-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nro/72kpCEpV3E1OgqGgEMu81F7Y8E2u3LLteCMUw2xbgYcW3VZiLiuyKGj7EPsp RbYTFrGHqn+LWevdBPmszQ== 0000950123-99-002322.txt : 19990323 0000950123-99-002322.hdr.sgml : 19990323 ACCESSION NUMBER: 0000950123-99-002322 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHX CORP CENTRAL INDEX KEY: 0000106618 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 133768097 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-02394 FILM NUMBER: 99569409 BUSINESS ADDRESS: STREET 1: 110 EAST 59TH ST STREET 2: 30TH FL CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123555200 MAIL ADDRESS: STREET 1: 1134 MARKET STREET CITY: WHEELING STATE: WV ZIP: 26003 FORMER COMPANY: FORMER CONFORMED NAME: WHEELING PITTSBURGH CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: WHEELING PITTSBURGH STEEL CORP DATE OF NAME CHANGE: 19910130 FORMER COMPANY: FORMER CONFORMED NAME: WHEELING STEEL CORP DATE OF NAME CHANGE: 19690202 10-K405 1 WHX CORPORATION 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998. OR [ ] TRANSITION REPORT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-2394 WHX CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3768097 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 110 EAST 59TH STREET 10022 NEW YORK, NEW YORK (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 212-355-5200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE SERIES A CONVERTIBLE PREFERRED STOCK, $.10 PAR NEW YORK STOCK EXCHANGE VALUE SERIES B CONVERTIBLE PREFERRED STOCK, $.10 PAR NEW YORK STOCK EXCHANGE VALUE
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of Common Stock held by non-affiliates of the Registrant as of March 1, 1999 was $126.9 million, which value, solely for the purposes of this calculation excludes shares held by Registrant's officers, directors, and their affiliates. Such exclusion should not be deemed a determination by Registrant that all such individuals are, in fact, affiliates of the Registrant. The number of shares of Common Stock issued and outstanding as of March 18, 1999 was 16,976,968, including 296,962 shares of redeemable Common Stock. DOCUMENTS INCORPORATED BY REFERENCE: Definitive proxy statement to be filed pursuant to Regulation 14A in connection with the 1998 annual meeting of stockholders Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS OVERVIEW WHX Corporation WHX Corporation (WHX or the Company) is a holding company formed in July 1994 to acquire and operate a diverse group of businesses on a decentralized basis. The Company's steel related businesses are Wheeling-Pittsburgh Corporation (WPC), a vertically integrated manufacturer of value-added flat rolled steel products; and Unimast Incorporated (Unimast), a leading manufacturer of steel framing and other products for commercial and residential construction. The Company's other business segment is Handy & Harman (H&H), a diversified industrial manufacturing company whose business units encompass: (i) manufacturing and selling of metal wire, cable and tubing products -- primarily stainless steel and specialty alloys; (ii) manufacturing and selling of precious metals products and precision electroplated materials and molded parts; and (iii) manufacturing and selling of other specialty products supplied to roofing, construction, do-it-yourself, natural gas, electric and water industries. STEEL AND RELATED BUSINESSES Wheeling-Pittsburgh Corporation WPC is a vertically integrated manufacturer of predominately value-added flat rolled steel products. WPC sells a broad array of value-added products, including cold rolled steel, tin and zinc-coated steels and fabricated steel products. WPC's products are sold to the construction industry, steel service centers, converters, processors, and the container and appliance industries. WPC believes that it is one of the low cost domestic flat rolled steel producers. WPC's low cost structure is the result of: (i) the restructuring of its work rules and staffing requirements under its five-year labor agreement which settled a ten-month strike in 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. WPC believes that its 1997 labor agreement is one of the most flexible in the industry. The new work rule package affords WPC substantially greater flexibility in reducing its overall workforce and assigning and scheduling work, thereby reducing costs and increasing efficiency. Furthermore, WPC has achieved pre-strike steel production levels with approximately 850 fewer employees (a reduction of approximately 20% in its hourly workforce). Unimast In March 1995, the Company acquired Unimast, a leading manufacturer of steel framing and related accessories for commercial and residential building construction. Unimast uses galvanized steel to manufacture steel framing components for wall, floor and roofing systems, in addition to other roll formed expanded metal construction accessories. HANDY & HARMAN WHX acquired H&H in April 1998. H&H's business groups are: (i) manufacturing and selling of metal wire, cable and tubing products, primarily stainless steel and specialty alloy; (ii) manufacturing and selling of precious metals products and precision electroplated materials and molded parts; and (iii) manufacturing and selling of other specialty products supplied to roofing, construction, do-it-yourself, natural gas, electric, and water industries. H&H's products are sold to industrial users in a wide range of applications which include the electric, electronic, automotive original equipment, computer equipment, oil and other energy related, refrigeration, construction, utility, telecommunications and medical industries. BUSINESS STRATEGY WHX's business strategy is to enhance the growth and profitability of each of its businesses and to build upon the strengths of those businesses through product line and other strategic acquisitions. Key elements of this strategy have been the expansion of downstream operations, reorganization of acquired businesses and facilities expansion. WPC continues to improve its cost structure and enhance productivity through job eliminations (850 positions were eliminated in 1997, approximately 20% of its pre-strike hourly workforce) and capital expenditures, upgrading and modernizing its steelmaking facilities. 1 3 WPC will continue to expand production of value-added products, principally through growth of fabricated products, and its emphasis on joint ventures, such as Wheeling-Nisshin, Inc. (Wheeling-Nisshin) and Ohio Coatings Company (OCC). H&H will continue to focus on niche markets for high margin products and innovative technology, while seeking growth through strategic acquisitions. H&H's business strategy is designed to limit exposure to lower margin, capital intensive businesses while increasing focus on higher margin strategic businesses. In the mid-nineties, H&H exited its commodity automotive OEM and precious metal refining businesses, and with its strong brand name and customer recognition expanded in specialty metals and materials product markets. H&H will also continue to focus on its materials engineering expertise to expand production of higher value-added products. H&H has pursued an acquisition strategy designed to: (i) enhance its offerings of higher-value added products; (ii) leverage its technological capabilities; and (iii) expand its customer base. In September 1994, H&H acquired Sumco, Inc., a precision electroplating company, which does electroplating of electronic connector and connector stock for the automotive, telecommunications, electronic and computer industries. In June 1996, H&H acquired ele Corporation, which provides value-added reel-to-reel molding capabilities appropriate for the semiconductor lead frame and sensor marketplace. In February 1997 H&H completed the acquisition of Olympic Manufacturing Group, Inc., the leading domestic manufacturer and supplier of fasteners for the commercial roofing industry. Unimast will continue to expand the breadth and depth of its product offerings and the geographic markets it serves, by both internal growth and acquisitions. In 1998, Unimast expanded its business through the acquisition of Clinch-On, a manufacturer of steel cornerbead and trim serving the non-residential and residential construction markets. PRODUCTS AND PRODUCT MIX Steel and Related Businesses -- WPC and Unimast The table below reflects the historical product mix of WPC's and Unimast's shipments, expressed as a percentage of tons shipped. Increases in the percentage of higher value products have been realized during the 1990's as (i) fabricated products operations were expanded, (ii) Wheeling-Nisshin's second coating line increased its requirements of cold-rolled coils from WPC, and (iii) the Company's acquisition of Unimast in March 1995. In addition, the OCC joint venture should enable the Company to increase tin mill product shipments in 1999 up to an additional 92,000 tons compared to 1998 levels.
HISTORICAL PRODUCT MIX ------------------------------------------------ YEAR ENDED DECEMBER 31 ------------------------------------------------ 1994 1995 1996(1) 1997(1) 1998 ------ ------ ------- ------- ------ PRODUCT CATEGORY: Higher Value-Added Products: Cold Rolled Products -- Trade.................... 10.5% 7.5% 7.6% 4.5% 9.9% Cold Rolled Products -- Wheeling-Nisshin.............................. 17.3 17.9 15.6 6.2 17.2 Coated Products.................................. 21.7 20.3 18.7 9.0 14.0 Tin Mill Products................................ 7.2 6.7 7.0 2.6 6.5 Fabricated Products.............................. 11.9 14.1 16.6 31.3 14.1 Unimast(2)....................................... -- 5.2 8.4 20.7 11.2 ------ ------ ------ ------ ------ Higher Value-Added Products as a percentage of total shipments.................................. 68.6% 71.7% 73.9% 74.3% 72.9% Hot Rolled Products................................ 31.4% 28.3% 26.1% 16.0% 26.8% Semi-Finished...................................... -- -- -- 9.7 0.3 ------ ------ ------ ------ ------ Total.................................... 100.0% 100.0% 100.0% 100.0% 100.0% ====== ====== ====== ====== ====== AVERAGE NET SALES PER TON.......................... $ 498 $ 543 $ 544 $ 606 $ 524
- --------------- (1) The allocation among product categories was affected by the strike. (2) Reclassified for comparability. 2 4 WPC Products produced by WPC are described below. These products are sold directly to third party customers and Unimast, and to Wheeling-Nisshin and OCC pursuant to long-term supply agreements. 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. In recent years, WPC has increased its cold rolled production to support increased sales to Wheeling-Nisshin, which is labeled as a separate product category above. COATED PRODUCTS. WPC manufactures a number of corrosion-resistant, zinc-coated products including hot dipped galvanized and electrogalvanized sheets for resale to trade accounts. WPC's trade sales of galvanized products are heavily oriented to unexposed applications, principally in the appliance, construction, service center and automotive markets. WPC sells electrogalvanized products for application in the appliance and construction markets. TIN MILL PRODUCTS. Tin mill products consist of backplate and tin-plate. Backplate is a cold rolled substrate (uncoated), the thickness of which is less than .0142 inches. While the majority of WPC's sales of these products is concentrated in container markets, WPC also markets products for automotive applications, such as oil filters and gaskets. WPC has phased out its tin mill facilities and produces all of its tin coated products through OCC. OCC's $69 million tin coating mill, which commenced commercial operations in January 1997, has a nominal annual capacity of 250,000 net tons. WPC will supply up to 230,000 tons of the substrate requirements of the joint venture subject to quality requirements and competitive pricing. HOT ROLLED PRODUCTS. Hot rolled coils represent the least processed of WPC's finished goods. Hot rolled black or pickled (acid cleaned) coils are sold to a variety of consumers such as converters/processors, steel service centers and the appliance industries. FABRICATED PRODUCTS. Fabricated products consist of cold rolled or coated products further processed mainly via roll forming and sold in the construction, highway, and agricultural products industries. 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. 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. Highway Products. Highway products consist of bridge form, which is roll-formed corrugated sheets utilized as concrete support forms in the construction of highway bridges. Unimast In March 1995, WHX acquired Unimast, a leading manufacturer of steel framing and related accessories for residential and commercial building construction with shipments of approximately 219,000 tons of steel products in 1997 and 276,000 tons in 1998. Unimast uses galvanized steel to manufacture steel framing components for wall, floor and roofing systems, in addition to other roll formed expanded metal construction accessories, providing WPC an additional outlet for some portion of its steel products. Unimast has facilities in Franklin Park, Illinois; Warren, Ohio; Morrow, Georgia; Baytown, Texas; Boonton, New Jersey; New Brighton, Minnesota; Brooksville, Florida; Goodyear, Arizona and East Chicago, Indiana. In January 1998 Unimast expanded its business through the acquisition of Clinch-On, a manufacturer of steel cornerbead and trims for both the non-residential and residential construction markets with approximately 14,000 tons annual capacity. Wheeling-Nisshin WPC owns a 35.7% equity interest in Wheeling-Nisshin, which is a joint venture between WPC and Nisshin Holding, Incorporated, a wholly-owned subsidiary of Nisshin Steel Co., LTD., ("Nisshin"). 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. Wheeling-Nisshin products are marketed through trading companies, and its shipments are not consolidated into WPC's shipments. 3 5 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 94%, to over 700,000 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. WPC's amended and restated supply agreement with Wheeling-Nisshin expires in 2013. Pursuant to the amended supply agreement, WPC 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. Shipments of cold rolled steel by WPC to Wheeling-Nisshin were approximately 66,500 tons, or 7.8% of WPC's total tons shipped in 1997 and approximately 354,300 tons, or 16.8%, in 1996. Shipments to Wheeling Nisshin in 1997 and 1996 were negatively affected by the strike. Shipments to Wheeling Nisshin in 1998 totaled approximately 428,000 tons, or 19.1%. Ohio Coatings Company WPC has a 50.0% equity interest in OCC, which is a joint venture between WPC 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. OCC completed construction of a $69 million state-of-the-art tin coating mill in 1996 and commenced commercial operations in January 1997. The OCC tin-coating facility is the only domestic electro-tin plating facility constructed in the past 30 years and is positioned to become a premier supplier of tin plate to the container and automotive industries. WPC has phased out its existing tin coating facilities and produces all of its tin coated products through OCC. As part of the joint venture agreement, WPC has the right to supply up to 230,000 tons of the substrate requirements of OCC through the year 2012, subject to quality requirements and competitive pricing. WPC will market 100% of OCC's products, partially through Nittetsu. In 1997 and 1998 OCC had an operating loss of $14.3 million and operating income of $ .3 million, respectively. The 1997 results reflected OCC's start-up, inability to source substrate during the 1997 strike and competitive market conditions for tinplate. NON-STEEL BUSINESSES Handy & Harman H&H, through several subsidiaries, manufactures a wide variety of specialty metal wire and tubing products. Small diameter precision drawn tubing fabricated from stainless steel, nickel alloy and carbon and alloy steel is produced in many sizes and shapes to critical specifications for use in the semiconductor, aircraft, petrochemical, automotive, appliance, refrigeration and instrumentation industries. Additionally, tubular product is manufactured for the medical industry for use as implants, surgical devices and instrumentation. Nickel alloy, galvanized and carbon steel and stainless steel wire products redrawn from rods are produced for such diverse applications as bearings, brushes, cable lashing, hose reinforcement, nails, knitted mesh, wire rope and cloth, air bags and antennas for use in the aerospace, automotive, chemical, communications, marine, medical, petrochemical, welding and other industries. H&H's precious metals activities include the fabrication of precious metals and their alloys into wire and rolled products, powders and grain and the utilization of precious metals in precision electroplating. H&H's profits from precious metal products are derived from the "value added" of processing and fabricating and not from the purchase and resale of precious metals. In accordance with general practice in the industry, prices to customers are a composite of two factors; namely (1) the value of the precious metal content of the product plus (2) an amount referred to as the "fabrication value" to cover the cost of base metals, labor, overhead, financing and profit. Fabricated precious metals are used in many applications including brazing, arts and contact materials for a wide variety of industries including aerospace, electronics, appliance, nuclear, automotive, jewelry, electrical, medical and silversmithing. H&H produces precision stamped, electroplated and molded components and parts (often using gold, silver, palladium and various base metals) for use in the semiconductor, telecommunications, automotive, electronics and computer industries. It also participates in the injection molded medical plastics market. H&H, through other subsidiaries, manufactures fasteners, fastening systems, plastic and steel fittings and connectors, and non-ferrous thermite welding powders for the roofing, construction, do-it-yourself, natural gas, electric and water distribution industries. 4 6 WHX Entertainment In October 1994, WHX Entertainment, a wholly owned subsidiary of WHX, purchased a 50.0% interest in the operations of Wheeling-Downs Racing Association (Wheeling-Downs) from Sportsystems Corporation for $12.5 million. Wheeling-Downs operates a racetrack and video lottery facility located in Wheeling, West Virginia. CUSTOMERS Steel and Related Businesses WPC and Unimast market 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 30.6% of its net sales in 1996, 25.9% in 1997, and 27.2% in 1998. Wheeling-Nisshin was the only customer to account for more than 10% of net sales in 1996. Wheeling-Nisshin accounted for 11.5% of net sales in 1996. No single customer accounted for more than 10% of net sales in 1997 or 1998. Geographically, the majority of WPC's customers are located within a 350-mile radius of the Ohio Valley. However, WPC 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. WPC has also acquired regional fabricated product facilities to service an even broader geographical area. The acquisition of Unimast in March 1995 increased the Company's shipments to the construction industry and its ability to market its products to broad geographic areas. Unimast has facilities located in Franklin Park, Illinois; Warren, Ohio; Morrow, Georgia; Baytown, Texas; Boonton, New Jersey; New Brighton, Minnesota; Brooksville, Florida; Goodyear, Arizona and East Chicago, Indiana. Shipments historically have been concentrated within seven major market segments: construction industry, steel service centers, converters/processors, agriculture, container, automotive, and appliances. The 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
YEAR ENDED DECEMBER 31, ------------------------------------------ MAJOR CUSTOMER CATEGORY: 1994 1995 1996(1) 1997(1) 1998 - ------------------------ ---- ---- ------- ------- ---- Construction.............................................. 18% 22% 28% 44% 27% Steel Service Centers..................................... 32 27 24 26 27 Converters/Processors..................................... 28 26 23 13 29 Agriculture............................................... 5 6 7 11 5 Containers................................................ 6 6 6 2 7 Automotive................................................ 6 5 5 2 -- Appliances................................................ 3 4 4 1 2 Exports................................................... -- 1 -- -- 1 Other..................................................... 2 3 3 1 2 --- --- --- --- --- Total........................................... 100% 100% 100% 100% 100% === === === === ===
