accordance with
its terms except as (i) the enforceability thereof may be limited by the effect
of applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the availability
of equitable or other remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Term Loan Agreement will conform in all
material respects as to legal matters to the summary description thereof in the
Offering Memorandum.
(m) Neither the Company nor any of its subsidiaries
is in violation of its respective charter or by-laws or in default in the
performance of any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries, taken as a whole, (i) to which
the Company or any of its subsidiaries is a party or (ii) by which the Company
or any of its subsidiaries or their respective property is bound.
(n) The execution, delivery and performance of this
Agreement and the other Operative Documents by the Company and each of the
Guarantors, compliance by the Company and each of the Guarantors with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter or
by-laws of the Company or any of its subsidiaries or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, (x) to which
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the Company or any of its subsidiaries is a party or (y) by which the Company or
any of its subsidiaries or their respective property is bound, (iii) violate or
conflict with any applicable law or any rule, regulation, judgment, order or
decree of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property, (iv) result
in the imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound, or (v) result in the termination, suspension
or revocation of any Authorization (as defined below) of the Company or any of
its subsidiaries or result in any other impairment of the rights of the holder
of any such Authorization.
(o) The Intercreditor, Indemnification and
Subordination Agreement has been duly authorized by the Company and WPSC and, on
the Closing Date, will have been duly executed and delivered by the Company and
WPSC. When the Intercreditor, Indemnification and Subordination Agreement has
been duly executed and delivered, the Intercreditor, Indemnification and
Subordination Agreement will be a valid and binding agreement of the Company and
WPSC, enforceable against the Company and WPSC in accordance with its terms
except as (i) the enforceability thereof may be limited by the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the availability
of equitable or other remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Intercreditor, Indemnification and
Subordination Agreement will conform in all material respects as to legal
matters to the summary description thereof in the Offering Memorandum.
(p) The Tax Sharing Agreement has been duly
authorized by the Company and, on the Closing Date, will have been duly executed
and delivered by the Company. When the Tax Sharing Agreement has been duly
executed and delivered, the Tax Sharing Agreement will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms except as (i) the enforceability thereof may be limited by the effect of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration, if applicable, and the availability
of equitable or other remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Tax Sharing Agreement will conform in
all material respects as to legal matters to the summary description thereof in
the Offering Memorandum.
(q) There are no legal or governmental proceedings
pending or to the best of the Company's knowledge, threatened to which the
Company or any of its subsidiaries is or could be a party or to which any of
their respective property is or could be subject, which might result, singly or
in the aggregate, in a Material Adverse Effect.
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(r) Except as has been disclosed in the Offering
Memorandum, neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws") or any provisions of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the rules and regulations promulgated thereunder, except for such violations
which would not have a Material Adverse Effect.
(s) Except as disclosed in the Offering Memorandum,
there are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any
Authorization, any related constraints on operating activities and any potential
liabilities to third parties) which would, singly or in the aggregate, have a
Material Adverse Effect.
(t) Each of the Company and its Restricted
Subsidiaries has such permits, licenses, consents, exemptions, franchises,
authorizations and other approvals (each, an "Authorization") of, and has made
all filings with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including
without limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force and effect
and each of the Company and its subsidiaries is in compliance with all the terms
and conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to the
Company or any of its subsidiaries; except where such failure to be valid and in
full force and effect or to be in compliance, the occurrence of any such event
or the presence of any such restriction would not, singly or in the aggregate,
have a Material Adverse Effect.
(u) The accountants, Price Waterhouse LLP, that have
certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum are independent
public accountants with respect to the Company and the Guarantors, as required
by the Act and the Exchange Act. The
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historical financial statements, together with related schedules and notes, set
forth in the Preliminary Offering Memorandum and the Offering Memorandum comply
as to form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act.
(v) The accountants for Wheeling-Nisshin, Inc.,
Coopers & Lybrand LLP, that have certified the financial statements and
supporting schedules for Wheeling- Nisshin, Inc. included in the Preliminary
Offering Memorandum and the Offering Memorandum are independent public
accountants with respect to the Company and the Guarantors, as required by the
Act and the Exchange Act. The historical financial statements, together with
related schedules and notes for Wheeling-Nisshin, Inc., set forth in the
Preliminary Offering Memorandum and the Offering Memorandum comply as to form in
all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(w) The historical financial statements, together
with related schedules and notes forming part of the Offering Memorandum (and
any amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the Company
and its subsidiaries on the basis stated in the Offering Memorandum at the
respective dates or for the respective periods to which they apply, but do not
contain year-end adjustments or notes to quarterly financial statements; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; and the other financial and
statistical information and data set forth in the Offering Memorandum (and any
amendment or supplement thereto) are, in all material respects, accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company.
(x) The "as adjusted" financial information and data
included in the Preliminary Offering Memorandum and the Offering Memorandum are,
in all material respects, accurately presented and as calculated are prepared on
a basis consistent with the historical financial statements.
(y) The Company is not and, after giving effect to
the offering and sale of the Series A Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
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<PAGE>
(z) There are no contracts, agreements or
understandings between the Company or any Guarantor and any person granting such
person the right to require the Company or such Guarantor to file a registration
statement under the Act with respect to any securities of the Company or such
Guarantor or to require the Company or such Guarantor to include such securities
with the Notes and Subsidiary Guarantees registered pursuant to any Registration
Statement.
(aa) Neither the Company nor any of its subsidiaries
nor any agent thereof acting on the behalf of them has taken, and none of them
will take, any action that might cause this Agreement or the issuance or sale of
the Series A Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T
(12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(ab) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act (i) has imposed (or has informed the Company or any Guarantor that it is
considering imposing) any condition (financial or otherwise) on the Company's or
any Guarantor's retaining any rating assigned to the Company or any Guarantor,
any securities of the Company or any Guarantor or (ii) has indicated to the
Company or any Guarantor that it is considering (a) the downgrading, suspension,
or withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any change in
the outlook for any rating of the Company, any Guarantor or any securities of
the Company or any Guarantor.
(ac) Since the respective dates as of which
information is given in the Offering Memorandum other than as set forth in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there has not occurred any
material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there has not been any material adverse change or any development
involving a prospective material adverse change in the capital stock or in the
long-term debt of the Company or any of its subsidiaries and (iii) neither the
Company nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent.
(ad) Each of the Preliminary Offering Memorandum and
the Offering Memorandum, as of its date, contains all the information specified
in, and meeting the requirements of, Rule 144A(d)(4) under the Act.
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(ae) When the Series A Notes and the Subsidiary
Guarantees are issued and delivered pursuant to this Agreement, neither the
Series A Notes nor the Subsidiary Guarantees will be of the same class (within
the meaning of Rule 144A under the Act) as any security of the Company or the
Guarantors that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(af) No form of general solicitation or general
advertising (as defined in Regulation D under the Act) was used by the Company,
the Guarantors or any of their respective representatives (other than the
Initial Purchasers, as to whom the Company and the Guarantors make no
representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(ag) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(ah) None of the Company, the Guarantors nor any of
their respective affiliates or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act ("Regulation S") with respect
to the Series A Notes or the Subsidiary Guarantees.