- --------------- (1) The allocation among customer categories was affected by the strike. CONSTRUCTION. The shipments to the construction industry are heavily influenced by fabricated product sales and the sales of Unimast. WPC 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, WPC has doubled its fabricated products shipments and has been able to market its products into broad geographical areas. Unimast is a leading manufacturer of steel framing and related accessories for residential and commercial building construction. STEEL SERVICE CENTERS. The 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. 5 7 CONVERTERS/PROCESSORS. The growth of 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, WPC's shipments to Wheeling-Nisshin increased significantly beginning in 1993. The converters/processors industry also represents a major outlet for their hot rolled products, which are converted into finished commodities such as pipe, tubing and cold rolled strip. AGRICULTURE. The shipments to the agricultural market are principally sales of 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 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 shipments to this market consists of cold rolled products for pails and drums. As a result of the OCC joint venture, WPC phased out its existing tin mill production facilities in 1996, and has begun to sell substrate to, and to distribute products produced by, OCC. AUTOMOTIVE. Unlike the majority of its competitors, WPC is not heavily dependent on shipments to the automotive industry. However, WPC seeks to establish higher value-added niches in this market, particularly in the area of hot dipped galvanized products for deep drawn automotive underbody parts. In addition, WPC has been a supplier of tin mill products for automotive applications, such as oil filters and gaskets. As a result of the strike, WPC was unable to secure automotive contracts for 1998. WPC will compete for automotive contracts in future periods. APPLIANCE. The 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 that supply OEMs. WPC has concentrated on niche product applications primarily used in washer/dryer, refrigerator/freezer and range appliances. WPC expects to be in a favorable position to compete for contracts to supply appliance manufacturers in 1999 and future periods. Handy & Harman H&H is diversified across both industrial markets and customers. H&H sells to the electronics, telecommunications, semi-conductor, computer, aerospace, home appliance OEM, automotive, construction, utility, medical, silversmith, and general manufacturing industries. In 1998, no customer accounted for more than 3% of H&H's sales. RAW MATERIALS Steel and Related Businesses WPC has a 12.5% ownership interest in Empire Iron Mining Partnership ("Empire") which operates a mine located in Palmer, Michigan. WPC 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, 1998, is estimated to be 19.8 million gross tons. WPC generally consumes approximately 2.4 million gross tons of iron ore pellets in its blast furnaces. WPC 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 2000 from world class suppliers. In 1993 WPC sold the operating assets of its coal company to an unrelated third party. WPC also entered into a long-term supply agreement with such third party to provide WPC with a substantial portion of WPC's metallurgical coal requirements at competitive prices. WPC's coking operations require a substantial amount of metallurgical coal. WPC currently produces coke in excess of its requirements and typically consumes generally all of the resultant by-product coke oven gas. In 1998, approximately 1.7 million tons of coking coal were consumed in the production of blast furnace coke by WPC. WPC may continue to sell its excess coke and coke oven by-products to third-party trade customers. WPC'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. WPC is presently dependent on external steel scrap for approximately 8% of its steel melt. The cost of these materials has been 6 8 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 WPC's raw material supply contracts provide for price adjustments in the event of increased commodity or energy prices. Unimast's raw material consists primarily of galvanized steel coils, which are readily available on the open market. Unimast purchases its steel requirements from major domestic steel producers throughout the country, including WPC. The price for steel coils tends to fluctuate due to changes in the domestic and international marketplaces. Unimast has not experienced any problems in obtaining the necessary quantities of steel from its suppliers, which totaled over 270,000 tons for the year ended December 31, 1998. Handy & Harman The raw materials used by H&H in its precious metal operations consist principally of silver, gold, copper, cadmium, zinc, nickel, tin, and the platinum group metals in various forms. Silver, gold and palladium constitute the major portion of the value of the raw materials involved. The prices of silver, gold, and palladium are subject to fluctuations and are expected to continue to be affected by world market conditions. Nonetheless, H&H has not experienced any problems obtaining necessary quantities of raw materials and, in the normal course of business, receives precious metals from suppliers and customers. These metals are returnable in fabricated or commercial bar form under agreed upon terms. Since precious metals are fungible, H&H does not physically segregate supplier and customer metals from its own inventories. Therefore, to the extent that supplier or customer metals are used by H&H, the amount of inventory which H&H must own is reduced. All precious metal raw materials are readily available from several sources. It is H&H's operating policy to maintain its precious metal inventory levels under the last in, first out (LIFO) method of accounting. Precious metals are purchased at the same prices and quantities as selling commitments to customers. From time-to-time, management reviews the appropriate inventory levels and may elect to make adjustments. The raw materials used by H&H in its non precious metal operations consist principally of stainless, galvanized, and carbon steel, nickel alloys, a variety of high performance alloys, and various plastic compositions. H&H purchases all such raw materials at open market prices from domestic and foreign suppliers. H&H has not experienced any problems obtaining necessary quantities of raw materials. Prices and availability, particularly of raw materials purchased from foreign suppliers, will be affected by world market conditions and government policies. BACKLOG WPC's order backlog was 365,622 net tons at December 31, 1998, compared to 368,025 net tons at December 31, 1997. The Company believes that the December 31, 1998 order backlog will be shipped by June 30, 1999. 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 1998 were approximately $48.3 million, including $9.5 million on environmental projects. Capital expenditures in 1997 and 1998 were lower than in recent years due to the strike. From 1994 to 1998, such expenditures aggregated approximately $285.8 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 WPC'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. 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 1999 from cash on hand and funds generated by operations, sale of receivables under the WPC Receivables Facility and funds available under the revolving credit facilities at WPSC, H&H and Unimast. During the 1997 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. 7 9 ENERGY REQUIREMENTS 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 at December 31, 1998 totaled 7,363 employees, of which 3,661 were represented by the USWA, and 558 by other unions. The remainder consisted of 1,806 salaried employees and 1,338 non-union operating employees. At December 31, 1998, WPC had 4,238 employees, H&H had 2,463 employees and Unimast had 662 employees. On August 12, 1997, WPC and the USWA entered into a new five-year labor agreement. COMPETITION Steel and Related Businesses The steel industry is cyclical in nature and has been marked historically by overcapacity, resulting in intense competition. WPC faces increasing competitive pressures from other domestic integrated producers, minimills and processors. Processors compete with WPC 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 steel production methods, 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 completion dates sometime in 1999. Near term, these minimills and processors are expected to compete with WPC primarily in the commodity flat rolled steel market. In the long-term, such minimills and processors may also compete with WPC 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 WPC'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. In addition, steel producers from 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 increased from 88 million to 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 19% in 1996, 20% in 1997 and 27% in 1998. Imports surged in 1998 due to severe economic conditions in Southeast Asia, Latin America, Japan and Russia, among others. 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. Unimast is one of the leading manufacturers of steel construction building products for the commercial and residential marketplace. While there are many companies who compete directly with Unimast, there are few manufacturers who carry a comparable variety of products. Unimast competes on a national basis and is increasing its presence in the West with its new manufacturing facility in Goodyear, Arizona. Competitive factors most affecting Unimast include service, price and quality, with price usually the leading consideration. Handy & Harman H&H is one of the leading fabricators of precious metal products and precision electroplating. Although there are no companies in the precious metals field whose operations exactly parallel those of H&H in every area, there are a number of competitors in each of the classes of precious metals products. Many of these competitors also carry on activities in other product lines in which H&H is not involved. There are many companies, domestic and foreign, which manufacture specialty wire and tubing products, and other specialty products of the type manufactured by 8 10 H&H. Competition is based on quality, service, price and new product introduction, each of which is of equal importance. ITEM 2. PROPERTIES STEEL AND RELATED BUSINESSES WPC And Unimast WPC 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, two operating blast furnaces, 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 WPC. 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 WPC and the annual capacity of the major products produced at each facility: OTHER MAJOR FACILITIES
LOCATION AND OPERATIONS CAPACITY TONS/YEAR MAJOR PRODUCTS - ----------------------- ------------------ --------------------------------------- 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 and oscillating rewind slitters.... 65,000 Electrolytic galvanized sheet and strip Martins Ferry, Ohio: Temper mill, zinc coating lines........... 750,000 Hot dipped galvanized sheets and coils Yorkville, Ohio: Continuous pickler, tandem mill, temper mills and annealing lines................. 660,000 Black plate and cold rolled sheets
All of the above facilities currently owned by WPC 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. WPC has fabricated products facilities 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. WPC maintains regional sales offices in Atlanta, Chicago, Detroit, Philadelphia and Pittsburgh. Unimast has facilities located at Franklin Park, Illinois; Warren, Ohio; Morrow, Georgia; Baytown, Texas; Boonton, New Jersey; New Brighton, Minnesota; Brooksville, Florida; Goodyear, Arizona and East Chicago, Indiana. Handy & Harman H&H, acquired in April 1998, has 26 active operating plants in the United States, Canada, England, Denmark and Singapore (50% owned) with a total area of approximately 1,887,000 square feet, including warehouse, office and laboratory space, but not including the plant used by the Singapore operation. H&H also owns or leases sales, service and warehouse facilities at two other locations in the United States, which, with H&H's general office, have a total area of approximately 63,000 square feet and owns ten non-operating or discontinued locations with a total area of approximately 498,000 square feet. H&H considers its manufacturing plants and services facilities to be well 9 11 maintained and efficiently equipped, and therefore suitable for the work being done. The productive capacity and extent of utilization of its facilities are dependent in some cases on general business conditions and in other cases on the seasonality of the utilization of its products. Capacity can be expanded readily to meet additional demands. Manufacturing facilities of H&H are located in: Fort Smith, Arkansas; Fontana, California; Toronto, Canada; Fairfield, Connecticut; Camden, Delaware; Kolding, Denmark; Stevenage, Retford, and Liversedge, England; Carmel, Indiana; Evansville, Indiana; Indianapolis, Indiana; Cockeysville, Maryland; Agawam, Westfield and North Attleboro, Massachusetts; Middlesex and Willingboro, New Jersey; Canastota and Oriskany, New York; East Providence, Rhode Island; Cudahy, Wisconsin; and Singapore (50% owned). All plants are owned in fee except for the Canastota, Carmel, Fort Smith, Stevenage, Middlesex, Retford and Westfield plants, which are leased. ITEM 3. LEGAL PROCEEDINGS ENVIRONMENTAL MATTERS WPC WPC, 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, WPC has incurred capital expenditures for environmental control projects aggregating $6.8 million, $12.4 million and $9.5 million for 1996, 1997 and 1998, respectively. WPC anticipates spending approximately $30.8 million in the aggregate on major environmental compliance projects through the year 2002, estimated to be spent as follows: $7.5 million in 1999, $7.3 million in 2000, $7.2 million in 2001, and $8.8 million in 2002. Due to the possibility of unanticipated factual or regulatory developments, the amount and timing of future expenditures may vary substantially from such estimates. WPC 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. WPC 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, WPC is unable to reasonably estimate the ultimate cost of compliance with Superfund laws. WPC believes, based upon information currently available, that its liability for clean up and remediation costs in connection with the Buckeye Reclamation will be between $2.5 and $3.0 million. At five other sites (MIDC Glassport, Tex-Tin, Breslube Penn, Four County Landfill and Beazer) WPC estimates the costs to approximate $500,000. WPC is currently funding its share of remediation costs. The Clean Air Act Amendments of 1990 (the "Clean Air Act") directly affect the operations of many of WPC's facilities, including coke ovens. WPC is presently in compliance with the provisions of the Act. However, 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. The forecasted environmental expenditures include amounts which will be spent on projects relating to compliance with these standards. In March 1993 the EPA notified WPC of Clean Air Act violations, alleging particulate matter and hydrogen sulfide emissions in excess of allowable concentrations, at WPC's Follansbee Coke Plant. The parties have entered into a consent decree settling the civil penalties related to this matter for $700,000 and WPC completed payment of all civil penalties in January 1997. 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. WPC 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 removed and a final closure plan has been submitted to the USEPA. WPC is waiting for approval from the USEPA to implement the plan. Until the USEPA responds to WPC, the full extent and cost of remediation cannot be ascertained. In June of 1995 the USEPA informally requested corrective action affecting other areas of the Follansbee facility. The USEPA sought to require WPC to perform a site investigation of the Follansbee plant. WPC actively contested the USEPA's jurisdiction to require a site investigation, but subsequently entered into a final administrative order with the USEPA to conduct a Resource Conservation and Recovery Act ("RCRA") facility investigation. By letter dated March 15, 1994 the Ohio Attorney General advised WPC of its intention to file suit on behalf of the Ohio EPA for alleged hazardous waste violations at WPC's Steubenville, Mingo Junction, Martins Ferry and 10 12 Yorkville facilities. In subsequent correspondence the State of Ohio demanded a civil penalty of approximately $300,000. Negotiations for settlement of past violations is on-going. In January 1998 the Ohio Attorney General notified WPC of a draft consent order and initial civil penalties in the amount of $1 million for various air violations at it's Steubenville and Mingo Junction facilities occurring from 1992 through 1996. WPC is engaged in discussions with the Ohio Environmental Enforcement Section to resolve these issues. WPC 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. A petition to terminate the Allenport consent decree was filed in 1998. WPC 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. Non-current accrued environmental liabilities totaled $10.6 million at December 31, 1997 and $12.7 million at December 31, 1998. As new information becomes available, including information provided by third parties, and changing laws and regulation, the liabilities are reviewed and the accruals adjusted quarterly. Management believes, based on its best estimate, that WPC has adequately provided for its present environmental obligations. Based upon information currently available, including WPC's prior capital expenditures, anticipated capital expenditures, consent agreements negotiated with Federal and state agencies and information available to WPC on pending judicial and administrative proceedings, WPC 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 WPC. However, as further information comes into WPC's possession, it will continue to reassess such evaluations. Handy & Harman In connection with the Montvale, New Jersey, facility (which was closed in 1984), formerly operated by Handy & Harman Electronic Materials Corporation ("HHEM"), a subsidiary of H&H, a civil action lawsuit was filed in April 1993 by the Borough of Park Ridge in the Superior Court of New Jersey, Law Division, Bergen County, against HHEM, the Company, the prior owner of the facility and other defendants asserting that a chemical used at the facility in Montvale, New Jersey, an adjoining municipality, had migrated and entered a drinking water supply of Park Ridge. This action seeks recovery of the alleged cost of treatment and remediation of water wells of the Borough of Park Ridge as a result of alleged contamination by the defendants. The H&H defendants denied responsibility for the alleged contamination of the Park Ridge wells and asserted that if any such contamination existed as a result of operation of the Montvale facility, damages arising therefrom are the responsibility of the owner or operator thereof prior to the purchase of the facility by HHEM from Plessey Incorporated (Plessey). The H&H defendants asserted substantial cross-claims against Plessey, GEC-Marconi Materials Corp. and a vendor of the chemical involved. H&H also filed a separate action, since consolidated with the above Park Ridge action, against Twin Cities Fire Insurance Company and other carriers, claiming coverage under various liability insurance policies and seeking indemnification and defense for all of Park Ridge's claims. H&H has settled its claims against its co-defendant, Plessey, Inc., and its claims against Twin City. As a result of those settlements, the Company believes that the resolution of the Park Ridge lawsuit, either by settlement or judgement, will not have a materially adverse effect on the financial position of the Company. SEC ENFORCEMENT ACTION On June 25, 1998, the Securities and Exchange Commission ("SEC") instituted an administrative proceeding against the Company alleging that it had violated certain SEC rules in connection with the tender offer for Dynamics Corporation of America ("DCA") commenced on March 31, 1997 through the Company's wholly- owned subsidiary, SB Acquisition Corp. (the "Offer"). The Company previously disclosed that the SEC intended to institute this proceeding. Specifically, the Order Instituting Proceedings (the "Order") alleges that, in its initial form the Offer violated the "All Holders Rule," Rule 14d-10(a)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), based on the Company's inclusion of a "record holder condition" in the Offer. No shareholder had tendered any shares at the time the condition was removed. The Order further alleges that the Company violated Rules 14d-4(c) and 14d-6(d) under the Exchange Act upon expiration of the Offer, by allegedly waiving material conditions to the Offer without prior notice to shareholders and purchasing the approximately 11 13 10.6% of DCA's outstanding shares tendered pursuant to the offer. The SEC does not claim that the Offer was intended to or in fact defrauded any investor. The Order institutes proceedings to determine whether the SEC should enter an order requiring the Company (i) to cease and desist from committing or causing any future violation of the rules alleged to have been violated and (ii) to pay approximately $1.3 million in disgorgement of profits. The Company has filed an answer denying any violations and seeking dismissal of the proceeding. Although there can be no assurance that an adverse decision will not be rendered, the Company intends to vigorously defend against the SEC's charges. GENERAL LITIGATION On October 27, 1998, WPC filed a complaint in Belmont County, Ohio against ten trading companies, two Japanese mills and three Russian mills alleging that it had been irreparably harmed as a result of sales of hot-rolled steel by the defendants at prices below the cost of production. WPC asked the Court for injunctive relief to prohibit such sales. On November 6, 1998, defendants removed the case from Belmont County to the US District Court for the Southern District of Ohio. WPC filed a motion in the US District Court asking the Court to remand the case to Belmont County. On November 19, 1998, the US District Court denied WPC's motion to remand the case to Belmont County. However, the Court permitted WPC to amend its complaint to allege violations of federal law. On November 20, 1998, WPC filed an amended complaint in the US District Court against nine trading companies. WPC added a claim under the 1916 Antidumping Act to its existing state law claims. The amended complaint seeks treble damages and injunctive relief. The defendants filed a motion to dismiss WPC's amended complaint and a motion to strike WPC's request for injunctive relief under the 1916 Act. The Court granted defendants' motion to dismiss WPC's state law causes of action, but denied defendants' motion to dismiss WPC's claims under the 1916 Antidumping Act. The Court has not yet issued its decision on defendants' motion to strike WPC's request for injunctive relief. The case has been set for trial on August 16, 1999. WPC has reached out-of-court settlements with three of the nine steel trading companies named in its 1916 Act lawsuit. While terms of the settlements are confidential, the settling defendants agreed to certain restrictions on the importation of foreign steel in the future and agreed to purchase certain steel products from WPC. 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NOT APPLICABLE 12 14 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The number of shares of Common Stock issued and outstanding as of March 18, 1999 was 16,976,968, including 296,962 shares of Redeemable Common Stock. In 1997 and 1998, the Company purchased 5,537,552 shares and 1,780,307 shares, respectively of Common Stock in open market purchases. The repurchased shares have been retired. In the first two months of 1999 the Company purchased approximately 900,000 Common Shares in the open market. The prices set forth in the following table represent the high and low sales prices for the Company's Common Stock:
COMMON STOCK ------------------ HIGH LOW ------- ------- 1997 First Quarter............................................... $ 9.250 $ 6.750 Second Quarter.............................................. 8.250 5.250 Third Quarter............................................... 15.250 7.625 Fourth Quarter.............................................. 14.250 10.375 1998 First Quarter............................................... 17.375 11.000 Second Quarter.............................................. 16.938 12.313 Third Quarter............................................... 13.938 10.000 Fourth Quarter.............................................. 12.875 9.500
As of March 1, 1999, there were approximately 11,902 holders of record of WHX's Common Stock. The Company intends to retain any future earnings for working capital needs and to finance capital improvements and presently does not intend to pay cash dividends on its Common Stock for the foreseeable future. 13 15 ITEM 6 SELECTED FINANCIAL DATA Five-Year Statistical (Thousands of Dollars)
1994 1995 1996* 1997* 1998 ---------- ---------- ---------- --------- ---------- PROFIT AND LOSS: Net sales............................. $1,193,878 $1,364,614 $1,232,695 $ 642,096 $1,645,498 Cost of products sold (excluding depreciation and amortization and profit sharing)..................... 979,277 1,147,899 1,096,228 720,722 1,376,431 Depreciation and amortization......... 61,514 67,700 68,956 49,445 96,870 Profit sharing........................ 9,257 6,718 -- -- -- Selling, administrative and general expense............................. 64,540 66,531 70,971 68,190 120,981 Special charge........................ -- -- -- 92,701 -- ---------- ---------- ---------- --------- ---------- Operating income (loss)............... 79,290 75,766 (3,460) (288,962) 51,216 Interest expense on debt.............. 22,581 22,830 25,963 29,047 78,096 Other income.......................... 17,925 47,139 25,974 50,668 89,696 B & LE settlement..................... 36,091 -- -- -- -- ---------- ---------- ---------- --------- ---------- Income (loss) before taxes............ 110,725 100,075 (3,449) (267,341) 62,816 Tax provision (benefit)............... 24,360 19,014 (4,107) (93,569) 23,386 ---------- ---------- ---------- --------- ---------- Income (loss) before extraordinary items............................... 86,365 81,061 658 (173,772) 39,430 Extraordinary items -- net of tax..... (9,984) (3,043) -- (25,990) 2,241 ---------- ---------- ---------- --------- ---------- Net income (loss)..................... 76,381 78,018 658 (199,762) 41,671 Preferred stock dividends............. 13,177 22,875 22,313 20,657 20,608 ---------- ---------- ---------- --------- ---------- Net income (loss) available to common stock............................... $ 63,204 $ 55,143 $ (21,655) $(220,419) $ 21,063 ========== ========== ========== ========= ========== BASIC INCOME (LOSS) PER SHARE: Income (loss) before extraordinary items............................... $ 2.72 $ 2.25 $ (.83) $ (8.83) $ 1.04 Extraordinary items -- net of tax..... (.37) (.12) -- (1.18) .12 ---------- ---------- ---------- --------- ---------- Net income (loss) per share........... $ 2.35 $ 2.13 $ (.83) $ (10.01) $ 1.16 Average number of common shares outstanding (in thousands).......... 26,957 25,850 26,176 22,028 18,198 FINANCIAL POSITION: Cash, cash equivalents and short term investments, net of short term borrowings.......................... $ 401,606 $ 439,493 $ 412,359 $ 305,934 $ 230,584 Working capital....................... 524,051 541,045 491,956 329,372 408,878 Property, plant and equipment -- net.................... 768,284 793,319 755,412 738,660 819,077 Plant additions and improvements...... 82,020 83,282 35,436 36,779 48,250 Total assets.......................... 1,729,908 1,796,467 1,718,779 2,061,920 2,712,084 Long-term debt........................ 289,500 285,676 268,198 350,453 893,356 Stockholders' equity.................. 692,254 768,405 714,437 453,393 446,512 NUMBER OF STOCKHOLDERS OF RECORD: Common................................ 8,729 13,408 12,697 12,273 11,915 Series A Convertible Preferred........ 27 28 42 42 31 Series B Convertible Preferred........ 22 48 62 79 69 EMPLOYMENT Employment costs...................... $ 328,584 $ 343,416 $ 321,347 $ 204,004 $ 394,701 Average number of employees........... 5,481 5,996 5,706 4,420 7,470
- --------------- WHX CORPORATION * The financial results of the Company for the fourth quarter of 1996 and all of 1997 were adversely affected by the strike. 14 16 NOTES TO FIVE-YEAR STATISTICAL SUMMARY The Company adopted Statement of Financial Accounting Standard No. 112, "Accounting for Postemployment Benefits" ("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 the 1994 first quarter as a result of the cumulative effect on prior years of adoption of the change in accounting method. The Company and its subsidiaries were reorganized into a new holding company structure on July 26, 1994. The transactions were accounted for as a reorganization of entities under common control. On the merger date, WHX had the same consolidated net worth as WPC and its subsidiaries prior to the reorganization. In 1995 the Company recorded an extraordinary charge of $3.0 million, net of taxes, to reflect the coal retiree medical benefits for additional retirees assigned to the Company by the Social Security Administration and the effect of recording the liability at its net present value. In 1996 the Company experienced a work stoppage which began October 1, 1996 and continued through August 12, 1997 at eight of its plants in Ohio, Pennsylvania and West Virginia. No steel products were produced or shipped from these facilities during the strike. These facilities account for approximately 80% of the tons shipped by the Company on an annual basis. In 1997 the Company recorded a special charge of $92.7 million related to a new labor agreement which ended the ten-month strike. The special charge included $66.7 million for enhanced retirement benefits, $15.5 million for signing and retention bonuses, $3.8 million for special assistance and other employee benefits payments and $6.7 million for a grant of 1.0 million stock options to WPN Corp. In 1997 the Company also recorded an extraordinary charge of $26.0 million, net of tax, related to premium and interest charges required to defease its then outstanding 9 3/8% Senior Unsecured Notes of $24.3 million and coal miner retiree medical benefits of $1.7 million. During 1998 the Company purchased and retired $48.0 million aggregate principal amount of 10 1/2% Senior Notes in the open market resulting in extraordinary income of $2.2 million, net of tax. In April 1998 the Company acquired H&H. The transaction had a total value of $651.4 million, including the assumption of approximately $229.6 million in debt. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overview In August 1997 WPC and the USWA entered into a new five-year labor agreement which settled a ten-month strike. The strike directly affected facilities accounting for approximately 80% of WPC's steel shipments. The strike materially affected the financial performance of WPC in the fourth quarter of 1996 and for all of 1997, and will be the primary reason for differences in year to year comparisons. All of WPC's production facilities resumed operations as of September 30, 1997. Raw steel production achieved 90% of capacity in the fourth quarter of 1997. By June 30, 1998, WPC was producing at its pre-strike production levels and shipping at its historical mix of products. 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 allowed WPC to eliminate 850 hourly jobs (approximately 20% of the work force) and materially reduced its labor costs. Partially offsetting these savings are hourly wage increases and the costs of a defined benefit pension plan, which include a retirement incentive. On March 31, 1998, the Company announced that it had entered into a definitive purchase agreement for the sale of $350.0 million principal amount of 10 1/2% Senior Notes due 2005 in a Rule 144A Private placement to qualified institutional buyers. The closing on the private placement of 10 1/2% Senior Notes occurred April 7, 1998. The net proceeds of $340.4 million from the offering were used to finance a portion of the acquisition of H&H and related transaction expenses. The 10 1/2% Senior Notes were exchanged for identical notes which were issued pursuant to an exchange offer registered under the Securities Act of 1933, as amended (the "Securities Act"). On April 13, 1998 the Company completed the acquisition of H&H and merged it with a wholly-owned subsidiary of the Company. The transaction has a total value of approximately $651.4 million, including the 15 17 assumption of approximately $229.6 million in debt. The Company financed the transaction through cash on hand and the private placement of its 10 1/2% Senior Notes. In May, 1998 WHX completed the merger of its pension plan with the pension plan of H&H. Under the terms of the merged WHX Pension Plan, there are a series of benefit structures, that essentially continue the various pension plans for employees of the WPC and H&H plans as they existed before the merger. The Company continues to pursue strategic alternatives to maximize the value of its portfolio of businesses. Some of these alternatives have included, and will continue to include selective acquisitions, divestitures and sales of certain assets. The Company has provided, and may from time to time in the future, provide information to interested parties regarding portions of its businesses for such purposes. 1998 Compared to 1997 Net sales for 1998 increased to $1.6 billion from $642.1 million in 1997. Sales increased primarily due to (i) the return to pre-strike levels of sales for WPC's operations of $1.1 billion compared to 1997 net sales of $489.7 million, which earlier period reflects the effect of the strike by the United Steel Workers of America, (ii) the acquisition of H&H $350.3 million and (iii) Unimast increased sales of $205.4 million in 1998 compared to $156.7 million in 1997. Cost of products sold for 1998 increased to $1.4 billion from $720.7 million in 1997. The increase in Cost of products sold reflects the increased volume of raw steel production at WPC's operations, which were idled throughout much of 1997 due to the strike, and the inclusion of H&H operations beginning in April 1998. Costs include $4.5 million related principally to physical inventory adjustments. Also, WPC experienced lower pension expense in 1998 as a result of the merger of the H&H and WPC pension plans. Depreciation and amortization expense increased to $96.9 million in 1998 from $49.4 million in 1997. Increased depreciation is principally due to the higher levels of raw steel production depreciation methods, as well as $9.6 million of depreciation at H&H. Raw steel production increased by 269%. Amortization increased $6.1 million, principally reflecting the goodwill acquired in the H&H acquisition. Selling, administrative and general expense increased $52.8 million to $121.0 million in 1998 from $68.2 million in 1997. The increase is primarily due to the acquisition of H&H in the second quarter, as well as increased activity at WPC after the strike. In 1997 the Company recorded a special charge of $92.7 million related to the new labor agreement. The special charge included $66.7 million for enhanced retirement benefits, $15.5 million for signing and retention bonuses, special assistance payments and other employee benefits totaling $3.8 million and $6.7 million for a grant of 1.0 million stock options to WPN Corp. Interest expense increased to $78.1 million in 1998 from $29.0 million in 1997 reflecting the $350.0 million of 10 1/2% Senior Notes issued in March 1998 for the purchase of H&H as well as $237.1 million of H&H outstanding indebtedness. Other income increased to $89.7 million in 1998 from $50.7 million in 1997. The increase reflects a $36.6 million increase in interest and realized and unrealized investment gains and losses on short-term investments. Equity income increased from a loss of $1.6 million in 1997 to income of $5.7 million in 1998 due to start-up losses in the OCC joint venture during 1997. Partially offsetting the increases are additional securitization fees in 1998 due to a higher level of accounts receivable securitization. The tax provision for 1998 and benefit for 1997 were $23.4 million and $93.6 million, respectively, and is based on pre-tax income. The Company pays taxes under the alternative minimum tax system and records the effect on deferred tax assets and liabilities caused by temporary tax adjustments. Income before extraordinary charges in 1998 totaled $39.4 million, or $1.04 per share of Common Stock. The 1998 extraordinary gain of $3.4 million ($2.2 million net of tax) reflects the discount on the purchase of $48.0 million aggregate principal amount of 10 1/2% Senior Notes in the open market. The 1997 extraordinary charge of $40.0 million ($26.0 million net of tax) reflects the premium and interest of $37.4 million on the legal defeasance of long term debt, and $2.6 million for coal miner retiree medical expense attributable to the allocation of additional retirees to the Company by the Social Security Administration. Net income in 1998 totaled $41.7 million, or income of $1.16 per share of Common Stock after deduction of preferred stock dividends. Net loss in 1997 totaled $199.8 million, or a loss of $10.01 per share of Common Stock after deduction of preferred stock dividends. 16 18 1997 Compared to 1996 Net sales for 1997 decreased to $642.1 million from $1,232.7 million in 1996. Shipments of steel products decreased to 1.1 million tons in 1997 from 2.3 million tons in 1996. The decrease in sales and tons shipped is primarily attributable to the work stoppage at WPC's eight plants located in Ohio, Pennsylvania and West Virginia. Production and shipment of steel products at these plants ceased on October 1, 1996 and the strike continued to August 12, 1997. Average net sales per ton increased to $606 in 1997 from $544 per ton in 1996 because higher value added products continued to be shipped during the strike from other locations. Unimast net sales for 1997 totaled $156.7 million on shipments of 219,000 tons compared to 1996 net sales of $133.5 million on shipments of 191,000 tons. Cost of goods sold increased to $680 per ton shipped in 1997 from $484 in 1996. This increase reflects the effect of high fixed cost and low capacity utilization and higher levels of external steel purchases due to the strike, higher costs for natural gas and a higher value-added product mix. In addition, costs were adversely affected by a door rehabilitation program at WPC's number 8 coke battery. The operating rate for the fourth quarter was 90.0%, but for the year of 1997 declined to 27.6%. The operating rate for the nine months prior to the work stoppage was 98.9%, but declined to 74.0% for the full year of 1996. Raw steel production is 100% continuous cast. Depreciation expense decreased to $49.4 million in 1997 from $69.0 million in 1996. Decreased depreciation is due to lower levels of raw steel production during the strike and its effect on units of production depreciation method. Raw steel production decreased by 62.8%. Selling, administrative and general expense decreased 3.9% to $68.2 million in 1997 from $71.0 million in 1996. The decrease is due to the reduced level of operations. In 1997 the Company recorded a special charge of $92.7 million related to the new labor agreement. The special charge included $66.7 million for enhanced retirement benefits, $15.5 million for signing and retention bonuses, special assistance payments and other employee benefits totaling $3.8 million and $6.7 million for a grant of 1 million stock options to WPN Corp. Interest expense increased to $29.0 million in 1997 from $26.0 million in 1996 due primarily to higher levels of borrowings under the WPC Revolving Credit Facility. Other income increased to $50.7 million in 1997 from $26.0 million in 1996. The increase reflects a $32.4 million increase in interest and investment income, including unrealized income of $17.4 million under mark to market rules. Equity income decreased from $9.5 million in 1996 to a loss of $1.6 million in 1997 due to start-up losses in the OCC joint venture. The tax benefits for 1997 and 1996 were $93.6 million and $4.1 million, respectively, before recording a tax benefit related to extraordinary charges in 1997. Loss before extraordinary charges in 1997 totaled $173.8 million, or $8.83 per share of Common Stock. The 1997 extraordinary charge of $40.0 million ($26.0 million net of tax) reflects the premium and interest of $37.4 million on the legal defeasance of long term debt, and $2.6 million for coal miner retiree medical expense attributable to the allocation of additional retirees to the Company by the Social Security Administration. Net loss in 1997 totaled $199.8 million, or a loss of $10.01 per share of Common Stock after deduction of preferred stock dividends. Net income in 1996 totaled $.7 million, or a loss of $.83 per share of Common Stock after deduction of preferred stock dividends. LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities for 1998 totaled $221.2 million. Short term trading investments and related short term borrowings are reported as cash flow from operating activities. Working capital accounts (excluding cash, short term investments, short term borrowings and current maturities of long-term debt) increased by $137.2 million, including amounts acquired from H&H. Accounts receivable increased $78.6 million (excluding a $26.0 million sale of trade receivables under the Receivables Facility) due to increased sales reflecting resolution of the labor dispute and the acquisition of H&H. Inventories valued principally by the LIFO method for financial reporting purposes, totaled $467.1 million at December 31, 1998, an increase of $182.4 million from the prior year end reflecting the acquisition of H&H. Trade payables increased $8.5 million due to higher operating levels and the acquisition of H&H. Net cash flow used in investing activities for 1998 totaled $446.6 million including capital expenditures of $48.3 million. Net cash flow from financing activities totaled $240.4 million including repayments under WPC's Revolving Credit Facility of $22.8 million, $299.2 million of additional long term debt, offset by $20.2 million utilized for Common Stock repurchases in the open market. 17 19 For the year ended December 31, 1998, the Company spent $48.3 million (including capitalized interest) on capital improvements, including $9.5 million on environmental control projects. Capital expenditures were lower than in recent years due to the strike. Additionally, the Company invested $7.2 million in 1997 in its OCC joint venture. On July 30, 1998 H&H entered into a $300 million Senior Secured Credit facility (the "Facilities") with Citibank USA Inc. as agent. The Facilities are comprised of (i) a $100 million 6-year Revolving Credit Facility, (ii) a $25 million 6-year Delayed Draw Term Loan Facility, (iii) a $50 million 6-year Term Loan A Facility, and (iv) a $125 million 8-year Term Loan B Facility. Interest under the Facilities is calculated at a rate determined either using (i) the Citibank prime rate or (ii) LIBOR, plus the Applicable Margin in effect from time to time. Applicable Margin means a percentage per annum determined by reference to the total leverage ratio for H&H. The rates in effect until December 31, 1998 are (a) in the case of the Term A Facility, the Delayed Draw Facility and the Revolving Credit Facility, calculated at LIBOR + 1.75% and (b) in the case of the Term B facility, calculated at LIBOR + 2.50%. Borrowings under the Facilities are secured by the pledge of 100% of the capital stock of all H&H's active U.S. subsidiaries and 65% of the stock of H&H's non-U.S. subsidiaries. In addition, H&H provided a perfected first priority lien on and security interest in substantially all the assets of H&H and its subsidiaries. The Facilities have certain financial covenants restricting indebtedness, liens and distributions. In addition, the Facilities required H&H to procure an interest rate hedge agreement covering a notional amount of not less than $125 million for a period of no less than three years. H&H has entered into a cancelable interest-rate swap to convert $125 million of its variable-rate debt to a fixed rate with Citibank, N.A. New York. The fixed rate is 4.53 percent, effective January 4, 1999, with a termination date of January 5, 2004; provided however Citibank may designate July 5, 2000 as the termination date. The Facilities replaced H&H's $125.0 million Senior Notes due 2004 and its then outstanding unsecured revolving credit facility. On April 7, 1998, the Company closed a definitive purchase agreement for the sale of $350.0 million principal amount of 10 1/2% Senior Notes due 2005 in a Rule 144A Private Placement to qualified institutional buyers. The net proceeds of $340.4 million from the offering were used to finance a portion of the acquisition of H&H and related transaction expenses. The 10 1/2% Senior Notes were exchanged for identical notes which were issued pursuant to an exchange offer registered under the Securities Act. During the third quarter of 1998, the Company purchased $48.0 million aggregate principal amount of 10 1/2% Senior Notes in the open market for $43.2 million. In November 1997 WPC issued $275.0 million principal amount of 9 1/4% Senior Unsecured Notes (the "9 1/4% Senior Notes") to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The 9 1/4% Senior Notes were exchanged for identical notes which were issued pursuant to an exchange offer registered under the Securities Act. In November 1997 WPC also entered into a Term Loan Agreement with DLJ Capital Funding, Inc., as syndication agent, 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 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. WPC's obligations under the Term Loan Agreement are guaranteed by WPC's outstanding present and its future operating subsidiaries. The proceeds from the 9 1/4% Senior Notes and the Term Loan Agreement were used to defease $266.2 million of 9 3/8% Senior Secured Notes due 2003 and to pay down borrowings under the Revolving Credit Facility. On December 28, 1995, WPSC entered into a new Revolving Credit Facility (Revolving Credit Facility) with Citibank, N.A. as agent. The Revolving Credit Facility, as amended, provides for borrowing for general corporate purposes of up to $150.0 million. The Revolving Credit Facility expires May 3, 1999 and is currently being renegotiated. Interest is calculated at a Citibank prime rate plus 1.0% and/or a Eurodollar rate plus 2.25%. Borrowings under the Revolving Credit Facility are secured primarily by 100% of WPSC's eligible inventory and requires that WPSC maintain a specified level of tangible net worth. The Revolving Credit Facility has certain financial covenants restricting indebtedness, liens and distributions. Borrowings under the Revolving Credit Facility at December 31, 1998 totaled $67.0 million. In August 1994 the Company entered into an agreement to sell, up to $75.0 million on a revolving basis, an undivided percentage ownership in a designated pool of trade receivables (the "Receivables Facility"). In July 1995, WPC amended such Receivables Facility to sell an additional $20.0 million on similar terms and conditions. The Receivables Facility expires in August 1999 and is currently being renegotiated. Accounts receivable at December 31, 1998, exclude $95.0 million representing accounts receivable sold with recourse limited to the extent of uncollectible balances. Fees paid by the Company under this Receivables Facility were based upon variable rates 18 20 that range from 5.5438% to 8.50%. Based on the Company's collection history, the Company believes that credit risk associated with the above arrangement is immaterial. In May, 1998 WHX completed the merger of its pension plan with the pension plan of its wholly owned H&H subsidiary. Under the terms of the merged WHX Pension Plan, there are a series of benefit structures, which essentially continue the various pension plans for employees of the WPC and H&H plans as they existed before the merger. At the time of the merger of the pension plans, the assets in the Handy & Harman pension plans exceeded the plans' liabilities by approximately $155.0 million. At that time, the liabilities of the WHX pension plan exceeded their assets by approximately $150.0 million. The pension plan merger thus eliminated both the underfunding in the WHX pension plan and the Company's balance sheet liability at the merger date, and materially reduced the Company's net periodic pension expense in future periods. Furthermore, based on the Company's current actuarial assumptions, the merged pension plan is substantially funded and will therefore eliminate approximately $135 million of cash funding obligations of the Company over the next four years. In 1998 the Company repurchased 1.8 million shares of Common Stock for $20.2 million. The Company may, from time to time, continue to purchase additional shares of Common Stock and Preferred Stock. Short-term liquidity is dependent, in large part, on cash on hand, investments, 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 satisfies its working capital requirements through cash on hand, investments, the Receivables Facility, borrowing availability under the Revolving Credit Facilities and funds generated from operations. The Company believes that such sources will provide the Company for the next twelve months with the funds required to satisfy working capital and capital expenditure requirements. External factors, such as worldwide steel production and demand and currency exchange rates could materially affect the Company's results of operations. During 1998 the Company had minimal activity with respect to futures contracts, and the impact of such activity was not material to the Company's financial condition and results of operations. As of December 31, 1998, the Company had cash and short-term investments, net of related investment borrowings, of $230.6 million. During 1998, the Company purchased $48.0 million aggregate principal amount of its 10 1/2% Senior Notes due 2005 in the open market. The Company announced on October 5, 1998 that it had purchased approximately 2.2 million shares of common stock, a 9.9 percent stake, in Global Industrial Technologies Inc. ("Global") for $14.9 million. Global is a Dallas-based industrial tool and special equipment products company. On December 17, 1998, the Company commenced a tender offer for any and all outstanding shares of Global that it does not already own at $10.50 per share. The purpose of the offer is for the Company to acquire control of, and ultimately the entire equity interest in, Global. As of March 15, 1999, each of the Rights Condition, the Supermajority Condition and the Business Combination Condition (each as defined in the Offer to Purchase) has not been satisfied. The offer is currently scheduled to expire on April 15, 1999, unless further extended. WHX's company wide Year 2000 Project is proceeding on schedule. The project addresses all aspects of computing in the Company including mainframe systems, external data interfaces to customers, suppliers, banks and government, mainframe controlling software, voice and data systems, internal networks and personal computers, plant process control systems, building controls, and in addition surveying major suppliers and customers to assure their readiness. Mainframe business systems were approximately 97% Year 2000 compliant at December 31, 1998 and expected to be 100% compliant by March 31, 1999; external data interfaces, mainframe software, voice and data systems and internal networks and personal computers are anticipated to be Year 2000 compliant by the end of the first quarter of 1999; process control systems are anticipated to be compliant by the end of the second quarter of 1999. Building controls are Year 2000 compliant at this time. Supplier and customer surveys are approximately 50% complete at this time and completion is expected by the end of the second quarter of 1999. The total costs associated with the required modifications to become Year 2000 compliant is not expected to be material to the Company's financial condition or results of operations. The estimated total cost of the Year 2000 Project is $3.0 million. The total amount expended on the project through December 31, 1998 is $2.5 million. Funds are being provided to the project through departmental expenses budgeted for at the beginning of this project. Failure to correct a Year 2000 problem could result in an interruption of certain normal business activities or operations. The Year 2000 project is expected to eliminate any issues that would cause such an interruption. The 19 21 Company believes that the implementation of the Year 2000 project changes will minimize any interruptions. The Company is currently in the process of developing contingency plans regarding component failure of any Year 2000 non-compliant segment of the business. 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. The Clean Air Act Amendment of 1990 is expected to increase the Company's costs related to environmental compliance; however, such an increase in cost is not reasonably estimable, but is not anticipated to have a material adverse effect on the consolidated financial condition of the Company. 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 1998 from cash on hand and funds generated from operations. Non-current accrued environmental liabilities totaled $10.6 million at December 31, 1997 and $7.8 million at December 31, 1998. 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 regulation, the liabilities are reviewed and the accruals adjusted quarterly. Management believes, based on its best estimate, that the Company has adequately provided for remediation costs that might be incurred or penalties that might be imposed under present environmental laws and regulations. When used in the Management's Discussion and Analysis, the words "anticipate", "estimate" and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the ability of the Company to develop market and sell its products, the effects of competition and pricing and Company and industry shipment levels, and the effect of Year 2000 on the Company, its customers and suppliers. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included herein will prove to be accurate. NEW ACCOUNTING STANDARDS In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 addresses costs incurred in connection with the implementation of internal-use software, and specifies the circumstances under which such costs should be capitalized or expensed. The Company will be required to adopt SOP 98-1 in the first quarter of 1999. At this time, management does not anticipate the adoption of SOP 98-1 will have a material impact on the Company's results of operations or financial position. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This pronouncement requires all derivative instruments to be reported at fair value on the balance sheet; depending on the nature of the derivative instrument, changes in fair value will be recognized either in net income or as an element of comprehensive income. SFAS 133 is effective for fiscal years beginning after June 15, 1999. The Company has not engaged in significant activity with respect to derivative instruments or hedging activities in the past. Management of the Company has not yet determined the impact, if any, of the adoption of SFAS 133 on the Company's financial position or results of operations. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Commodity Price Risk and Related Risks In the normal course of business, the Company is exposed to market risk or price fluctuations related to the purchase of natural gas, precious metals and steel products. To a lesser extent, the Company is exposed to the risk of price fluctuations on coal, coke, natural gas liquids, electricity and certain nonferrous metals used as raw materials. The Company is also exposed to the effects of price fluctuations on the value of its commodity inventories, specifically, H&H's precious metals inventories. The Company's market risk strategy has generally been to obtain competitive prices for its products and services and allow operating results to reflect market price movements dictated by supply and demand. 20 22 FOREIGN CURRENCY EXCHANGE RATE RISK The Company is subject to the risk of price fluctuations related to anticipated revenues and operating costs, firm commitments for capital expenditures and existing assets or liabilities denominated in currencies other than U.S. dollars. The Company has not generally used derivative instruments to manage this risk. EQUITY PRICE RISK The Company is subject to equity price risk resulting from its investments in certain marketable equity securities of unrelated parties; the Company accounts for its investment in these securities in accordance with Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). At December 31, 1998, the Company held $30.3 million in equity securities classified as "trading" in accordance with SFAS 115. Each quarter the Company adjusts the carrying amount of its trading securities to fair market value, with any resulting adjustment being charged or credited to other income. At year end 1998, a hypothetical 10% decrease in the value of the equity trading securities would have resulted in a $3.0 million unfavorable impact on pretax income. Such a decrease in value might also reduce the future cash flows generated from the ultimate liquidation of the investment in trading securities. At December 31, 1998, the Company held $23.2 million in equity securities classified as "available for sale" in accordance with SFAS 115. Each quarter the Company adjusts the carrying amount of its available for sale securities to fair market value, with any resulting adjustment being charged or credited, net of the related income tax effect, to other comprehensive income. The balance of unrealized gain at December 31, 1998, associated with the Company's available for sale securities totaled $5.4 million, net of tax. At year-end 1998, a hypothetical 10% decrease in the value of the equity available for sale securities would have resulted in a $1.5 million unfavorable impact, net of tax, on other comprehensive income. Such a decrease in value might also reduce the future cash flows generated from the ultimate liquidation of the investment in trading securities. See Note F to the consolidated financial statements for additional information concerning the Company's short-term investments. INTEREST RATE RISK The Company is subject to the effects of interest rate fluctuations on certain of its financial instruments. A sensitivity analysis of the projected incremental effect of a hypothetical 10% change in 1998 year-end interest rates on the fair value of WHX's financial instruments is provided in the following table:
FAIR CARRYING MARKET INCREMENTAL(1) VALUE VALUE INCR./(DECR.) -------- -------- -------------- (DOLLARS IN THOUSANDS) Financial assets: Investments in fixed income securities.................... $640,125 $640,125 $(22,404) Financial liabilities: Fixed-rate long-term debt (including amounts due within one year).............................................. $576,071 $533,590 $ 29,237
- --------------- (1) Reflects a 10% increase in interest rates for financial assets and a 10% decrease in interest rates for financial liabilities. Fair value of cash and cash equivalents, receivables, short-term borrowings, accounts payable, accrued interest and variable-rate long-term debt approximate their carrying values and are relatively insensitive to changes in interest rates due to the short-term maturity of the instruments or the variable nature of underlying interest rates. Accordingly, these items have been excluded from the above table. At December 31, 1998, the Company's investment portfolio included U.S. government fixed income securities totaling $640.1 million. The fair value of these instruments will increase or decrease as a result of changes in market interest rates. The Company accounts for these investments as "trading securities" as defined by SFAS 115. Accordingly, each quarter the Company adjusts the balance of its portfolio to fair market value, with any resulting adjustment being charged or credited to income as an unrealized loss or gain and included in other income. Realized gains and losses resulting from the disposition of such investments are recorded as income in the period during which such disposition took place. During 1998, the Company recognized realized and unrealized gains totaling $59.4 million in connection with its fixed income securities investment portfolio. The Company provides no assurance that these gains are sustainable going forward. The Company's exposure to increases in interest rates that might result in a corresponding decrease in the fair value of its fixed income securities investment portfolio could have an unfavorable effect on the Company's results of operations and cash flows. For additional information, see Note F to the consolidated financial statements. 21 23 The Company attempts to maintain a reasonable balance between fixed- and floating-rate debt in an attempt to keep financing costs as low as possible. At December 31, 1998, a majority of the Company's portfolio of long-term debt consisted of fixed-rate instruments. Accordingly, the fair value of such instruments may be relatively sensitive to effects of interest rate fluctuations. In addition, the fair value of such instruments is also affected by investors' assessments of the risks associated with industries in which the Company operates as well as the Company's overall creditworthiness and ability to satisfy such obligations upon their maturity. However, the Company's sensitivity to interest rate declines and other market risks that might result in a corresponding increase in the fair value of its fixed-rate debt portfolio would only have an unfavorable effect on the Company's results of operations and cash flows to the extent that the Company elected to repurchase or retire all or a portion of its fixed-rate debt portfolio at an amount in excess of the corresponding carrying value. The Company has entered into an interest rate swap for certain of its variable-rate debt. The swap agreement covers a notional amount of $125 million and converts $125 million of its variable-rate debt to fixed rate with Citibank, N.A. New York. The fixed rate is 4.53%, effective January 4, 1999, with a termination date of January 5, 2004; however, Citibank may designate July 5, 2000, as the termination date. See Note I to the consolidated financial statements for additional information concerning the Company's long-term debt arrangements. SAFE HARBOR The Company's quantitative and qualitative disclosures about market risk include forward-looking statements with respect to management's opinion about the risks associated with the Company's financial instruments. These statements are based on certain assumptions with respect to market prices, interest rates and other industry-specific risk factors. To the extent these assumptions prove to be inaccurate, future outcomes may differ materially from those discussed above. 22 24 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of WHX Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in stockholders' equity present fairly, in all material respects, the financial position of WHX Corporation and its subsidiaries (the "Company") at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, 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 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. PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania February 18, 1999 23 25 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE)