(ai) Subject to the accuracy of the representations
and warranties of the Initial Purchasers in Section 7 hereof, the Series A Notes
offered and sold in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(aj) Subject to the accuracy of the representations
and warranties of the Initial Purchasers in Section 7 hereof, the sale of the
Series A Notes pursuant to Regulation S is not part of a plan or scheme to evade
the registration provisions of the Act.
(ak) The Company, the Guarantors and their respective
affiliates and all persons acting on their behalf (other than the Initial
Purchasers, as to whom the Company and the Guarantors make no representation)
have complied with and will comply with the offering restrictions requirements
of Regulation S in connection with the offering of the Series
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A Notes outside the United States and, in connection therewith, the Offering
Memorandum will contain the disclosure required by Rule 902(h).
(al) The Series A Notes sold in reliance on
Regulation S will be represented upon issuance by a temporary global security
that may not be exchanged for definitive securities until the expiration of the
40-day restricted period referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes by non-U.S. persons
or U.S. persons who purchased such Series A Notes in transactions that were
exempt from the registration requirements of the Act.
(am) No registration under the Act of the Series A
Notes or the Subsidiary Guarantees is required for the sale of the Series A
Notes and the Subsidiary Guarantees to the Initial Purchasers as contemplated
hereby or for the Exempt Resales assuming the accuracy of the Initial
Purchasers' representations and warranties and agreements set forth in Section 7
hereof.
(an) Except as disclosed in the Offering Memorandum,
no relationship, direct or indirect, exists between or among the Company or any
of its subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, which would be required by Item 404 of Regulation S-K under the Act to be
described in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 filed with the
Commission.
(ao) All indebtedness of the Company and the
Guarantors that will be repaid with the net proceeds of the issuance and sale of
the Series A Notes was incurred, and the indebtedness represented by the Series
A Notes is being incurred, for proper corporate purposes and in good faith and
each of the Company and the Guarantors was, at the time of the incurrence of
such indebtedness that will be repaid with the net proceeds of the issuance and
sale of the Series A Notes, and will be on the Closing Date (after giving effect
to the application of the net proceeds from the issuance of the Series A Notes)
solvent, and had at the time of the incurrence of such indebtedness that will be
repaid with the net proceeds of the issuance and sale of the Series A Notes and
will have on the Closing Date (after giving effect to the application of the net
proceeds from the issuance of the Series A Notes) sufficient capital for
carrying on their respective business and were, at the time of the incurrence of
such indebtedness that will be repaid with the net proceeds of the issuance and
sale of the Series A Notes, and will be on the closing Date (after giving effect
to the application of the proceeds from the issuance of the Series A Notes) able
to pay their respective debts as they mature.
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(ap) The Company and its Restricted Subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of all
Liens and defects, except such as are described in the Offering Memorandum or
such as do not materially affect the value of such property and do not interfere
in any material respect with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any material real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere in any material respect with the use made and
proposed to be made of such property and buildings by the Company and its
Restricted Subsidiaries, in each case except as described in the Offering
Memorandum.
(aq) All material tax returns required to be filed by
the Company and each of its subsidiaries in any jurisdiction have been filed,
other than those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any assessment received by
the Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(ar) To the knowledge of the Company no action has
been taken and no law, statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency or body which prevents the
execution, delivery and performance of any of the Operative Documents, the
issuance of the Series A Notes or the Subsidiary Guarantees, or suspends the
sale of the Series A Notes or the Subsidiary Guarantees in any jurisdiction
referred to in Section 5(e); and no injunction, restraining order or other order
or relief of any nature by a federal or state court or other tribunal of
competent jurisdiction has been issued with respect to the Company or any of its
subsidiaries which would prevent or suspend the issuance or sale of the Series A
Notes or the Subsidiary Guarantees in any jurisdiction referred to in Section
5(e).
(as) Each certificate signed by any officer of the
Company or any Guarantor and delivered to the Initial Purchasers or counsel for
the Initial Purchasers at the Closing shall be deemed to be a representation and
warranty by the Company or such Guarantor to the Initial Purchasers as to the
matters covered thereby.
The Company acknowledges that the Initial Purchasers and, for
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 9 hereof, counsel to the
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Company and the Guarantors and counsel to the Initial Purchasers will rely upon
the accuracy and truth of the foregoing representations and hereby consents to
such reliance.
7. Initial Purchasers' Representations and Warranties. Each of
the Initial Purchasers, severally and not jointly, represents and warrants to
the Company, and agrees that:
(a) Such Initial Purchaser is a QIB, with such
knowledge and experience in financial and business matters as is necessary in
order to evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the
Series A Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Series A Notes in a transaction that
would violate the Act or the securities laws of any state of the United States
or any other applicable jurisdiction and (B) will be reoffering and reselling
the Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of
general solicitation or general advertising (within the meaning of Regulation D
under the Act) has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of the Series A Notes
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection
with Exempt Resales, such Initial Purchaser will solicit offers to buy the
Series A Notes only from, and will offer to sell the Series A Notes only to,
Eligible Purchasers. Each Initial Purchaser further agrees that it will offer to
sell the Series A Notes only to, and will solicit offers to buy the Series A
Notes only from (A) Eligible Purchasers that such Initial Purchaser reasonably
believes are QIBs and (B) Regulation S Purchasers, in each case, that agree that
(x) the Series A Notes purchased by them may be resold, pledged or otherwise
transferred within the time period referred to under Rule 144(k) (taking into
account the provisions of Rule 144(d) under the Act, if applicable) under the
Act, as in effect on the date of the transfer of such Series A Notes, only (I)
to the Company or any of its subsidiaries, (II) to a person whom the seller
reasonably believes is a QIB purchasing for its own account or for the account
of a QIB in a transaction meeting the requirements of Rule 144A under the Act,
(III) in an offshore
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transaction (as defined in Rule 902 under the Act) meeting the requirements of
Rule 904 of the Act, (IV) in a transaction meeting the requirements of Rule 144
under the Act, (V) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable to the
Company) or (VI) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Series A Notes or an interest therein is transferred a
notice substantially to the effect of the foregoing.
(e) None of such Initial Purchaser nor any of its
affiliates or any person acting on its or their behalf has engaged or will
engage in any directed selling efforts within the meaning of Regulation S with
respect to the Series A Notes or the Subsidiary Guarantees.
(f) The Series A Notes offered and sold by such
Initial Purchaser pursuant hereto in reliance on Regulation S have been and will
be offered and sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold
by such Initial Purchaser pursuant hereto in reliance on Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not
offered or sold and will not offer or sell the Series A Notes in the United
States or to, or for the benefit or account of, a U.S. Person (other than a
distributor), in each case, as defined in Rule 902 under the Act (i) as part of
its distribution at any time and (ii) otherwise until 40 days after the later of
the commencement of the offering of the Series A Notes pursuant hereto and the
Closing Date, other than in accordance with Regulation S of the Act or another
exemption from the registration requirements of the Act. Such Initial Purchaser
agrees that, during such 40-day restricted period, it will not cause any
advertisement with respect to the Series A Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in any
public place and will not issue any circular relating to the Series A Notes,
except such advertisements as permitted by and include the statements required
by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior
to confirmation of a sale of Series A Notes by it to any distributor, dealer or
person receiving a selling concession, fee or other remuneration during the
40-day restricted period referred to in Rule 903(c)(3) under the Act, it will
send to such distributor, dealer or person receiving a selling concession, fee
or other remuneration a confirmation or notice to substantially the following
effect:
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The Series A Notes covered hereby have not been registered
under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of your distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the Offering and the Closing Date, except in either case in
accordance with Regulation S under the Securities Act (or Rule
144A), and in connection with any subsequent sale by you of
the Series A Notes covered hereby in reliance on Regulation S
during the period referred to above to any distributor, dealer
or person receiving a selling concession, fee or other
remuneration, you must deliver a notice to substantially the
foregoing effect. Terms used above have the meanings assigned
to them in Regulation S.