YEAR ENDED DECEMBER 31, ------------------------------------- 1996 1997 1998 ---------- --------- ---------- REVENUES: Net sales................................................... $1,232,695 $ 642,096 $1,645,498 COST AND EXPENSES: Cost of products sold, excluding depreciation............. 1,096,228 720,722 1,376,431 Depreciation and amortization............................. 68,956 49,445 96,870 Selling, administrative and general expense............... 70,971 68,190 120,981 Special charge............................................ -- 92,701 -- ---------- --------- ---------- 1,236,155 931,058 1,594,282 ---------- --------- ---------- Operating income (loss)..................................... (3,460) (288,962) 51,216 Interest expense on debt.................................... 25,963 29,047 78,096 Other income................................................ 25,974 50,668 89,696 ---------- --------- ---------- Income (loss) before taxes and extraordinary items.......... (3,449) (267,341) 62,816 Tax provision (benefit)..................................... (4,107) (93,569) 23,386 ---------- --------- ---------- Income (loss) before extraordinary items.................... 658 (173,772) 39,430 Extraordinary items -- net of tax........................... -- (25,990) 2,241 ---------- --------- ---------- Net income (loss)........................................... 658 (199,762) 41,671 Dividend requirement for preferred stock.................... 22,313 20,657 20,608 ---------- --------- ---------- Net income (loss) available to common stock................. $ (21,655) $(220,419) $ 21,063 ========== ========= ========== BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK Income (loss) before extraordinary items.................... $ (.83) $ (8.83) $ 1.04 Extraordinary items -- net of tax........................... -- (1.18) .12 ---------- --------- ---------- Net income (loss) per share....................... $ (.83) $ (10.01) $ 1.16 ========== ========= ========== INCOME (LOSS) PER SHARE OF COMMON STOCK-ASSUMING DILUTION Income (loss) before extraordinary items.................... $ (.83) $ (8.83) $ .99 Extraordinary items -- net of tax........................... -- (1.18) .12 ---------- --------- ---------- Net income (loss) per share -- assuming dilution........................................ $ (.83) $ (10.01) $ 1.11 ========== ========= ==========
- --------------- See Notes to Consolidated Financial Statements WHX Corporation 24 26 CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------ 1997* 1998 ---------- ---------- ASSETS Current assets: Cash and cash equivalents................................. $ 1,002 $ 16,004 Short term investments.................................... 581,550 702,082 Trade receivables, less allowances for doubtful accounts of $1,108 and $2,366................................... 44,993 97,552 Inventories............................................... 284,757 467,130 Prepaid expenses and deferred charges..................... 26,581 11,136 ---------- ---------- Total current assets.............................. 938,883 1,293,904 Investment in associated companies.......................... 80,409 84,978 Property, plant and equipment, at cost less accumulated depreciation and amortization............................. 738,660 819,077 Intangibles, net of amortization............................ -- 288,216 Deferred income taxes....................................... 188,483 110,935 Intangible asset -- pensions................................ 76,714 50,449 Deferred charges and other assets........................... 38,771 64,525 ---------- ---------- $2,061,920 $2,712,084 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade payables............................................ $ 123,872 $ 132,412 Short term debt........................................... 366,418 559,501 Payroll and employee benefits............................. 56,212 69,845 Federal, state and local taxes............................ 12,059 12,516 Deferred income taxes -- current.......................... 32,196 69,551 Interest and other........................................ 18,288 40,589 Long-term debt due in one year............................ 466 612 ---------- ---------- Total current liabilities......................... 609,511 885,026 Long-term debt.............................................. 350,453 893,356 Pension liability........................................... 166,652 5,952 Other employee benefit liabilities.......................... 427,124 423,225 Other liabilities........................................... 49,979 54,383 ---------- ---------- 1,603,719 2,261,942 ---------- ---------- Redeemable common stock -- 360 shares and 298 shares........ 4,808 3,630 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred stock -- $.10 par value; authorized 10,000 shares; issued and outstanding: 5,883 shares (liquidation preference of $50 per share).............................. 589 589 Common stock $.01 par value; authorized 60,000 shares; issued and outstanding: 19,074 and 17,545 shares.......... 193 175 Accumulated other comprehensive income...................... 15,754 5,472 Additional paid-in capital.................................. 602,657 582,795 Treasury stock-205 shares and 0 shares...................... (2,218) -- Accumulated earnings (deficit).............................. (163,582) (142,519) ---------- ---------- 453,393 446,512 ---------- ---------- $2,061,920 $2,712,084 ========== ==========
- --------------- * Reclassified See Notes to Consolidated Financial Statements WHX Corporation 25 27 CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------------- 1996 1997 1998 -------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)........................................... $ 658 $(199,762) $ 41,671 Items not affecting cash from operating activities: Depreciation and amortization............................. 69,287 49,776 96,870 Other postretirement benefits............................. 3,505 2,322 (8,409) Coal retirees' medical benefits, net of tax............... -- 1,700 -- Premium on early debt retirement, net of tax.............. -- 24,290 (2,241) Income taxes.............................................. (6,572) (94,029) 19,575 (Gain) loss on asset dispositions......................... 1,541 2,335 (8,998) Special charge, net of current portion.................... -- 69,137 -- Pension expense........................................... -- 9,327 9,236 Equity loss (income) in affiliated companies.............. (9,496) 1,644 (5,699) Minority interest in net income........................... -- -- 921 Decrease (increase) in working capital elements, net of effect of acquisitions Trade receivables......................................... 50,290 (43,188) (7,487) Trade receivables sold.................................... (22,000) 24,000 26,000 Inventories............................................... 70,469 (69,355) (4,821) Short term investments-trading............................ (60,125) (70,239) (142,069) Investment account borrowings............................. 68,841 206,649 212,012 Other current assets...................................... 4,248 (12,639) 38,383 Other current liabilities................................. (70,467) 69,411 (38,661) Other items -- net.......................................... 4,629 15,705 (5,087) -------- --------- --------- Net cash provided by (used in) operating activities......... 104,808 (12,916) 221,196 -------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Plant additions and improvements............................ (35,436) (36,779) (48,250) Short term investments -- available for sale................ 7,920 (26,290) 6,740 Handy & Harman acquisition, net of cash acquired............ -- (13,222) (402,632) Other investments........................................... (17,240) (7,150) (8,335) Proceeds from sales of assets............................... 2,785 1,217 835 Dividends from affiliated companies......................... 2,500 2,500 5,000 -------- --------- --------- Net cash used in investing activities....................... (39,471) (79,724) (446,642) -------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Long-term debt proceeds, net of issuance cost............... 400 340,455 561,749 Long-term debt retirement................................... (15,246) (268,766) (267,321) (Premium)discount on early debt retirement.................. -- (32,600) 4,779 Letter of credit collateralization.......................... 384 16,984 1,520 Short-term borrowings (payments)............................ 1,382 89,546 (18,929) Proceeds from warrants exercised............................ 5,170 -- -- Common stock purchases...................................... (27,556) (55,604) (20,228) Preferred stock purchases................................... (15,002) (9,839) -- Preferred stock dividends................................... (22,313) (20,657) (20,608) Redemption of equity issues................................. (542) (897) 300 Dividends on minority interest in consolidated subsidiaries.............................................. -- -- (814) -------- --------- --------- Net cash provided by (used in) financing activities......... (73,323) 58,622 240,448 -------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (7,986) (34,018) 15,002 Cash and cash equivalents at beginning of year.............. 43,006 35,020 1,002 -------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 35,020 $ 1,002 $ 16,004 ======== ========= =========
- --------------- See Notes to Consolidated Financial Statements WHX Corporation 26 28 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DOLLARS AND SHARES IN THOUSANDS)
ACCUMULATED OTHER ACCUMULATED CAPITAL IN COMMON PREFERRED TREASURY COMPREHENSIVE COMPREHENSIVE EARNINGS EXCESS OF STOCK STOCK STOCK INCOME INCOME (DEFICIT) PAR VALUE ------ --------- -------- ------------- ------------- ----------- ---------- Balance January 1, 1996................ $256 $650 $(22,594) $ 735 $ 78,492 $710,471 Net Income............................. -- -- -- 658 658 -- Other comprehensive income, net of tax Reclassification adjustment for gains included in net income............. (735) Foreign currency translation adjustments........................ -- -------- Other comprehensive income............. (735) (735) -------- Comprehensive income................... (77) ======== EIP shares sold (5 shares)............. -- -- -- -- 75 Stock options exercised (124 shares)... 1 -- -- -- 947 Warrants exercised (1,477 shares)...... 15 -- -- -- 9,377 401k contribution (94 shares).......... 1 -- -- -- 960 Purchase of treasury stock (2,940 shares).............................. (19) -- (27,537) -- -- Retirement of treasury stock (4,808 shares).............................. (9) -- 48,749 -- (48,741) Retirement of preferred stock (363 shares).............................. -- (36) -- -- (14,966) Preferred dividends.................... -- -- -- (22,313) -- ---- ---- -------- -------- --------- -------- Balance December 31, 1996.............. 245 614 (1,382) -- 56,837 658,123 Net loss............................... -- -- -- (199,762) (199,762) -- Other comprehensive income, net of tax Unrealized gains arising during period............................. 15,754 Foreign currency translation adjustments........................ -- -------- Other comprehensive income........... 15,754 15,754 -------- Comprehensive income................... (184,008) ======== EIP shares sold (4 shares)............. -- -- -- -- 67 Stock options exercised (1,735 shares).............................. 2 -- -- -- 1,388 WPN stock option....................... -- -- -- -- 6,678 401k contribution (107 shares)......... 1 -- -- -- 927 Purchase of treasury stock (5,537 shares).............................. -- -- (55,602) -- -- Retirement of treasury stock (5,489 shares............................... (55) -- 54,766 -- (54,712) Retirement of preferred stock (254 shares).............................. -- (25) -- -- (9,814) Preferred dividends.................... -- -- -- (20,657) -- ---- ---- -------- -------- --------- -------- Balance December 31, 1997.............. 193 589 (2,218) 15,754 (163,582) 602,657 Net income............................. -- -- -- 41,671 41,671 -- Other comprehensive income, net of tax Unrealized gains arising during period............................. 6,200 Reclassification adjustment for gains included in net income............. (16,565) Foreign currency translation adjustments........................ 83 -------- Other comprehensive income........... (10,282) (10,282) -------- Comprehensive income................... 31,389 ======== EIP shares sold (9 shares)............. -- -- -- -- 137 Stock options exercised (161 shares)... 1 -- -- -- 1,339 401k contribution (89 shares).......... 1 -- -- -- 1,088 Purchase of treasury stock (1,780 shares).............................. -- -- (20,228) -- (22,426) Retirement of treasury stock (1,985 shares).............................. (20) -- 22,446 -- -- Preferred dividends.................... -- -- -- (20,608) -- ---- ---- -------- -------- --------- -------- Balance December 31, 1998.............. $175 $589 $ 0 $ 5,472 $(142,519) $582,795 ==== ==== ======== ======== ========= ========
- --------------- See Notes to Consolidated Financial Statements WHX Corporation 27 29 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. BUSINESS SEGMENTS The Company is a holding company that has been structured to acquire and operate a diverse group of businesses on a decentralized basis, with a corporate staff providing strategic direction and support. The Company's primary business currently is Wheeling-Pittsburgh Corporation (WPC), a vertically integrated manufacturer of value-added flat rolled steel products. The Company's other principal businesses include Handy & Harman (H&H), a diversified industrial manufacturing company whose business units encompass (a) manufacturing and selling of metal wire, cable and tubing products primarily stainless steel and specialty alloys; (b) manufacturing and selling of precious metals products and precision electroplated material and molded parts; and (c) manufacturing and selling of other specialty products supplied to roofing, construction, do-it-yourself, natural gas, electric and water industries; and Unimast, Incorporated (Unimast), a leading manufacturer of steel framing and other products for commercial and residential construction. See Segment disclosures in Note R. 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. FAIR VALUE OF FINANCIAL INSTRUMENTS The recorded amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments. Short term investments are recorded at fair market value based on trading in the public market. Redeemable common stock is recorded at the redemption amount which is considered to approximate fair value. See Note I for a description of fair value of debt instruments. 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. H&H's non-precious metals inventories are stated at the lower of cost (principally average) or market. For precious metals inventories no segregation among raw materials, work in process and finished goods is practicable. In 1998 and 1997, approximately 75% and 93%, respectively, of inventories are valued using the LIFO method. 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. The modified units of production method adjusts the straight line method based on an activity factor for operating assets. Adjusted annual depreciation is not less than 60% nor more than 110% of straight line depreciation. Accumulated depreciation after adjustment is not less than 75% nor more than 110% of straight line depreciation. Interest cost is capitalized for qualifying assets during the assets' acquisition period. Capitalized interest cost is amortized over the life of the asset. Depreciation on H&H and Unimast property, plant and equipment is provided principally on the straight-line method over the estimated useful lives of the assets. 28 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. INTANGIBLES AND AMORTIZATION The excess of purchase price over net assets acquired in business combinations is being amortized on the straight-line method over 40 years. Purchased patents are stated at cost, which is amortized over the respective remaining lives of the patents. The Company uses estimated future undiscounted cash flows when evaluating the recoverability of the unamortized balance of the excess of purchase price over net assets acquired in a business combination. The assessment of the recoverability of goodwill will be impacted if estimated future operating cash flows are not achieved. PENSIONS AND OTHER POSTRETIREMENT PLANS The Company has tax qualified defined benefit pension plans covering United Steelworkers of America ("USWA") represented hourly employees and substantially all salaried employees and certain hourly employees and tax qualified defined contribution pension plans covering certain other hourly employees. The defined benefit plan covering USWA-represented employees provides for a defined monthly benefit based on years of service. The defined benefit plan covering salaried employees is based on contributions based on a percentage of compensation with a minimum based on years of service. The defined contribution plans provide for contributions based on a rate per hour worked for hourly employees. Costs for the defined contribution plans are being funded currently. Unfunded accumulated benefit obligations under the defined benefit plan are subject to annual minimum cash funding requirements under the Employees Retirement Income Security Act ("ERISA"). The Company sponsors medical and life insurance programs for substantially all employees. Similar group medical programs extend to a group of pensioners and dependents. The management plan provides basic medical and major medical benefits on a non-contributory basis through age 65. STOCK-BASED COMPENSATION Pursuant to the provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation", the Company accounts for employee stock-based compensation under Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees." ENVIRONMENTAL MATTERS The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. EARNINGS PER SHARE In 1997, the Company adopted Statement of Financial Accounting Standards No. 128 ("SFAS 128") "Earnings per Share." Pursuant to SFAS 128, basic earnings per share is based on the weighted average number of shares of Common Stock outstanding during each year, excluding redeemable common shares. Diluted earnings per share gives effect to dilutive potential common shares outstanding during the period. FOREIGN CURRENCY TRANSLATION Assets and liabilities of foreign subsidiaries have been translated at current exchange rates, and related revenues and expenses have been translated at average rates of exchange in effect during the year. Resulting cumulative translation adjustments have been recorded as a separate component of accumulated other comprehensive income. NOTE A -- COLLECTIVE BARGAINING AGREEMENT WPC's prior labor agreement with the USWA expired on October 1, 1996. On August 1, 1997 WPC and the USWA announced that they had reached a tentative agreement on the terms of a new collective bargaining 29 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) agreement. The tentative agreement was ratified on August 12, 1997 by USWA-represented employees, ending a ten month strike. The new collective bargaining agreement provided 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 provided for the reduction of 850 jobs, mandatory multicrafting as well as modification of certain work practices. NOTE B -- HANDY & HARMAN ACQUISITION On April 13, 1998, the Company completed the acquisition of Handy & Harman ("H&H") and merged it with a wholly-owned subsidiary of the Company (the "Merger"). The transaction had a total value of approximately $651.4 million, including the assumption of approximately $229.6 million in debt. The acquisition was accounted for as a purchase business combination in accordance with APB No. 16. Accordingly, the assets and liabilities of H&H have been adjusted to reflect their relative fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired totaled $292 million and is being amortized over a period of 40 years. The Company financed the transaction through cash on hand and a private placement of debt securities of the Company. See Note S. The following unaudited pro forma disclosure is presented as if the H&H acquisition had occurred on January 1 of the respective periods.
YEAR ENDED DECEMBER 31, ------------------------ 1997 1998 ---------- ---------- (IN MILLIONS, EXCEPT PER SHARE) Revenue..................................................... $1,093.2 $1,765.8 Net income (loss) before extraordinary items................ (194.6) 36.5 Net income (loss)........................................... (220.6) 38.8 Basic income (loss) per share............................... (10.95) 1.00 Diluted income (loss) per share............................. (10.95) .95
The results of H&H included in the pro forma have been adjusted to exclude merger related transaction costs. NOTE C -- SPECIAL CHARGE -- NEW LABOR AGREEMENT The Company recorded a special charge of $92.7 million in 1997. The special charge is primarily related to certain benefits included in its new collective bargaining agreement. The special charges included enhanced retirement benefits paid under the defined benefit pension program which totaled $66.7 million and 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" ("SFAS No. 88"), and various other charges which totaled $26.0 million. These charges included $15.5 million for signing and retention bonuses, $3.8 million for special assistance payments to laid-off employees and other employee benefits and $6.7 million for the fair value of a stock option grant to WPN Corp. for its performance in negotiating a new labor agreement. NOTE D -- PENSIONS, OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS Pension Programs On August 12, 1997 WPC established a defined benefit pension plan for most USWA represented employees pursuant to a new labor agreement. The plan includes individual participant accounts of those USWA represented employees from the prior hourly defined contribution plan and merges those accounts into the defined benefit plan. The Company also established a supplemental defined benefit pension plan for substantially all salaried employees and provides defined contribution pension plans for salaried and certain other hourly employees. These tax qualified defined contribution plans provide, in the case of the salaried employees an increasing company contribution based on age and in certain cases an increasing contribution based on age and service. For the hourly employees, company contributions are made for each hour worked based on the age of its employees. As of December 31, 1998, $120.3 million of fully vested funds are held in trust for benefits earned under the hourly defined contribution pension plans. Approximately 80% of the trust assets are invested in equities and 18% in fixed income investments and 2% in cash and equivalents. As of December 31, 1998, $38.3 million of fully vested funds are held in trust for benefits earned under the salaried employees defined contribution plan. Approximately 80% of the assets are invested in equities 18% are in 30 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) fixed income investments, and 2% in cash and equivalents. All plan assets are invested by professional investment managers. All pension provisions charged against income totaled $9.3 million, $12.6 million and $14.2 million in 1996, 1997 and 1998, respectively. In 1997, the Company also recorded a $66.7 million charge for enhanced retirement benefits paid under the defined benefit pension plan, pursuant to a new labor agreement. The Defined Benefit Plans The plan covering most USWA represented employees was established pursuant to a collective bargaining agreement ratified on August 12, 1997. Prior to that date, benefits were provided through a defined contribution plan, the Wheeling-Pittsburgh Steel Corporation Retirement Security Plan ("Retirement Security Plan"). The plan also includes individual participant accounts from the Retirement Security Plan. The assets of the Retirement Security Plan were merged into the defined benefit pension plan as of December 1, 1997. Since the plan includes the account balances from the Retirement Security Plan, the plan includes both defined benefit and defined contribution features. The gross benefit, before offsets, is calculated based on years of service and the current benefit multiplier under the plan. This gross amount is then offset for benefits payable from the Retirement Security Plan and benefits payable by the Pension Benefit Guaranty Corporation from previously terminated plans. Individual employee accounts established under the Retirement Security Plan are maintained until retirement. Upon retirement, the account balances are converted into monthly benefits that serve as an offset to the gross benefit, as described above. Aggregate account balances held in trust in individual employee accounts, which will be available upon retirement to offset the gross benefit, totaled $119.4 million at December 31, 1998. As part of WPC's new five-year labor agreement, the Company offered a limited program of Retirement Enhancements. The Retirement Enhancement program provided for unreduced retirement benefits to the first 850 employees who retired after October 1, 1996. In addition, each retiring participant could elect a lump sum payment of $25,000 or a $400 monthly supplement payable until age 62. More than 850 employees applied for retirement under this program by December 31, 1997. The Retirement Enhancement program represented a Curtailment and Special Termination Benefits under SFAS No. 88. The Company recorded a charge of $66.7 million in 1997 to cover the retirement enhancement program. In May, 1998 WHX completed the merger of its pension plan with the pension plan of its wholly owned H&H subsidiary. Under the terms of the merged WHX Pension Plan, there are a series of benefit structures, which essentially continue the various pension plans for employees of the WPC and H&H plans as they existed before the merger. At the time of the merger of the pension plans, the assets in the Handy & Harman pension plans exceeded the plans' liabilities by approximately $155 million. At that time, the liabilities of the WHX pension plan exceeded their assets by approximately $150 million. The pension plan merger thus eliminated both the underfunding in the WHX pension plan and the Company's balance sheet liability at the merger date, and materially reduced the Company's net periodic pension expense in future periods. Furthermore, based on the Company's current actuarial assumptions, the merged pension plan is substantially funded and will therefore eliminate approximately $135 million of cash funding obligations of the Company over the next four years. The Company's funding policy is to contribute annually an amount that satisfies the minimum funding standards of ERISA. In 1998 the Company established a supplemental defined benefit plan covering WPC salaried employees employed as of January 31, 1998 which provides a guaranteed minimum benefit based on years of service and compensation. The gross benefit from this plan is offset by the annuitized value of the defined contribution plan account balance and any benefits payable from the Pension Benefit Guaranty Corporation from the previously terminated defined benefit pension plan. 31 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The amounts (prepaid) accrued at December 31, included the following components.
POSTRETIREMENT BENEFITS PENSION BENEFITS OTHER THAN PENSIONS --------------------- ------------------------ 1997 1998 1997 1998 --------- -------- ---------- ---------- (DOLLARS IN THOUSANDS) Change in benefit obligation: Benefit Obligation at beginning of year........ $ -- $172,431 $ 361,341 $ 308,812 Service cost................................... 2,278 6,163 3,337 2,264 Interest cost.................................. 4,172 16,495 21,573 19,539 Actuarial (gain)............................... -- 6,771 (24,792) (3,359) Benefits paid.................................. (12,505) (30,232) (19,100) (28,074) Plan Amendments -Implementation................ 101,295 813 (45,277) -- Business Combinations.......................... -- 122,442 -- 7,657 Curtailments/Settlements/Termination Benefits.................................... 59,506 -- 11,730 -- Transfers from DC Plans........................ 17,685 14,270 -- -- --------- -------- --------- --------- Benefit Obligation at December 31.............. $ 172,431 $309,153 $ 308,812 $ 306,839 --------- -------- --------- --------- Change in plan assets: Fair value of plan assets at beginning of year........................................ $ -- $ 5,180 $ 13,010 $ 7,795 Actual return on plan assets................... -- 33,390 104 137 Benefits paid.................................. (12,505) (30,232) (5,319) (7,508) Business combinations.......................... -- 275,132 -- -- Transfers from DC Plans........................ 17,685 14,270 -- -- --------- -------- --------- --------- Fair value of plan assets at December 31....... $ 5,180 $297,740 $ 7,795 $ 424 --------- -------- --------- --------- Plan assets in excess of (less than) benefit obligation.................................. $(167,252) $(11,413) $(301,017) $(306,415) Unrecognized prior service cost................ 76,714 71,017 (40,486) (36,568) Unrecognized net actuarial (gain)loss.......... -- (15,107) (71,942) (70,094) --------- -------- --------- --------- Net amount recognized at December 31........... $( 90,538) $ 44,497 $(413,445) $(413,077) ========= ======== ========= ========= Amounts recognized in the statement of financial position consists of: Accrued benefit liability...................... $(167,252) $ (5,952) $(413,445) $(413,077) Intangible asset............................... 76,714 50,449 -- -- --------- -------- --------- --------- Net amount recognized at December 31........... $ (90,538) $ 44,497 $(413,445) $(413,077) ========= ======== ========= =========
Net Periodic (credit) costs for pension and postretirement benefits other than pensions (principally health care and life insurance) for employees and covered dependents.
POSTRETIREMENT BENEFITS PENSION BENEFITS OTHER THAN PENSIONS ------------------ --------------------------- 1997 1998 1996 1997 1998 ------- -------- ------- ------- ------- (DOLLARS IN THOUSANDS) Components of net periodic (credit) cost: Service cost........................... $ 2,278 $ 6,163 $ 3,953 $ 2,488 $ 2,264 Interest cost.......................... 4,172 16,494 23,982 20,950 19,539 Expected return on plan assets......... -- (18,619) -- -- (156) Curtailment (gain)/loss................ 66,676 -- -- -- -- Amortization of prior service cost..... 2,877 6,509 -- -- (3,918) Recognized actuarial (gain)/loss....... -- (1,401) (3,888) (7,490) (5,696) ------- -------- ------- ------- ------- Total.................................. $76,003 $ 9,146 $24,047 $15,948 $12,033 ======= ======== ======= ======= =======
32 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The discount rate and rates of compensation increases used in determining the benefit obligations at December 31, 1998, 1997, and 1996, and the expected long-term rate of return on assets in each of the years 1998, 1997, and 1996 were as follows:
PENSION POSTRETIREMENT BENEFITS BENEFITS OTHER THAN PENSIONS ------------ ----------------------- 1997 1998 1996 1997 1998 ---- ---- ----- ----- ----- Discount rate......................................... 7.0% 6.5% 7.0% 7.0% 6.5% Expected return on assets............................. 10.0% 10.0% 8.0% 8.0% 8.0% Rate of compensation increase......................... N/A 4.0% -- -- -- Medical care cost trend rate.......................... -- -- 9.5% 9.0% 8.5%
The following table presents the plans with the accumulated benefit obligation in excess of plan assets.
PENSION POSTRETIREMENT BENEFITS BENEFITS OTHER THAN PENSIONS -------------------- ------------------------ 1997 1998 1997 1998 -------- -------- ---------- ---------- (DOLLARS IN THOUSANDS) Projected benefit obligation................ $172,431 $309,153 $308,812 $306,839 Accumulated benefit obligation.............. 172,431 303,692 172,431 303,692 Fair value of assets........................ 5,180 297,740 7,795 424
401-k PLANS The Company matches salaried employee contributions to the WPC and H&H 401(k) plans with shares of the Company's Common Stock. WPC matches 50% of the employees contributions with a limit of 3% of the employee's salary. H&H matches 50% of the first 3% of the employee's contribution. At December 31, 1996, 1997 and 1998, the 401(k) plans held 190,111 shares, 275,537 shares and 301,252 shares of the Company's Common Stock, respectively. POSTEMPLOYMENT BENEFITS The Company provides benefits to former or inactive employees after employment but before retirement. Those benefits include, among others, disability, severance and workers' compensation. The assumed discount rate used to measure the benefit liability was 7.0% at December 31, 1997 and, 6.5% at December 31, 1998. OTHER POSTRETIREMENT BENEFITS The Company sponsors postretirement benefit plans that cover certain 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 its collective bargaining agreement. The new collective bargaining agreement provides for the use of those funds to pay current benefit obligations and suspends additional funding until 2002. 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 APBO of $24.3 million, and net periodic benefit cost of $4.3 million. A 1% decrease in the health care cost trend rate would result in approximate decreases of $21.6 million in APBO and net periodic benefit cost of $3.3 million. 33 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 relates to its previous ownership of coal mining operations. At December 31, 1997 the actuarially determined accrued liability discounted at 7% covering 532 assigned retirees and dependents and 133 orphans, totaled $10.8 million. The Company recorded an extraordinary charge of $1.7 million (net of tax) in 1997 related to assignment of additional orphans. At December 31, 1998, the actuarially determined liability discounted at 6.5% covering 494 assigned retirees and dependents and 188 orphans, totaled $11.0 million. NOTE E -- INCOME TAXES
YEAR ENDED DECEMBER 31, ------------------------------- 1996 1997 1998 ------- --------- ------- (DOLLARS IN THOUSANDS) INCOME TAXES BEFORE EXTRAORDINARY ITEMS Current Federal tax provision..................................... $ 2,065 $ -- $ 1,854 State tax provision....................................... 400 460 1,573 Foreign tax provision..................................... -- -- 22 ------- --------- ------- Total income taxes current........................ 2,465 460 3,449 ------- --------- ------- Deferred Federal tax provision (benefit)........................... (6,572) (94,029) 19,575 State tax provision....................................... -- -- 362 ------- --------- ------- Income tax provision (benefit).............................. $(4,107) $ (93,569) $23,386 ======= ========= ======= TOTAL INCOME TAXES Current Federal tax provision..................................... $ 2,065 $ -- $ 1,854 State tax provision....................................... 400 460 1,573 Foreign tax provision..................................... -- -- 22 ------- --------- ------- Total income taxes current........................ 2,465 460 3,449 ------- --------- ------- Deferred Federal tax provision (benefit)........................... (6,572) (108,024) 20,781 State tax provision....................................... -- -- 362 ------- --------- ------- Income tax provision (benefit).............................. $(4,107) $(107,564) $24,592 ======= ========= ======= COMPONENTS OF TOTAL INCOME TAXES Operations.................................................. $(4,107) $ (93,569) $23,386 Extraordinary items......................................... -- (13,995) 1,206 ------- --------- ------- Income tax provision (benefit).............................. $(4,107) $(107,564) $24,592 ======= ========= =======
34 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes result from temporary differences in the financial basis and tax basis of assets and liabilities. The type of differences that give rise to deferred income tax liabilities or assets are shown in the following table: DEFERRED INCOME TAX SOURCES
1997 1998 --------- --------- (DOLLARS IN MILLIONS) ASSETS Postretirement and postemployment employee benefits......... $ 147.7 $ 146.5 Operating loss carryforward (expiring in 2005 to 2012)...... 76.7 67.6 Minimum tax credit carryforwards (indefinite carryforward)............................................. 49.5 52.1 Provision for expenses and losses........................... 87.0 49.0 Leasing activities.......................................... 23.8 22.2 State income taxes.......................................... 1.4 2.5 Miscellaneous other......................................... 7.5 5.8 ------- ------- DEFERRED TAX ASSETS............................... $ 393.6 $ 345.7 ------- ------- LIABILITIES Property plant and equipment................................ $(166.1) $(173.1) Inventory................................................... (34.9) (66.3) Pension benefits............................................ -- (25.6) State income taxes.......................................... (1.0) (8.5) Miscellaneous other......................................... (6.8) (2.7) ------- ------- DEFERRED TAX LIABILITY............................ $(208.8) $(276.2) ------- ------- Valuation allowance......................................... (20.0) (28.1) ------- ------- DEFERRED INCOME TAX ASSET -- NET............................ $ 164.8 $ 41.4 ======= =======
As of December 31, 1998, for financial statement reporting purposes a balance of approximately $20.0 million of prereorganization tax benefits exist. These benefits will be reported as a direct addition to equity as they are recognized. No prereorganization tax benefits were recognized in 1996, 1997 or 1998. During 1998, the valuation allowance increased $8.1 million primarily due to a change in judgement about the realizability of certain tax credit carryforwards in future years as well as the addition of H&H's valuation allowance of $3.2 million against the realizability of foreign operating loss carryforwards. Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries and other foreign investments carried at equity. These earnings have been substantially reinvested and the Company does not plan to initiate any action that would precipitate the payment of income taxes thereon. During 1994, the Company experienced an ownership change as defined by Section 382 of the Internal Revenue Code. As the result of this event, pre-change of control net operating losses that can be used to offset post- change of control pretax income will be limited to approximately $32 million per year. Post-change of control net operating losses do not have an annual offset limitation. Total federal and state income taxes paid in 1996, 1997 and 1998 were $3.5 million and $0.7 million and $1.2 million, respectively. Federal tax returns have been examined by the Internal Revenue Service ("IRS") through 1987. The statute of limitations has expired for years through 1993, 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. 35 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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:
1996 1997 1998 ------- --------- ------- (DOLLARS IN THOUSANDS) Income (loss) before taxes and extraordinary item........ $(3,449) $(267,341) $62,816 ------- --------- ------- Tax provision (benefit) at statutory rate................ $(1,207) $ (93,569) $21,986 Increase (reduction) in tax due to: Percentage depletion................................... (1,027) (1,092) (829) Equity earnings........................................ (2,408) 338 (1,484) Goodwill amortization.................................. -- -- 1,983 State income tax net of federal effect................. 260 299 1,258 Recognition of pre-acquisition benefits................ -- -- (4,519) Change in valuation allowance.......................... -- -- 4,904 Other miscellaneous.................................... 275 455 87 ------- --------- ------- Tax provision (benefit).................................. $(4,107) $ (93,569) $23,386 ======= ========= =======
NOTE F -- SHORT TERM INVESTMENTS The composition of the Company's short term investments are as follows:
DECEMBER 31, ----------------------- 1997 1998 ---------- ---------- (DOLLARS IN THOUSANDS) Trading Securities: U.S. Treasury Securities.................................. $513,906 $640,125 U.S. Government Agency Mortgage Backed Obligations........ -- 3,880 Equities.................................................. -- 30,308 Other..................................................... 3,890 4,537 Available-for-sale securities:.............................. 63,754 23,232 -------- -------- Equities.................................................. $581,550 $702,082 ======== ========