(j) Such Initial Purchaser agrees that the Series A
Notes offered and sold in reliance on Regulation S will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the 40-day restricted period referred to in
Rule 903(c)(3) of the Act and only upon certification of beneficial ownership of
such Series A Notes by non-U.S. persons or U.S. persons who purchased such
Series A Notes in transactions that were exempt from the registration
requirements of the Act.
(k) Such Initial Purchaser further represents and
agrees that (i) it has not offered or sold and will not offer or sell any Series
A Notes to persons in the United Kingdom prior to the expiration of the period
of six months from the issue date of the Series A Notes, except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Series A Notes in, from or otherwise
involving the United Kingdom and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the Series A Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the document may
otherwise lawfully be issued or passed on.
(l) Such Initial Purchaser agrees that it will not
offer, sell or deliver any of the Series A Notes in any jurisdiction outside the
United States except under circumstances that will result in compliance with the
applicable laws thereof, and that it will take at its own expense whatever
action is required to permit its purchase and resale of the
22
<PAGE>
Series A Notes in such jurisdictions. Such Initial Purchaser understands that no
action has been taken to permit a public offering in any jurisdiction outside
the United States where action would be required for such purpose.
Each Initial Purchaser acknowledges that the Company and the
Guarantors and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchasers will rely upon the accuracy and
truth of the foregoing representations and each Initial Purchaser hereby
consents to such reliance.
8. Indemnification.
(a) The Company and each Guarantor agree, jointly and
severally, to indemnify and hold harmless each Initial Purchaser, its directors,
its officers and each person, if any, who controls such Initial Purchaser within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or any Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to an Initial Purchaser furnished in
writing to the Company by such Initial Purchaser.
(b) The Initial Purchasers agree, severally but not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors, to the same extent as the foregoing indemnity
from the Company and the Guarantors to the Initial Purchasers but only with
reference to information relating to the Initial Purchasers furnished in writing
to the Company by the Initial Purchasers expressly for use in the Preliminary
Offering Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced involving
any person in respect of which indemnity may be sought pursuant to Section 8(a)
or 8(b) (the "indemnified
23
<PAGE>
party"), the indemnified party shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to the indemnified party and the
payment of all fees and expenses of such counsel, as incurred (except that in
the case of any action in respect of which indemnity may be sought pursuant to
both Sections 8(a) and 8(b), the Initial Purchasers shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Initial Purchasers). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to timely assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that representation of both parties is inappropriate due
to actual or potential different legal defenses available to them (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson, Lufkin
& Jenrette Securities Corporation, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of
24
<PAGE>
the indemnified party from all liability on claims that are or could have been
the subject matter of such action and (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in
this Section 8 is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages, liabilities or judgments referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers on the
other hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchasers bear to the total price to investors of the Series A Notes, in each
case as set forth in the table on the cover page of the Offering Memorandum. The
relative fault of the Company and the Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantors, on the one hand, or the
Initial Purchasers, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Guarantors, and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation (even if
the Initial Purchasers were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to
25
<PAGE>
such losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, the Initial Purchasers shall not be required to
contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchasers exceeds the amount of any
damages which the Initial Purchasers have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Initial Purchasers'
obligations to contribute pursuant to this Section 8(d) are several in
proportion to the respective principal amount of Series A Notes purchased by
each of the Initial Purchasers hereunder and not joint.
(e) The remedies provided for in this Section 8 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following conditions;
provided, that, satisfaction of the condition in paragraph (l) below may not be
waived by the Initial Purchasers without the Company's consent:
(a) All the representations and warranties of the
Company and the Guarantors contained in this Agreement shall be true and correct
in all material respects, except for those representations and warranties of the
Company and the Guarantors which are qualified as to materiality, which
representations and warranties shall be true and correct in all respects, on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) On or after the date hereof, (i) there shall not
have occurred any downgrading, suspension or withdrawal of, nor shall any notice
have been given of any potential or intended downgrading, suspension or
withdrawal of, or of any review (or of any potential or intended review) for a
possible change that does not indicate the direction of the possible change in,
any rating of the Company or any Guarantor or any securities of the Company or
any Guarantor (including, without limitation, the placing of any of the
foregoing ratings on credit watch with negative or developing implications or
under review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change, nor
shall any notice have been given of any potential or intended change, in the
outlook for any rating of the Company or any Guarantor or any securities of the
Company or
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<PAGE>
any Guarantor by any such rating organization and (iii) no such rating
organization shall have given notice that it has assigned (or is considering
assigning) a lower rating to the Notes than that on which the Notes were
marketed.
(c) Since the respective dates as of which
information is given in the Offering Memorandum other than as set forth in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there shall not have occurred any
change or any development involving a prospective change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and its subsidiaries, taken as a whole, (ii) there shall not have
been any change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company or any of its subsidiaries and
(iii) neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum.
(d) You shall have received on the Closing Date a
certificate dated the Closing Date, signed by the President and the Chief
Financial Officer (or if there is no Chief Financial Officer, the Treasurer) of
the Company and each of the Guarantors, confirming the matters set forth in
Sections 6(ab), 9(a) and 9(b) and stating that each of the Company and the
Guarantors has complied with all the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied on or
prior to the Closing Date.
(e) You shall have received on the Closing Date an
opinion (satisfactory to you and counsel for the Initial Purchasers), dated the
Closing Date, of Olshan Grundman Frome & Rosenzweig LLP, counsel for the Company
and the Guarantors, to the effect that:
(i) each of the Company and its Restricted
Subsidiaries has been duly incorporated, is validly
existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its
business as described in the Offering Memorandum and
to own, lease and operate its properties;
27
<PAGE>
(ii) each of the Company and its Restricted
Subsidiaries is duly qualified and is in good
standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of
its business or its ownership or leasing of property
requires such qualification or license, except where
the failure to be so qualified or licensed would not
have a Material Adverse Effect;
(iii) all the outstanding shares of capital
stock of the Company have been duly authorized and
validly issued and are fully paid, non-assessable and
not subject to any preemptive or similar rights;
(iv) all of the outstanding shares of
capital stock of each of the Company's direct and
indirect subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable,
and are owned by the Company, free and clear of any
Lien, except as set forth in Schedule C-3 hereto;
(v) the Series A Senior Notes have been duly
authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, will
be entitled to the benefits of the Indenture and will
be valid and binding obligations of the Company,
enforceable in accordance with their terms except as
(x) the enforceability thereof may be limited by the
effect of applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally
and (y) rights of acceleration, if applicable, and
the availability of equitable or other remedies or
other may be limited by equitable principles of
general applicability;
(vi) the Subsidiary Guarantees have been
duly authorized and, when the Series A Notes are
executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid
for by the Initial Purchasers in accordance with the
terms of this Agreement, the Subsidiary Guarantees
endorsed thereon will be entitled to the benefits of
the Indenture and will be valid and binding
obligations of the Guarantors, enforceable in
accordance with their terms except as (x) the
enforceability thereof may be limited by the effect
of applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights
of acceleration, if applicable, and the availability
28
<PAGE>
of equitable or other remedies may be limited by
equitable principles of general applicability;
(vii) the Indenture has been duly
authorized, executed and delivered by the Company and
each Guarantor and is a valid and binding agreement
of the Company and each Guarantor, enforceable
against the Company and each Guarantor in accordance
with its terms except as (x) the enforceability
thereof may be limited by the effect of applicable
bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of
equitable or other remedies may be limited by
equitable principles of general applicability;
(viii) this Agreement has been duly
authorized, executed and delivered by the Company and
the Guarantors;
(ix) the Registration Rights Agreement has
been duly authorized, executed and delivered by the
Company and the Guarantors and is a valid and binding
agreement of the Company and each Guarantor,
enforceable against the Company and each Guarantor in
accordance with its terms, except as (x) the
enforceability thereof may be limited by the effect
of applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (y) rights
of acceleration, if applicable, and the availability
of equitable or other remedies may be limited by
equitable principles of general applicability;
(x) the Term Loan Agreement has been duly
authorized, executed and delivered by the Company and
is a valid and binding agreement of the Company,
enforceable against the Company in accordance with
its terms, except as (x) the enforceability thereof
may be limited by the effect of applicable
bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of
equitable or other remedies may be limited by
equitable principles of general applicability;
(xi) the Series B Senior Notes have been
duly authorized;
(xii) the Intercreditor, Indemnification and
Subordination Agreement has been duly authorized,
executed and delivered by each of
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<PAGE>
WHX, Unimast, the Company and WPSC and is a valid and
binding agreement of each party thereto in accordance
with its terms, except as (x) the enforceability
thereof may be limited by the effect of applicable
bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of
equitable or other remedies may be limited by
equitable principles of general applicability;
(xiii) the Tax Sharing Agreement has been
duly authorized, executed and delivered by each of
WHX and the Company and is a valid and binding
agreement of each party thereto in accordance with
its terms, except as (x) the enforceability thereof
may be limited by the effect of applicable
bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of
acceleration, if applicable, and the availability of
equitable or other remedies may be limited by
equitable principles of general applicability;
(xiv) the statements under the captions
"Risk Factors-Significant Outstanding Indebtedness of
The Company," "Risk Factors-Cross-default
Provisions," "Risk Factors-Obligations to Joint
Ventures" "Risk Factors- Substantial Employee Post
Retirement Obligations," "Fraudulent Conveyance;
Possible Invalidity of Subsidiary Guarantees"
"Business- Legal Proceedings-Environmental Matters,"
"Business-Legal Proceedings-General Litigation,"
"Description of Notes," "Description of Principal
Indebtedness", "Description of Receivables Facility"
and "Indemnification and Intercreditor Agreement" in
the Offering Memorandum, insofar as such statements
constitute a summary of the legal matters, documents
or proceedings referred to therein, fairly present in
all material respects such legal matters, documents
and proceedings;
(xv) neither the Company nor any of its
subsidiaries is in violation of its respective
charter or by-laws and, to the best of such counsel's
knowledge after due inquiry, neither the Company nor
any of its subsidiaries is in default in the
performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement,
mortgage, lease or other agreement or instrument that
is material to the Company and its subsidiaries,
taken as a whole, (i) to which the Company or any of
its subsidiaries is a party or (ii) by which
30
<PAGE>
the Company or any of its subsidiaries or their
respective property is bound;
(xvi) the execution, delivery and
performance of this Agreement and the other Operative
Documents by the Company and each of the Guarantors,
the compliance by the Company and each of the
Guarantors with all provisions hereof and thereof and
the consummation of the transactions contemplated
hereby and thereby will not (i) require any consent,
approval, authorization or other order of, or
qualification with, any court or governmental body or
agency (except such as may be required under the
securities or Blue Sky laws of the various states),
(ii) conflict with or constitute a breach of any of
the terms or provisions of, or a default under, the
charter or by-laws of the Company or any of its
subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument (x)
to which the Company or any of its subsidiaries is a
party or (y) by which the Company or any of its
subsidiaries or their respective property is bound,
that is material to the Company and its subsidiaries,
taken as a whole, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body
or agency having jurisdiction over the Company, any
of its subsidiaries or their respective property,
(iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any
agreement or instrument to which the Company or any
of its subsidiaries is a party or by which the
Company or any of its subsidiaries or their
respective property is bound, or (v) result in the
termination, suspension or revocation of any
Authorization (as defined below) of the Company or
any of its subsidiaries or result in any other
impairment of the rights of the holder of any such
Authorization;
(xvii) after due inquiry but without
independent investigation, other than as set forth on
the Offering Memorandum such counsel does not know of
any legal or governmental proceedings pending or
threatened to which the Company or any of its
subsidiaries is or could be a party or to which any
of their respective property is or could be subject,
which might result, singly or in the aggregate, in a
Material Adverse Effect;
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<PAGE>
(xviii) the Company is not and, after giving
effect to the offering and sale of the Series A Notes
and the application of the net proceeds thereof as
described in the Offering Memorandum, will not be, an
"investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xix) to the best of such counsel's
knowledge after due inquiry but without independent
investigation, there are no contracts, agreements or
understandings between the Company or any Guarantor
and any person granting such person the right to
require the Company or such Guarantor to file a
registration statement under the Act with respect to
any securities of the Company or such Guarantor or to
require the Company or such Guarantor to include such
securities with the Notes and Subsidiary Guarantees
registered pursuant to any Registration Statement;
(xx) the Indenture complies as to form in
all material respects with the requirements of the
TIA, and the rules and regulations of the Commission
applicable to an indenture which is qualified
thereunder. It is not necessary in connection with
the offer, sale and delivery of the Series A Notes to
the Initial Purchasers in the manner contemplated by
this Agreement or in connection with the Exempt
Resales to qualify the Indenture under the TIA.
(xxi) no registration under the Act of the
Series A Notes is required for the sale of the Series
A Notes to the Initial Purchasers as contemplated by
this Agreement or for the Exempt Resales assuming
that (i) each Initial Purchaser is a QIB, or a
Regulation S Purchaser, (ii) the accuracy of, and
compliance with, the Initial Purchasers'
representations and agreements contained in Section 7
of this Agreement and (iii) the accuracy of the
representations of the Company and the Guarantors set
forth in Sections 5(h) and 6(ah), (ai), (aj), (ak)
and (al) of this Agreement.
(xxii) such counsel has no reason to believe
that, as of the date of the Offering Memorandum or as
of the Closing Date, the Offering Memorandum, as
amended or supplemented, if applicable (except for
the financial statements and other financial data
included therein, as to which such counsel need not
express any belief) contains any untrue statement
32
<PAGE>
of a material fact or omits to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading.
The opinion of Olshan Grundman Frome & Rosenzweig LLP
described in Section 9(e) above shall be rendered to you at the request of the
Company and the Guarantors and shall so state therein. In giving such opinion
with respect to the matters covered by Section 9(f)(xxii), Olshan Grundman Frome
& Rosenzweig LLP may state that their opinion and belief are based upon their
participation in the preparation of the Offering Memorandum and any amendments
or supplements thereto and review and discussion of the contents thereof, but
are without independent check or verification except as specified. For opinions
other than those with respect to federal law, the laws of the State of New York
or Delaware corporate laws, Olshan Grundman Frome & Rosenzweig LLP may rely on
opinions of local counsel.
(f) The Initial Purchasers shall have received on the
Closing Date an opinion, dated the Closing Date, of Weil, Gotshal & Manges LLP,
counsel for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(g) The Initial Purchasers shall have received, at
the time this Agreement is executed and at the Closing Date, letters dated the
date hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers from Price Waterhouse LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to the Initial Purchasers
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(h) The Initial Purchasers shall have received, at
the time this Agreement is executed and at the Closing Date, letters dated the
date hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchasers from Coopers & Lybrand LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to the Initial Purchasers
with respect to the financial statements and certain financial information for
Wheeling-Nisshin, Inc. contained in the Offering Memorandum.
(i) The Series A Notes shall have been approved by
the NASD for trading and duly listed in PORTAL.
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<PAGE>
(j) The Initial Purchasers shall have received a
counterpart, conformed as executed, of the Indenture which shall have been
entered into by the Company, the Guarantors and the Trustee.
(k) The Company and the Guarantors shall have
executed the Registration Rights Agreement and the Initial Purchasers shall have
received an original copy thereof, duly executed by the Company and the
Guarantors.
(l) The Company shall have executed and delivered the
Term Loan Agreement, the Company shall have borrowed an aggregate of not less
than $75,000,000 thereunder and the Initial Purchasers shall have received an
original copy thereof, duly executed by the Company.
(m) The Initial Purchasers shall have received a
certificate of Bank One, N.A., as trustee under the Indenture, dated as of
November 15, 1993, by and between the Company and Bank One, Columbus N.A. n/k/a
Bank One, N.A. (the "Old Indenture"), certifying that the Company has satisfied
all conditions to defease the 9 3/8% Senior Notes due 2003 (the "Old Notes")
under Section 8.2 of the Old Indenture and that the Company's obligations under
the Old Indenture have been discharged in accordance with Section 8.2 thereof.
(n) Each of WHX, Unimast, the Company and WPSC shall
have entered into the Intercreditor, Indemnification and Subordination Agreement
in a form acceptable to the Initial Purchasers, and the Initial Purchasers shall
have received an original copy thereof, duly executed by the parties thereto.
(o) Each of WHX and the Company shall have entered
into the Tax Sharing Agreement in a form acceptable to the Initial Purchasers,
and the Initial Purchasers shall have received an original copy thereof, duly
executed by the parties thereto.
(p) Neither the Company nor the Guarantors shall have
failed at or prior to the Closing Date to perform or comply with any of the
agreements herein contained and required to be performed or complied with by the
Company or the Guarantors, as the case may be, at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
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<PAGE>
This Agreement may be terminated at any time on or prior to
the Closing Date by the Initial Purchasers by written notice to the Company if
any of the following has occurred: (i) any outbreak or escalation of hostilities
or other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchasers' judgment, is material and adverse and, in the Initial
Purchasers' judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or any Guarantor on any
exchange or in the over-the-counter market, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
If on the Closing Date any one or more of the Initial
Purchasers shall fail or refuse to purchase the Series A Notes which it or they
have agreed to purchase hereunder on such date and the aggregate principal
amount of the Series A Notes which such defaulting Initial Purchaser or Initial
Purchasers, as the case may be, agreed but failed or refused to purchase is not
more than one-tenth of the aggregate principal amount of the Series A Notes to
be purchased on such date by all Initial Purchasers, each non-defaulting Initial
Purchaser shall be obligated severally, in the proportion which the principal
amount of the Series A Notes set forth opposite its name in Schedule B bears to
the aggregate principal amount of the Series A Notes which all the
non-defaulting Initial Purchasers, as the case may be, have agreed to purchase,
or in such other proportion as you may specify, to purchase the Series A Notes
which such defaulting Initial Purchaser or Initial Purchasers, as the case may
be, agreed but failed or refused to purchase on such date; provided that in no
event shall the aggregate principal amount of the Series A Notes which any
Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-ninth of
such principal amount of the Series A Notes without the written consent of such
Initial Purchaser. If on the Closing Date any Initial Purchaser or Initial
Purchasers shall fail or refuse to purchase the Series A Notes and the aggregate
principal amount of the Series A
35
<PAGE>
Notes with respect to which such default occurs is more than one-tenth of the
aggregate principal amount of the Series A Notes to be purchased by all Initial
Purchasers and arrangements satisfactory to the Initial Purchasers and the
Company for purchase of such Series A Notes are not made within 48 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Initial Purchaser and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of any such Initial Purchaser under
this Agreement.
11. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company or any
Guarantor, to Wheeling-Pittsburgh Corporation, 1134 Market Street, Wheeling,
West Virginia 26003, Attention: Chief Financial Officer and (ii) if to the
Initial Purchasers, c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in
any case to such other address as the person to be notified may have requested
in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantors
and the Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling an Initial Purchaser, the Company, any Guarantor, the officers or
directors of the Company or any Guarantor, or any person controlling the Company
or any Guarantor, (ii) acceptance of the Series A Notes and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or
on behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and each
Guarantor, jointly and severally, agree to reimburse the Initial Purchasers for
all out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by them. Notwithstanding any termination of this Agreement, the Company
shall be liable for all expenses which it has agreed to pay pursuant to Section
5(i) hereof. The Company and each Guarantor also agree, jointly and severally,
to reimburse the Initial Purchasers and their officers, directors and each
person, if any, who
36
<PAGE>
controls such Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act for any and all fees and expenses (including
without limitation the fees and expenses of counsel) incurred by them in
connection with enforcing their rights under this Agreement (including without
limitation its rights under this Section 8).
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Guarantors, the Initial Purchasers, the Initial Purchasers' directors and
officers, any controlling persons referred to herein, the directors of the
Company and the Guarantors and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Series A Notes from the
Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
37
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
WHEELING-PITTSBURGH CORPORATION
By:
---------------------------------
Name:
Title:
WHEELING-PITTSBURGH STEEL
CORPORATION
By:
---------------------------------
Name:
Title:
CONSUMERS MINING COMPANY
By:
-----------------------------------
Name:
Title:
WHEELING EMPIRE COMPANY
By:
----------------------------------
Name:
Title:
MINGO OXYGEN COMPANY
By:
---------------------------------
Name:
Title:
38
<PAGE>
PITTSBURGH CANFIELD CORPORATION
By:
------------------------------------
Name:
Title:
WHEELING CONSTRUCTION PRODUCTS,
INC.
By:
------------------------------------
Name:
Title:
WP STEEL VENTURE CORPORATION
By:
-----------------------------------
Name:
Title:
CHAMPION METAL PRODUCTS, INC.
By:
-----------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
------------------------------------
Name:
Title:
39
<PAGE>
CITICORP SECURITIES, INC.
By:
--------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Guarantors
Wheeling-Pittsburgh Steel Corporation
Consumers Mining Company
Wheeling-Empire Company
Mingo Oxygen Company
Pittsburgh-Canfield Company
Wheeling Construction Products, Inc.
WP Steel Venture Corporation
Champion Metal Products, Inc.
A-1
<PAGE>
SCHEDULE B
Principal Amount
Initial Purchaser of Notes
Donaldson, Lufkin & Jenrette
Securities Corporation.................................. $220,000,000
Citicorp Securities, Inc.................................. $ 55,000,000
Total ................................................. $275,000,000
B-1
<PAGE>
SCHEDULE C-1
Subsidiaries
Wheeling-Pittsburgh Corporation Subsidiaries:
Wheeling-Pittsburgh Steel Corporation Consumers Mining Company
Wheeling-Empire Company Monessen Southwestern Railway Company Mingo
Oxygen Company Pittsburgh-Canfield Corporation Wheeling Construction
Products, Inc.
Wheeling-Pittsburgh Steel Corporation Subsidiaries:
Wheeling Pittsburgh Funding, Inc.
WP Steel Venture Corp.
Consumers Mining Company Subsidiary:
W-P Coal Company
Wheeling-Construction Products, Inc. Subsidiary:
Champion Metal Products, Inc.
C-1
<PAGE>
SCHEDULE C-2
Joint Ventures
Entity Number of Shares Percentage Interest
Wheeling-Nisshin, Inc. 2,500 35.7%
Ohio Coatings Company 600 50.0%
C-2
<PAGE>
SCHEDULE C-3
Pledged Subsidiary Stock
Wheeling-Pittsburgh Funding, Inc.
Pittsburgh-Canfield Corporation
Wheeling Construction Products, Inc.
Champion Metal Products, Inc.
C-3
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Wheeling-Pittsburgh Corporation of our
report dated February 10, 1997, except for Notes M and N, which are as of August
12, 1997, and November 20, 1997, respectively, relating to the consolidated
financial statements of Wheeling-Pittsburgh Corporation and its subsidiaries,
which appears in such Prospectus. We also consent to the reference to us under
the headings "Experts" and "Selected Consolidated Financial Data" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated Financial Data."
Price Waterhouse LLP
Pittsburgh, Pennsylvania
January 7, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
Wheeling-Pittsburgh Corporation's $275 million 9.25% Senior Notes Exchange Offer
of our report dated February 14, 1997, on our audits of the financial statements
of Wheeling- Nisshin, Inc. We also consent to the references to our firm under
the caption "Experts."
Coopers & Lybrand LLP
Pittsburgh, Pennsylvania
January 7, 1998
LETTER OF TRANSMITTAL
for
Tender of all Outstanding
9 1/4% Senior Notes Due 2007
in Exchange for
9 1/4% Senior Exchange Notes Due 2007
of
Wheeling-Pittsburgh Corporation
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ___________, ________________, 1998 (THE
"EXPIRATION DATE"),
UNLESS EXTENDED BY WHEELING-PITTSBURGH CORPORATION
EXCHANGE AGENT:
BANK ONE, N.A.
<TABLE>
<CAPTION>
By Mail: By Overnight Courier: By Hand: By Facsimile:
<S> <C> <C> <C>
Bank One, N.A. Bank One, N.A. Bank One, N.A. fax no. (614) 248-2566
100 E. Broad Street 100 E. Broad Street 100 E. Broad Street (For Eligible Institutions
Columbus, Ohio 43215-3607 Corporate Trust Operations Columbus, Ohio 43215-3607 Only)
Department Attn: Corporate Trust Services
Columbus, Ohio 43215-3607 Confirm by telephone:
(registered or certified mail telephone no. (614) 248-5811
recommended)
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated January
__, 1998 (the "Prospectus") of Wheeling-Pittsburgh Corporation ("Company")
which, together with this Letter of Transmittal (the "Letter of Transmittal"),
constitute the Company's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of a new series of 9 1/4% Senior Exchange Notes Due 2007 (the
"New Notes") of the Company which will be guaranteed by all of the Company's
present and future operating subsidiaries, for each $1,000 in principal amount
of outstanding 9 1/4% Senior Notes Due 2007 (the "Old Notes") of the Company
which are guaranteed by all of the Company's present and future operating
subsidiaries. The terms of the New Notes are identical in all material respects
to the terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the offer and sale of the New Notes will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and, therefore, the New Notes will not bear legends restricting the transfer
thereof.
<PAGE>
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
================================================================================
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
================================================================================
Name(s) and address(es) of Certificate Aggregate Principal Amount
Registered Holder(s) Number(s) Principal Amount Tendered*
(Please fill in) Represented by
Notes
======================================
Total $ $
====================================================
- --------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by Old Notes. See Instruction 2.
================================================================================
This Letter of Transmittal is to be used if certificates for Old Notes
are to be forwarded herewith.
Unless the context requires otherwise, the term "Holder" for purposes
of this Letter of Transmittal means any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond power
from the registered holder.
-2-
<PAGE>
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes according to
the guaranteed delivery procedure set forth in the Prospectus under the caption
"The Exchange Offer--Procedures for Tendering."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):__________________________________________
Name of Eligible Institution that Guaranteed Delivery:_________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:__________________________________________________________________
Address:_______________________________________________________________
-3-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of Old Notes. Subject to, and effective upon, the acceptance for exchange of the
Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company right, title and interest in and
to such Old Notes. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that said Exchange Agent acts as the agent of
the undersigned in connection with the Exchange Offer) to cause the Old Notes to
be assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Old Notes and to acquire New Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Old Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered Old Notes.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "Exchange Offer -- Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company) as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Old Notes tendered hereby and, in such event, the Old Notes not exchanged will
be returned to the undersigned at the address shown below the signature of the
undersigned.
By tendering, each Holder of Old Notes represents to the Company that
(i) the New Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Notes, whether
or not such person is such Holder, (ii) neither the Holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) if the Holder is not a
broker-dealer or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the Holder nor any such other person
is engaged in or intends to participate in a distribution of the New Notes and
(iv) neither the Holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or, if such
Holder is such an "affiliate," that such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. If the tendering Holder is a broker-dealer (whether or not it
is also an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) that will receive New Notes for its own account in exchange for
Old Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making activities or other trading
activities, and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act
-4-
<PAGE>
in connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Tendered Old Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time on the
business day prior to the Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
(signature(s) on following page)
-5-
<PAGE>
TENDERING HOLDER(S) SIGN HERE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Signature(s) of Holder(s)
Dated: , 1998
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted herewith. If signature by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth the full title of such person.) See Instruction 3.
Name(s):______________________________________________________________________
- ------------------------------------------------------------------------------
(Please Print)
Capacity (full title):________________________________________________________
Address:______________________________________________________________________
- ------------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.: _________________________________________________
- ------------------------------------------------------------------------------
Tax Identification No.
-6-
<PAGE>
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instruction 3)
Authorized
Signature:_____________________________________________________________________
Name:________________________________________________________________________
Title:_________________________________________________________________________
Address:______________________________________________________________________
Name of Firm:________________________________________________________________
Area Code and Telephone No.:__________________________________________________
Dated: __________________, 1998
-7-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Old Notes, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at any of its addresses set forth herein on or
prior to the Expiration Date.
The method of delivery of this Letter of Transmittal, the Old Notes and
any other required documents is at the election and risk of the Holder and,
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. Instead of delivery by mail, it is
recommended that Holders use an overnight or hand delivery service.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "Exchange
Offer--Procedures for Tendering." Pursuant to such procedure: (i) such tender
must be made by or through an Eligible Institution (as defined in the
Prospectus); (ii) on or prior to the Expiration Date, the Exchange Agent must
have received from such Eligible Institution a letter, telegram or facsimile
transmission setting forth the name and address of the tendering Holder, the
names in which such Old Notes are registered, and, if possible, the certificate
numbers of the Old Notes to be tendered; and (iii) all tendered Old Notes as
well as this Letter of Transmittal and all other documents required by this
Letter of Transmittal must be received by the Exchange Agent within three
American Stock Exchange trading days after the date of execution of such letter,
telex, telegram or facsimile transmission, all as provided in the Prospectus
under the caption "Exchange Offer -- Procedures for Tendering."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. Partial Tenders; Withdrawals. Tenders of Old Notes will be accepted
in denominations of $1,000 principal amount and integral multiples in excess
thereof. If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering Holder must fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such Holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
-8-
<PAGE>
Tenders of Old Notes pursuant to the Exchange Offer are irrevocable,
except that Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date. To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Exchange Agent.
Any such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Old Notes to be withdrawn, the certificate
numbers and designation of the Old Notes to be withdrawn, the principal amount
of Old Notes delivered for exchange, a statement that such a Holder is
withdrawing its election to have such Old Notes exchanged, and the name of the
registered Holder of such Old Notes, and must be signed by the Holder in the
same manner as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of certificates
or separate written instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered Holder
or Holders, in either case signed exactly as the name or names of the registered
Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority to so act must be submitted.
-9-
<PAGE>
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
Holder of such Old Notes; or (ii) for the account of any Eligible Institution.
4. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Old Notes for principal amounts
not tendered or accepted for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered Holder of the Old
Notes tendered hereby, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Notes. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
7. Requests for Assistance or Additional Copies. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth above. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Exchange Agent at the address specified in the Prospectus.
8. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Old
Notes will be resolved by the Company, whose determination will be final and
binding. The Company reserves the absolute right to reject any or all Letters of
Transmittal or tenders that are not in proper form or the acceptance of which
would, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the right to waive any irregularities or conditions of tender as to the
particular Old Notes covered by any Letter of Transmittal or tendered pursuant
to such Letter of Transmittal. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for
-10-
<PAGE>
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer shall be final and binding.
9. Definitions. Capitalized terms used in this Letter of Transmittal
and not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together
with certificates for Old Notes and all other required documents) or a Notice of
Guaranteed Delivery must be received by the Exchange Agent on or prior to the
Expiration Date.
-11-
Tender for all Outstanding
9 1/4% Senior Notes Due 2007
in Exchange for
9 1/4% Senior Exchange Notes Due 2007
of
Wheeling-Pittsburgh Corporation
To Registered Holders:
We are enclosing herewith the material listed below relating
to the offer (the "Exchange Offer") by Wheeling-Pittsburgh Corporation, a
Delaware corporation ("Company"), to exchange its 9 1/4% Senior Exchange Notes
Due 2007 (the "New Notes"), which will be guaranteed by all of the Company's
present and future operating subsidiaries, the offer and sale of which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of the Company's issued and outstanding 9 1/4%
Senior Notes Due 2007 (the "Old Notes"), which are guaranteed by all of the
Company's present and future operating subsidiaries, upon the terms and subject
to the conditions set forth in the Prospectus of the Company, dated
______________, 1998, and the related Letter of Transmittal.
Enclosed herewith are copies of the following documents:
1. Prospectus dated ______________, 1998;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder from Beneficial Owner; and
5. Letter that may be sent to your clients for whose account you
hold Old Notes in your name or in the name of your nominee, to
accompany the instruction form referred to above, for
obtaining such client's instruction with regard to the
Exchange Offer.
We urge you to contact your clients promptly. Please note that
the Exchange Offer will expire at 5:00 p.m., New York City time, on ___________,
_____________, 1998, unless extended.
The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered.
<PAGE>
Pursuant to the Letter of Transmittal, each holder of Old
Notes will represent to the Company that (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is such holder, (ii)
neither the holder of the Old Notes nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in a distribution of the New Notes and (iv) neither the holder nor
any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if such person is an "affiliate," that
such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the tendering
holder is a broker-dealer that will receive New Notes for its own account in
exchange for Old Notes, you will represent on behalf of such broker-dealer that
the Old Notes to be exchanged for the New Notes were acquired by it as a result
of market-making activities or other trading activities, and acknowledge on
behalf of such broker-dealer that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. By acknowledging that it will deliver and by delivering a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes, such broker-dealer is not deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The enclosed Instruction to Registered Holder from Beneficial
Owner contains an authorization by the beneficial owners of the Old Notes for
you to make the foregoing representations on their behalf.
The Company will not pay any fee or commission to any broker
or dealer or to any other persons (other than the exchange agent for the
Exchange Offer) in connection with the solicitation of tenders of Old Notes
pursuant to the Exchange Offer. The Company will pay or cause to be paid any
transfer taxes payable on the transfer of Old Notes to it, except as otherwise
provided in Instruction 4 of the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained
from the undersigned.
Very truly yours,
Bank One, N.A.
Exchange Agent
-2-
<PAGE>
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF THE COMPANY OR BANK ONE, N.A., OR AUTHORIZE YOU TO USE ANY DOCUMENT OR
MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER
THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
-3-
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
of
9 1/4% Senior Notes Due 2007
of
Wheeling-Pittsburgh Corporation
To Registered Holder:
The undersigned hereby acknowledges receipt of the Prospectus
dated _________, 1998 (the "Prospectus") of Wheeling-Pittsburgh Corporation, a
Delaware corporation (the "Company"), and accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange $1,000 in principal amount of a new series of 9
1/4% Senior Exchange Notes Due 2007 (the "New Notes") of the Company which will
be guaranteed by all of the Company's present and future operating subsidiaries
for each $1,000 in principal amount of outstanding 9 1/4% Senior Notes Due 2007
(the "Old Notes") of the Company, which are guaranteed by all of the Company's
present and future operating subsidiaries. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the
action to be taken by you relating to the Exchange Offer with respect to the Old
Notes held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the
account of the undersigned is (fill in amount):
$__________ of 9 1/4% Senior Notes Due 2007.
With respect to the Exchange Offer, the undersigned hereby
instructs you (check appropriate box):
/ / To TENDER the following Old Notes held by you for the
account of the undersigned (insert principal amount of Old
Notes to be tendered (if any)):
$__________ of 9 1/4% Senior Notes Due 2007.
/ / NOT to TENDER any Old Notes held by you for the
account of the undersigned.
If the undersigned instructs you to tender Old Notes held by
you for the account of the undersigned, it is understood that you are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations,
<PAGE>
that (i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the undersigned, (ii) neither the
undersigned nor the person receiving such New Notes (of other than the
undersigned) has an arrangement or understanding with any person to participate
in the distribution of such New Notes, (iii) if the undersigned is not a
broker-dealer, or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the undersigned nor any such other
person is engaged in or intends to participate in the distribution of such New
Notes and (iv) neither the undersigned nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act"), or, if the undersigned is an
"affiliate," that the undersigned will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned is a broker-dealer (whether or not it is also an "affiliate")
that will receive New Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Notes. By acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes, the undersigned is not deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s) (please print):_____________________________________
Signature(s):___________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer identification or Social Security Number:______________________________
________________________________________________________________________________
Date:___________________________________________________________________________
-2-
<PAGE>
Tender for all Outstanding
9 1/4% Senior Notes Due 2007
in Exchange for
9 1/4% Senior Exchange Notes Due 2007
of
Wheeling-Pittsburgh Corporation
To Our Clients:
We are enclosing herewith a Prospectus, dated ______________,
of Wheeling- Pittsburgh Corporation, a Delaware corporation ("Company"), and a
related Letter of Transmittal (which together constitute the "Exchange Offer")
relating to the offer by the Company to exchange its 9 1/4% Senior Exchange
Notes Due 2007 (the "New Notes"), which will be guaranteed by all of the
Company's present and future operating subsidiaries the offer and sale of which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding 9
1/4% Senior Notes Due 2007 (the "Old Notes"), which are guaranteed by all of the
Company's present and future operating subsidiaries upon the terms and subject
to the conditions set forth in the Exchange Offer.
Please note that the Exchange Offer will expire at 5:00 p.m., New York
City time, on ______________, _______________, 1998 unless extended.
The Exchange Offer is not conditioned upon any minimum number
of Old Notes being tendered.
We are the holder of record of Old Notes held by us for your
account. A tender of such Old Notes can be made only by us as the record holder
and pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Old Notes held by
us for your account.
We request instructions as to whether you wish to tender any
or all of the Old Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old
Notes will represent to the Company that (i) the New Notes acquired in the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is such holder, (ii)
neither the holder of the Old Notes nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer or is a broker-dealer but will
not receive New Notes for its own account in exchange for Old Notes, neither the
holder nor any such other person is engaged in or intends to participate in a
distribution of the New Notes and (iv) neither
<PAGE>
the holder nor any such other person is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act or, if such holder is an
"affiliate," that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
tendering holder is a broker-dealer (whether or not it is also an "affiliate")
that will receive New Notes for its own account in exchange for Old Notes, we
will represent on behalf of such broker-dealer that the Old Notes to be
exchanged for the New Notes were acquired by it as a result of market-making
activities or other trading activities, and acknowledge on behalf of such
broker-dealer that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. By acknowledging
that it will deliver and by delivering a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Very truly yours,
-2-
NOTICE OF GUARANTEED DELIVERY
for
Tender of all Outstanding
9 1/4% Senior Notes Due 2007
in Exchange for
9 1/4% Senior Exchange Notes Due 2007
of
Wheeling-Pittsburgh Corporation
Registered holders of outstanding 9 1/4% Senior Notes Due 2007 (the
"Old Notes") of Wheeling-Pittsburgh Corporation ("Company"), which are
guaranteed by all of the Company's present and future operating subsidiaries,
who wish to tender their Old Notes in exchange for a like principal amount of 9
1/4% Senior Exchange Notes Due 2007 (the "New Notes") of the Company which will
be guaranteed by all of the Company's present and future operating subsidiaries,
and whose Old Notes are not immediately available or who cannot deliver their
Old Notes and Letter of Transmittal (and any other documents required by the
Letter of Transmittal) to Bank One, N.A. (the "Exchange Agent"), prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight delivery) or mail to the Exchange
Agent. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
BANK ONE, N.A.
<TABLE>
<CAPTION>
By Mail: By Overnight Courier: By Hand: By Facsimile:
<S> <C> <C> <C>
Bank One, N.A. Bank One, N.A. Bank One, N.A. fax no. (614) 248-2566
100 E. Broad Street 100 E. Broad Street 100 E. Broad Street (For Eligible Institutions
Columbus, Ohio 43215-3607 Corporate Trust Operations Columbus, Ohio 43215-3607 Only)
Department Attn: Corporate Trust Services
Columbus, Ohio 43215-3607 Confirm by telephone:
(registered or certified mail telephone no. (614) 248-5811
recommended)
</TABLE>
<PAGE>
Delivery of this Notice of Guaranteed Delivery to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If
a signature on a Letter of Transmittal is required to be guaranteed by an
Eligible Institution, such signature guarantee must appear in the applicable
space provided on the Letter of Transmittal for Guarantee of Signatures.
(signature(s) on following page)
-2-
<PAGE>
Ladies & Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Exchange Offer and the Letter of
Transmittal, receipt of which is hereby acknowledged, the aggregate principal
amount of Old Notes set forth below pursuant to the guaranteed delivery
procedures set forth in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange Offer
may not be withdrawn after 5:00 p.m., New York City time on the business day
prior to the Expiration Date. Tenders of Old Notes may also be withdrawn if the
Exchange Offer is terminated without any such Old Notes being purchased
thereunder or as otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
<TABLE>
<CAPTION>
<S> <C>
Signature(s) of Registered Owner(s) or Authorized Name(s) of Registered Holder(s):
Signatory:_______________________________________
-------------------------------------------
- -----------------------------------------------
-------------------------------------------
- -----------------------------------------------
-------------------------------------------
Principal Amount of Old Notes
Tendered:_______________________________________ Address:____________________________________
- -----------------------------------------------
-------------------------------------------
Certificate No(s). of Old Notes (if available)___________
Area Code and Telephone No.:_________________
- -----------------------------------------------
Date:______________________________________
- -----------------------------------------------
</TABLE>
-3-
<PAGE>
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear(s) on certificates
for Old Notes or on a security position listing it (them) as the owner of Old
Notes, or by person(s) authorized to become registered Holder(s) by endorsements
and documents transmitted with this Notice of Guaranteed Delivery. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s): _______________________________________________________________________
_______________________________________________________________________
Capacity: ______________________________________________________________
Address(es): ______________________________________________________________
______________________________________________________________
Do not send Old Notes with this form. Old Notes should be sent to the Exchange
Agent together with a properly completed and duly executed Letter of
Transmittal.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States or an
"eligible guarantor institution" as defined by Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents
that each holder of Old Notes on whose behalf this tender is being made "own(s)"
the Old Notes covered hereby within the meaning of Rule 14e-4 under the Exchange
Act, (b) represents that such tender of Old Notes complies with such Rule 14e-4,
and (c) guarantees that, within three New York Stock Exchange trading days after
the date of this Notice of Guaranteed Delivery, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with
certificates representing the Old Notes covered hereby in proper form for
transfer and required documents will be deposited by the undersigned with the
Exchange Agent.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Old Notes tendered hereby to the Exchange Agent within the time set forth
above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm:______________________ Authorized Signature
Address:___________________________
___________________________________ Name:_________________________________
Area Code and Telephone No.:_______ Title:________________________________
___________________________________ Date:_________________________________
- -------------------------------------------------------------------------------
-4-