These investments are subject to price volatility associated with any interest bearing instrument. Fluctuations in general interest rates affect the value of these investments. The Company recognizes gains and losses based on specific identification of the securities which comprise the investment balance with the exception of Equity Securities, for which average cost is used. At December 31, 1997 and 1998 unrealized holding gains on available-for-sale securities of $24.3 million, and $8.3 million, respectively, were reported, net of the related tax effect, as a separate component of accumulated other comprehensive income. Net unrealized holding gains and losses on trading securities included in net income for 1997 and 1998 were a gain of $17.4 million and a loss of $11.3 million, respectively. At December 31, 1997 and 1998 the Company had short term margin borrowings of $275.5 million and $487.5 million, respectively, related to the short term investments. During 1998, the Company sold available-for-sale securities for $21.7 million, recording a realized gain of $8.8 million. In 1998, the Company reclassified $30.3 million of available-for-sale investments to the trading category and recorded an unrealized gain upon transfer of $16.9 million. As a result of the sale and reclassification, the Company recorded an unfavorable reclassification adjustment within other comprehensive income of $16.6 million, net of related income tax benefit of $9.1 million. During 1996 the Company sold available-for-sale securities for $8.4 million, recording a realized gain of $2.6 million. As a result of the sale, the Company recorded an unfavorable reclassification adjustment within other comprehensive income of $.7 million, net of related income tax benefit of $.4 million. During 1997 and 1998, the Company recorded net unrealized gains on available-for-sale securities within other comprehensive income of $15.8 million and $6.2 million, respectively, net of tax expense of $8.5 million and $3.3 million, respectively. 36 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE G -- INVENTORIES
DECEMBER 31, ---------------------- 1997 1998 --------- --------- (DOLLARS IN THOUSANDS) Finished products........................................... $ 63,133 $ 80,021 In-process.................................................. 106,270 130,204 Raw materials............................................... 105,648 98,710 Precious metals............................................. -- 122,653 Other materials and supplies................................ 19,875 33,373 -------- -------- 294,926 464,961 LIFO reserve................................................ (10,169) 2,169 -------- -------- $284,757 $467,130 ======== ========
During 1997 and 1998, certain inventory quantities were reduced, resulting in liquidations of LIFO inventories, the effect of which increased income by approximately $0.6 million and $1.8 million in 1997 and 1998, respectively. NOTE H -- PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ------------------------ 1997 1998 ---------- ---------- (DOLLARS IN THOUSANDS) Land and mineral properties................................. $ 26,424 $ 42,583 Buildings, machinery and equipment.......................... 1,069,215 1,221,534 Construction in progress.................................... 22,603 24,273 ---------- ---------- 1,118,242 1,288,390 Accumulated depreciation and amortization................... 379,582 469,313 ---------- ---------- $ 738,660 $ 819,077 ========== ==========
WPC 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 1997 and 1998 depreciation under the modified units of production method was $21.6 million or 40% less and $1.1 million or 2.0% more respectively, than straight line depreciation. The 1997 reduction in depreciation primarily reflects the ten month strike which began October 1, 1996 and continued until August 12, 1997. Depreciation on H&H and Unimast property, plant and equipment is provided principally on the straight-line method over the estimated useful lives of the assets. 37 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE I -- LONG-TERM DEBT
DECEMBER 31, ---------------------- 1997 1998 --------- --------- (DOLLARS IN THOUSANDS) Senior Unsecured Notes due 2007, 9 1/4%..................... $273,966 $274,071 Term Loan Agreement due 2006, floating rate................. 75,000 75,000 Senior Unsecured Notes due 2005, 10 1/2%.................... -- 302,000 Handy & Harman Senior Secured Credit Facility............... -- 228,654 Other....................................................... 1,953 14,243 -------- -------- 350,919 893,968 Less portion due within one year............................ 466 612 -------- -------- Total Long-Term Debt(1)................................... $350,453 $893,356 ======== ========
- --------------- (1) The fair value of long-term debt at December 31, 1997 and December 31, 1998 was $350.9 million and $851.5 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: 1999, $612; 2000, $10,862; 2001, $10,412; 2002, $17,646; and 2003, $11,250. A summary of the financial agreements at December 31, 1998 follows: REVOLVING CREDIT FACILITY On December 28, 1995, Wheeling-Pittsburgh Steel Corporation (WPSC), a wholly-owned subsidiary of WPC, 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 May 3, 1999 and is currently being renegotiated. 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. A commitment fee of .5% is charged on the unused portion. The letter of credit fee is 2.25% and is also performance based. Borrowings are secured primarily by 100% of the eligible inventory of WPSC, Pittsburgh-Canfield Corporation (PCC), and Wheeling Construction Products, Inc. (WCPI), wholly-owned subsidiaries of WPC, 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. WPC, PCC and WCPI have each guaranteed all of the obligations of WPSC under the RCF. Borrowings outstanding against the RCF at December 31, 1998 and December 31, 1997 totaled $67.0 million and $89.8 million, respectively. Letters of credit outstanding under the RCF were $8.6 million at December 31, 1998. In August 1994 WPSC entered into a separate facility for letters of credit up to $50 million. At December 31, 1998 letters of credit totaling $7.7 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. 9 3/8% SENIOR NOTES DUE 2003 On November 23, 1993 WPC issued $325 million of 9 3/8% Senior Notes. Interest on the 9 3/8% Senior Notes is payable semi-annually on May 15 and November 15 of each year, commencing May 15, 1994. The 9 3/8% Senior Notes mature on November 15, 2003. On November 26, 1997, WPC, under the terms of the 9 3/8% Indenture, defeased the remaining $266.2 million 9 3/8% Senior Notes outstanding at a total cost of $298.8 million. The 9 3/8% Senior Notes were placed into trusteeship where they will be held until redemption on November 15, 2000. 38 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9 1/4% SENIOR NOTES DUE 2007 On November 26, 1997 WPC issued $275 million principal amount of 9 1/4% Senior Notes. Interest on the 9 1/4% Senior Notes is payable semi-annually on May 15 and November 15 of each year, commencing May 15, 1998. The 9 1/4% Senior Notes mature on November 15, 2007. The 9 1/4% Senior Notes were exchanged for identical notes which were issued pursuant to an exchange offer registered under the Securities Act of 1933, as amended. The 9 1/4% Senior Notes are redeemable at the option of WPC, in whole or in part, on or after November 15, 2002 at specified redemption prices, plus accrued interest and liquidated damages, if any, thereon to the date of redemption. Upon the occurrence of a Change of Control (as defined), WPC will be required to make an offer to repurchase all or any part of each holder's 9 1/4% Senior Notes at 101% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, thereon to the date of repurchase. The 9 1/4% Senior Notes are unsecured obligations of WPC, ranking senior in right of payment to all existing and future subordinated indebtedness of WPC, and pari passu with all existing and future senior unsecured indebtedness of WPC, including borrowings under the Term Loan Agreement. The 9 1/4% Senior Notes are fully and unconditionally guaranteed on a joint and several and senior basis by the guarantors, which consist of WPC's present and future operating subsidiaries. The 9 1/4% Senior Notes 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 sales of assets; (vi) limitations on issuance and sale of capital stock of subsidiaries; (vii) limitations on dividends and other payment restrictions affecting subsidiaries; and (vii) restrictions on consolidations, mergers and sales of assets. TERM LOAN AGREEMENT On November 26, 1997 WPC entered into the Term Loan Agreement with DLJ Capital Funding Inc., as syndication agent, pursuant to which it borrowed $75 million. Amounts outstanding under the Term Loan Agreement bear interest at the Base Rate (as defined therein) plus 2.25% or the LIBO Rate (as defined therein) plus 3.25%. Interest on the Term Loan Agreement is payable on March 15, June 15, September 15 and December 15 as to Base Rate Loans, and with respect to LIBOR loans on the last day of each applicable interest period, and if such interest period shall exceed three months, at intervals of three months after the first day of such interest period. WPC's obligations under the Term Loan Agreement are guaranteed by its present and future operating subsidiaries. WPC 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. 10 1/2% SENIOR NOTES DUE 2005 On April 7, 1998 WHX issued $350 million principal amount of 10 1/2% Senior Notes. Interest on the 10 1/2% Senior Notes is payable semi-annually on April 15 and October 15 of each year, commencing October 15, 1998. The 10 1/2% Senior Notes mature on April 15, 2005. The 10 1/2% Senior Notes were exchanged for identical notes which were issued pursuant to an exchange offer registered under the Securities Act of 1933, as amended. The 10 1/2% Senior Notes are redeemable at the option of WHX, in whole or in part, on or after April 15, 2002 at specified prices, plus accrued interest and liquidated damages, if any, thereon to the date of redemption. Upon the occurrence of a Change of Control (as defined), the Company will be required to make an offer to repurchase all or any part of each holder's 10 1/2% Senior Notes at 101% of the principal amount thereof, plus accrued interest and liquidated damages, if any, thereon to the date of repurchase. The 10 1/2% Senior Notes are unsecured obligations of WHX, ranking senior in right of payment to all existing and future subordinated indebtedness of WHX, and pari passu with all existing and future senior unsecured indebtedness of WHX. The 10 1/2% Senior Notes indenture contains certain covenants, including, but not limited to, covenants with respect to: (i) limitations on indebtedness and preferred stock; (ii) limitations on restricted payments; 39 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iii) limitations on transactions with affiliates; (iv) limitations on liens; (v) limitations on sales of assets; (vi) limitations on dividends and other payment restrictions affecting subsidiaries; and (vii) restrictions on consolidations, mergers and sales of assets. During the third quarter of 1998, the Company purchased $48.0 million aggregate principal amount of 10 1/2% Senior Notes in the open market for $43.2 million. HANDY & HARMAN SENIOR SECURED CREDIT FACILITY On July 30, 1998 H&H entered into a $300 million Senior Secured Credit facility (the "Facilities") with Citibank USA Inc. as agent. The Facilities are comprised of (i) a $100 million 6-year Revolving Credit Facility, (ii) a $25 million 6-year Delayed Draw Term Loan Facility, (iii) a $50 million 6-year Term Loan A Facility, and (iv) a $125 million 8-year Term Loan B Facility. Interest under the Facilities is calculated at a rate determined either using (i) the Citibank prime rate or (ii) LIBOR, plus the Applicable Margin in effect from time to time. Applicable Margin means a percentage per annum determined by reference to the total leverage ratio of H&H. The rates in effect until December 31, 1998 are (a) in the case of the Term A Facility, the Delayed Draw Facility and the Revolving Credit Facility, calculated at LIBOR + 1.75% and (b) in the case of the Term B facility, calculated at LIBOR + 2.50%. Borrowings under the Facilities are secured by the pledge of 100% of the capital stock of all H&H's active U.S. subsidiaries and 65% of the stock of H&H's non-U.S. subsidiaries. In addition, H&H provided a perfected first priority lien on and security interest in substantially all the assets of H&H and its subsidiaries. The Facilities have certain financial covenants restricting indebtedness, liens and distributions. In addition, the Facilities required H&H to procure an interest rate hedge agreement covering a notional amount of not less than $125 million for a period of no less than three years. H&H has entered into a cancelable interest-rate swap to convert $125 million of its variable-rate debt to a fixed rate with Citibank, N.A. New York. The fixed rate is 4.53 percent, effective January 4, 1999, with a termination date of January 5, 2004; provided however Citibank may designate July 5, 2000 as the termination date. The Facilities replaced H&H's $125 million Senior Notes due 2004 and its unsecured Revolving Credit Facility. Letters of credit outstanding under the facilities totaled $16.2 million at December 31, 1998. UNIMAST REVOLVING CREDIT AGREEMENT On November 24, 1998, Unimast entered into a Revolving Credit Agreement (RCA) with The First National Bank of Chicago (First Chicago) as lender and agent and Citicorp USA Inc. as lender and collateral agent. The RCA is for general corporate purposes, including working capital needs and capital expenditures up to $50 million with a $3 million sub-limit for letters of credit (LC). The RCA expires on November 24, 2003. Interest rates are based upon the Eurodollar rate plus 2.125% and/or First Chicago corporate base rate plus the federal funds rate plus 1.125%, but the margin over the Eurodollar rate and the corporate base rate and federal funds rate can fluctuate based upon performance. A commitment fee between 0.25% and 0.5% is charged on the unused portion of the RCF. The letter of credit fees are 1.0625% for a commercial LC and 2.125% for a standby LC. The commitment fees and the LC fees are all performance based. Borrowings are secured primarily by 100% of the eligible inventory, accounts receivable, and fixed assets of Unimast, and its subsidiaries. Following the expiration of the sale of receivables (See Note N), borrowings will be additionally secured by accounts receivable. The terms of the RCA contain various restrictive covenants limiting dividend payments, major acquisitions or other distribution of assets, as defined in the RCA. Certain financial covenants associated with leverage, net worth, capital spending and interest coverage must be maintained. Borrowings outstanding against the RCA at December 31, 1998 totaled $5 million. No letters of credit were outstanding under the RCA. 40 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INTEREST COST Aggregate interest costs on debt and amounts capitalized during the three years ended December 31, 1998, are as follows:
1996 1997 1998 ------- ------- -------- (DOLLARS IN THOUSANDS) Aggregate interest expense on debt.......................... $28,463 $31,274 $ 80,159 Less: Capitalized interest.................................. 2,500 2,227 2,063 ------- ------- -------- Interest expense............................................ $25,963 $29,047 $ 78,096 ======= ======= ======== Interest paid............................................... $27,660 $29,589 $ 73,070 ======= ======= ========
NOTE J -- STOCKHOLDERS' EQUITY The authorized capital stock of WHX consists of 60,000,000 shares of Common Stock, $.01 par value, of which 17,843,368 shares (including redeemable Common Stock) were outstanding as of December 31, 1998 and 10,000,000 shares of Preferred Stock, $0.10 par value, of which 2,907,880 shares of Series A Convertible Preferred Stock and 2,975,100 shares of Series B Convertible Preferred Stock were outstanding as of December 31, 1998. In 1997 and 1998, the Company purchased 5,537,552 shares and 1,780,307 shares, respectively, of Common Stock in open market purchases. In the first two months of 1999 the Company purchased approximately 900,000 Common Shares in the open market. SERIES A CONVERTIBLE PREFERRED STOCK In July 1993 the Company issued 3,000,000 shares of Series A Convertible Preferred Stock for net proceeds of $145.0 million. Dividends on the shares of the Series A Convertible Preferred Stock are cumulative, are payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, in an amount equal to $3.25 per share per annum. Each share of the Series A Convertible Preferred Stock is convertible at the option of the holder thereof at any time into shares of Common Stock of the Company, par value $.01 per share, at a conversion price of $15.78 per share of Common Stock (equivalent to a conversion rate of approximately 3.1686 shares of Common Stock for each share of Series A Convertible Preferred Stock), subject to adjustment under certain conditions. The Series A Convertible Preferred Stock was not redeemable prior to July 1, 1996. On and after such date, the Series A Convertible Preferred Stock is redeemable at the option of the Company, in whole or in part, for cash, initially at $52.275 per share and thereafter at prices declining ratably to $50.00 per share on and after July 1, 2003, plus in each case accrued and unpaid dividends to the redemption date. The Series A Convertible Preferred Stock is not entitled to the benefit of any sinking fund. In 1996 and 1997 the Company purchased and retired 92,000 shares of Series A Convertible Preferred Stock on the open market. An additional 120 shares were converted into Common Stock. No additional shares were purchased during 1998. SERIES B CONVERTIBLE PREFERRED STOCK The Company issued 3,500,000 shares of Series B Convertible Preferred Stock in September 1994 for net proceeds of $169.8 million. Dividends on the shares of the Series B Convertible Preferred Stock are cumulative, are payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, in an amount equal to $3.75 per share per annum. Each share of the Series B Convertible Preferred Stock is convertible at the option of the holder thereof at any time into shares of Common Stock of the Company, par value $.01 per share, at a conversion price of $20.40 per share of Common Stock (equivalent to a conversion rate of approximately 2.4510 shares of Common Stock for each share of Series B Convertible Preferred Stock), subject to adjustment under certain conditions. The Series B Convertible Preferred Stock was not redeemable prior to October 1, 1997. On and after such date, the Series B Convertible Preferred Stock is redeemable at the option of the Company, in whole or in part, for cash, initially at $52.625 per share and thereafter at prices declining ratably to $50.00 per share on and after October 1, 2004, plus in each case accrued and unpaid dividends to the redemption date. The Series B Convertible Preferred Stock is not entitled to the benefit of any sinking fund. In 1996 and 1997 the Company purchased and retired 41 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 524,900 shares of Series B Convertible Preferred Stock in open market purchases. No additional shares were purchased during 1998. REDEEMABLE COMMON STOCK Certain present and former employees of the Company were issued preferred shares of the Company prior to the Chapter 11 proceeding of the Company's predecessor in exchange for wage and salary concessions. Such preferred shares were exchanged for 1,279,935 shares of Common Stock under the Chapter 11 Plan of Reorganization, these shares were issued to an Employee Stock Ownership Plan ("ESOP") on such employees' behalf. Beneficial owners of such shares who were active employees on August 15, 1990 and who have either retired, died or become disabled, or who reach 30 years of service, may sell their Common Stock to the Company at a price of $15 or, upon qualified retirement, $20 per share. These contingent obligations are expected to extend over many years, as participants in the ESOP satisfy the criteria for selling shares to the Company. In addition, each beneficiary can direct the ESOP to sell any or all of its Common Stock into the public markets at any time; provided, however, that the ESOP will not on any day sell in the public markets more than 20% of the number of shares of Common Stock traded during the previous day. As of December 31, 1998, 297,926 shares of redeemable Common Stock remained outstanding. STOCK OPTION PLAN The WHX Corporation Stock Option Plan (1991 Plan) is intended to assist the Company in securing and retaining key employees by allowing them to participate in the ownership and growth of the Company through the grant of incentive and non-qualified options (collectively, the Options) to full-time employees of the Company and its subsidiaries. Incentive stock options granted under the Option Plan are intended to be "Incentive Stock Options" as defined by Section 422 of the Code. An aggregate of 2,500,000 shares of Common Stock has been reserved for issuance upon exercise of Options under the 1991 Plan. The Options vest over three years from the date of grant. The 1991 Plan is administered by a committee (the Committee) consisting of not less than three nonemployee members appointed by the Board of Directors. The term of Options granted under the 1991 Plan may not exceed 10 years (five years in the case of an incentive Option granted to an optionee owning more than 10% of the voting stock of the Company (a 10% Holder)). The Option price for Options shall not be less than 100% of the "fair market value" of the shares of Common Stock at the time the Option is granted; provided, however, that with respect to an incentive option, in the case of a 10% Holder, the purchase price per share shall be at least 110% of such fair market value. The aggregate fair market value of the shares of Common Stock as to which an optionee may first exercise incentive stock options in any calendar year may not exceed $100,000. Payment for shares purchased upon exercise of Options is to be made in cash, but, at the discretion of the Committee, may be made by delivery of other shares of Common Stock of comparable value. The 1991 Plan will terminate on September 24, 2001 and may be terminated at any time by the Board of Directors prior to that date. DIRECTORS OPTION PLANS The 1993 Directors D&O Plan (the 1993 D&O Plan) is authorized to issue shares of Common Stock pursuant to the exercise of options with respect to a maximum of 400,000 shares of Common Stock. The options vest over three years from the date of grant. The 1997 Directors Stock Option Plan (1997 D&O Plan) is authorized to issue an additional 400,000 shares of Common Stock. OPTION GRANTS TO WPN CORP. On July 29, 1993 (the Approval Date), the Board of Directors approved the grant of options to WPN Corp. to purchase 1,000,000 shares of Common Stock (the Option Grants). The Option Grants were approved by the stockholders on March 31, 1994. On August 4, 1997 the compensation committee of the Board of Directors granted an option to purchase 1,000,000 shares of Common Stock to WPN Corp, at the then market price per share, subject to stockholder approval. The Board of Directors approved such grant on September 25, 1997, and the stockholders approved it on December 1, 1997 (measurement date). The options under each plan are exercisable with respect to one-third of the shares of Common Stock issuable upon the exercise thereunder at any time on or after the date of stockholder approval of the Option Grants. The 42 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) options with respect to an additional one-third of the shares of Common Stock may be exercised on the first and second anniversaries of the Approval Date, respectively. The options, to the extent not previously exercised, will expire on April 29, 2003 and August 4, 2007, respectively. The Company is required to record a charge for the fair value of the 1997 option grants under SFAS 123. The fair value of the option grant is estimated on the measurement date using the Black -- Scholes option-pricing model. The following assumptions were used in the Black -- Scholes calculation: expected volatility of 48.3%, risk-free interest rate of 5.83%, an expected life of 5 years and a dividend yield of zero. The resulting estimated fair value of the shares granted in 1997 was $6.7 million which was recorded as part of the special charge related to the new labor agreement. A Summary of the Option Plans:
NUMBER OF OPTIONS --------------------------------- 1991 D & O WPN OPTION PRICE WEIGHTED AVERAGE PLAN PLAN GRANTS OR RANGE OPTION PRICE --------- ------- --------- ------------- ---------------- Balance 12/31/95.................... 1,158,417 292,000 1,000,000 $10.949 Granted........................... 23,000 34,000 -- $9.875-13.50 11.226 Cancelled......................... (8,423) -- -- 8.75-14.625 14.317 Exercised......................... (123,664) -- -- 6.125-8.750 7.667 --------- ------- --------- Balance 12/31/96.................... 1,049,330 326,000 1,000,000 11.054 Granted........................... 982,500 166,000 1,000,000 6.875-13.8125 11.641 Cancelled......................... (222,802) (5,334) -- 8.75-14.625 13.648 Exercised......................... (172,639) -- -- 6.125-8.75 8.048 --------- ------- --------- Balance 12/31/97.................... 1,636,389 486,666 2,000,000 11.342 --------- ------- --------- Granted........................... 1,170,627 25,000 -- 10.00-16.625 15.516 Cancelled......................... (309,989) -- -- 8.75-14.625 13.865 Exercised......................... (160,890) -- -- 6.125-14.625 8.335 --------- ------- --------- Balance 12/31/98.................... 2,336,137 511,666 2,000,000 12.277 ========= ======= =========
Options outstanding at December 31, 1998 which are exercisable totaled 2,831,403 and have a weighted average option price of $11.120. Options outstanding at December 31, 1998, had a weighted-average remaining life of 7.3 years. In 1996 the Company adopted SFAS No. 123, and elected to continue to account for such compensation under the provisions of APB 25. Therefore, no compensation costs have been recognized for the stock option plans in 1997 or 1998. Had the Company elected to account for stock-based compensation under the provisions of SFAS No. 123 during 1996, 1997 and 1998, the effect on net income and earnings per share in 1996 and 1997 would not be material. Had the Company elected to account for stock-based compensation under the provision of SFAS No. 123 during 1998, the effect on net income would have been an additional expense of $2.1 million, net of related income tax benefit of $1.1 million or $.11 per share of Common Stock after deduction of Preferred Stock Dividends on a basic and diluted basis. The fair value of the option grants is estimated on the measurement date using the Black -- Scholes option-pricing model. The following weighted-average assumptions were used in the Black -- Scholes calculation: expected volatility of 46.5%, risk-free interest rate of 5.8%, an expected life of 5 years and a dividend yield of zero. EARNINGS PER SHARE In 1997 the Company adopted SFAS No. 128, Earnings per Share. The computation of basic earnings per common share is based upon the average shares of Common Stock outstanding. In 1996 and 1997, the conversion of preferred shares and redeemable common stock and exercise of options and warrants would have had an anti-dilutive effect. The computation of earnings per common share -- assuming dilution in 1998 assumes conversion of 43 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) redeemable common stock and exercise of outstanding stock options. Previously reported EPS has been restated. A reconciliation of the income and shares used in the computation follows: RECONCILIATION OF INCOME AND SHARES IN EPS CALCULATION
FOR THE YEAR ENDED DECEMBER 31, 1998 --------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- (DOLLARS AND SHARES IN THOUSANDS) Income before extraordinary item............................ $39,430 Less: Preferred stock dividends............................. 20,608 Basic EPS ------- Income available to common stockholders................... $18,822 18,198 $1.04 Effect of Dilutive Securities Options................................................... $ -- 566 Convertible preferred stock............................... -- -- Redeemable common stock................................... -- 298 Diluted EPS Income available to common stockholders plus assumed ------- ------ conversions............................................ $18,822 19,062 $ .99 ======= ====== =====
The assumed conversion of preferred stock would have an anti-dilutive effect on earnings per share.
FOR THE YEAR ENDED DECEMBER 31, 1997 --------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- (DOLLARS AND SHARES IN THOUSANDS) Loss before extraordinary item.............................. $(173,772) Less: Preferred stock dividends............................. 20,657 Basic EPS and Diluted EPS --------- Loss available to common stockholders..................... $(194,429) 22,028 $(8.83) ========= ====== ======
The assumed conversion of stock options, preferred stock and redeemable common stock would have an anti-dilutive effect on earnings per share.
FOR THE YEAR ENDED DECEMBER 31, 1996 --------------------------------------- INCOME SHARES PER-SHARE (NUMERATOR) (DENOMINATOR) AMOUNT ----------- ------------- --------- (DOLLARS AND SHARES IN THOUSANDS) Income before extraordinary item............................ $ 658 Less: Preferred stock dividends............................. 22,313 Basic EPS and Diluted EPS -------- Income (loss) available to common stockholders............ $(21,655) 26,176 $(0.83) ======== ====== ======
The assumed conversion of stock options, preferred stock and redeemable common stock would have an anti-dilutive effect on earnings per share. NOTE K -- COMMITMENTS AND 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 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 one of these 44 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) sites, reclamation will be between $2.5 and $3.0 million. At several other sites the Company estimates costs to aggregate less than $1.0 million. The Company is currently funding its share of remediation costs. 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 $6.8 million, $12.4 million and $9.5 million for 1996, 1997 and 1998, respectively. The Company anticipates spending approximately $30.8 million in the aggregate on major environmental compliance projects through the year 2002, estimated to be spent as follows: $7.5 million in 1999, $7.3 million in 2000, $7.2 million in 2001 and $8.8 million in 2002. Due to the possibility of unanticipated factual or regulatory developments, the amount of future expenditures may vary substantially from such estimates. Non-current accrued environmental liabilities totaled $10.6 million at December 31, 1997 and $12.7 million at December 31, 1998. 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 regulation the liabilities are reviewed and the accruals adjusted quarterly. Management believes, based on its best estimate, that the Company has adequately provided for remediation costs that might be incurred or penalties that might be imposed under present environmental laws and regulations. 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 and liability 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. NOTE L -- RELATED PARTY TRANSACTIONS The Chairman of the Board of the Company is the president and sole shareholder of WPN Corp. Pursuant to a management agreement effective as of January 3, 1991, as amended January 1, 1993, April 11, 1994, January 1, 1998 and April 13, 1998, approved by a majority of the disinterested directors of the Company, WPN Corp. provides certain financial, management advisory and consulting services to the Company. Such services include, among others, identification, evaluation and negotiation of acquisitions and divestitures, responsibility for financing matters for the Company and its subsidiaries, review of annual and quarterly budgets, supervision and administration, as appropriate, of all the Company's accounting and financial functions and review and supervision of reporting obligations under Federal and state securities laws. In exchange for such services, WPN Corp. received a fixed monthly fee of $458,333 in 1996 and 1997 and from January 1 through April 13, 1998. Commencing April 14, 1998 until December 31, 1998, WPN Corp. received a monthly fee of $520,833. In addition to the fixed monthly fee in 1997, the Company paid a $300,000 bonus to WPN Corp. for its services in obtaining a new five-year labor contract with significant job reductions. In 1998, the Company paid WPN Corp. a bonus of $3.75 million in recognition of the extraordinary return earned by WPN on behalf of the Company in its management of the Company's cash and marketable securities. The management agreement has a two year term and is renewable automatically for successive one year periods, unless terminated by either party upon 60 days' prior written notice. WPN Corp. also receives certain benefits from financial intermediaries which it transacts business with on behalf of the Company in the form of research materials and services, which are used by WPN Corp. on behalf of the Company and in connection with its other activities. For fiscal year 1998, the amount of such reimbursement was approximately $75,000. In 1997, the stockholders approved a grant of an option to purchase 1,000,000 shares of Common Stock to WPN Corp. for their performance in obtaining a new labor agreement. The options were valued using the Black-Scholes formula at $6.7 million and recorded as a special charge related to the labor contract. 45 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE M -- OTHER INCOME
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1997 1998 ------- ------- ------- (DOLLARS IN THOUSANDS) Interest and investment income.............................. $19,660 $52,092 $88,781 Equity income (loss)........................................ 9,496 (1,644) 5,699 Receivables securitization fees............................. (4,934) (3,826) (6,192) Other, net.................................................. 1,752 4,046 1,408 ------- ------- ------- $25,974 $50,668 $89,696 ======= ======= =======
NOTE N -- SALE OF RECEIVABLES In 1994, a special purpose wholly-owned subsidiary 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, WCPI 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 receivable generated by Unimast in the pool of accounts receivable sold. Accounts receivable at December 31, 1997 and 1998 exclude $69 million and $95 million, respectively, representing uncollected accounts receivable sold with recourse limited to the extent of uncollectible balances. Fees paid by the Company under such agreement range from 5.5438% 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. NOTE O -- INFORMATION ON SIGNIFICANT JOINT VENTURES The Company owns 35.7% of Wheeling-Nisshin, Inc. (Wheeling-Nisshin). Wheeling-Nisshin had total debt outstanding at December 31, 1997 and 1998 of approximately $18.5 million and $11.6 million, respectively. The Company derived approximately 3.9% and 9.8% of its revenues from sale of steel to Wheeling-Nisshin in 1997 and 1998 respectively. The increase in revenue reflects the effect of the strike on the company's shipments to Wheeling-Nisshin, Inc. in 1997. The Company received dividends of $2.5 million annually from Wheeling-Nisshin in 1996 and 1997 and $5.0 million in 1998. Amounts due the Company at December 31, 1998 totaled $4.0 million. Audited financial statements of Wheeling-Nisshin are presented under Item 14 because it was considered a significant subsidiary of the Company in 1996 under SEC regulations. The Company owns 50.0% of Ohio Coatings Company (OCC). OCC had total debt outstanding at December 31, 1997 and 1998 of approximately $57.2 million. The Company derived approximately 0.8% and 4.1% of its revenues from sale of steel to OCC in 1997 and 1998 respectively. The increase in revenue reflects the effect of the strike on the Company's shipments to OCC in 1997. Amounts due the Company at December 31, 1998 totaled $28.0 million, including an advance of $16.5 million. NOTE P -- EXTRAORDINARY ITEMS
YEAR ENDED DECEMBER 31, ----------------------- 1997 1998 ---------- --------- (DOLLARS IN THOUSANDS) Premium (discount) on early debt retirement................. $ 32,600 $(4,779) Unamortized debt issuance cost.............................. 4,770 1,332 Coal retiree medical benefits............................... 2,615 -- Income tax effect........................................... (13,995) 1,206 -------- ------- $ 25,990 $(2,241) ======== =======
In the third quarter of 1998 the Company purchased and retired $48.0 million aggregate principal amount of 10 1/2% Senior Notes in the open market resulting in a $2.4 million gain, net of tax. In November 1997 the Company paid a premium of $32.6 million to defease the remaining $266.2 million of the 9 3/8 Senior Notes at a total cost of $298.8 million. 46 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 1997 a 7% discount rate was used to calculate the actuarially determined coal retiree medical benefit liability compared to 7.5% in 1996. In 1997 the Company also incurred higher premiums for additional retirees and orphans assigned in 1995. See Note D. NOTE Q -- SUPPLEMENTAL WHX PARENT COMPANY SUMMARIZED FINANCIAL INFORMATION WHX Parent Company summarized financial information is included because of certain restrictions placed on subsidiaries as a result of credit agreements that restrict the transfer or dividend of cash or assets to the parent company.
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1997 1998 ------- ------- ------- (DOLLARS IN THOUSANDS) INCOME DATA Net sales................................................. $ -- $ -- $ -- Cost of products sold, excluding depreciation............. -- (3,000) 252 Depreciation.............................................. 1,169 1,263 1,583 Selling, general and administrative expense............... 7,258 7,428 5,843 ------- ------- ------- Operating income(expense)................................. (8,427) (5,691) (7,678) Interest expense on debt.................................. -- -- 26,385 Other income(expense)..................................... 16,808 51,342 87,308 ------- ------- ------- Income before tax and extraordinary item.................. 8,381 45,651 53,245 Tax provision............................................. 3,046 15,978 18,586 ------- ------- ------- Income before extraordinary item.......................... 5,335 29,673 34,659 Extraordinary item........................................ -- -- 2,241 ------- ------- ------- Net Income................................................ $ 5,335 $29,673 $36,900 ======= ======= =======
YEAR ENDED DECEMBER 31, ---------------------------------- 1996 1997 1998 -------- -------- ---------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA Assets Current assets............................................ $449,569 $590,011 $ 704,735 Non-current assets........................................ 253,545 291,842 703,351 -------- -------- ---------- Total Assets................................................ $703,114 $881,853 $1,408,086 ======== ======== ========== Liabilities and Stockholder's Equity Current liabilities....................................... $ 77,103 $282,931 $ 504,835 Non-current liabilities................................... 8,771 4,809 305,629 Stockholder's equity...................................... 617,240 594,113 597,622 -------- -------- ---------- Total Liabilities and Stockholder's Equity.................. $703,114 $881,853 $1,408,086 ======== ======== ==========
NOTE R -- REPORTED SEGMENTS The Company's reportable operating segments consist of WPC, H&H and Unimast, each providing their own unique products and services. Each of these segments is independently managed and requires different production technology and marketing and distribution channels. The accounting policies of the segments are consistent with those of the Company, as discussed in the summary of significant accounting policies. For the periods presented, intersegment sales and transfers were conducted as if the sales or transfers were to third parties, that is, at prevailing market prices. Income taxes are allocated to the segments in accordance with the Company's tax sharing agreement, which generally requires separate segment tax calculations. The benefit, if any, of WPC NOL carryforwards are allocated to WPC. 47 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The table below presents information about reported segments and a reconciliation of total segment sales to total consolidated sales for the years ending December 31.
SEGMENT CONSOLIDATED WPC H&H* UNIMAST ALL OTHER TOTAL ADJUSTMENTS TOTAL ---------- -------- -------- ---------- ---------- ----------- ------------ (DOLLARS IN THOUSANDS) 1998 Revenues......................... $1,111,541 $350,286 $205,444 $ -- $1,667,271 $(21,773) $1,645,498 Intersegment revenues............ 21,773 -- -- -- 21,773 -- 21,773 Net interest expense............. 36,699 13,188 2,462 26,385 78,734 (638) 78,096 Depreciation and amortization.... 76,321 15,585 3,381 1,583 96,870 -- 96,870 Equity income (loss)............. 5,333 588 -- (222) 5,699 -- 5,699 Income taxes..................... (3,101) 7,271 630 18,586 23,386 -- 23,386 Segment net income (loss)........ (6,503) 4,785 6,582 36,900 41,764 (93) 41,671 Segment assets................... 1,256,367 668,362 60,697 1,408,086 3,393,512 (681,428) 2,712,084 Investment in equity-method subsidiaries................... 69,075 4,507 -- 11,396 84,978 -- 84,978 Capital expenditures............. 33,595 10,701 3,954 -- 48,250 -- 48,250 1997 Revenues......................... $ 489,662 $ -- $156,678 $ -- $ 646,340 $ (4,244) $ 642,096 Intersegment revenues............ 4,244 -- -- -- 4,244 -- 4,244 Net interest expense............. 27,204 -- 2,296 -- 29,500 (453) 29,047 Depreciation and amortization.... 46,203 -- 1,978 1,264 49,445 -- 49,445 Equity income (loss)............. (1,206) -- -- (438) (1,644) -- (1,644) Income taxes..................... (110,035) -- 488 15,978 (93,569) -- (93,569) Extraordinary item............... (25,990) -- -- -- (25,990) -- (25,990) Segment net income (loss)........ (230,453) -- 1,086 29,673 (199,694) (68) (199,762) Segment assets................... 1,424,568 -- 54,538 881,853 2,360,959 (299,039) 2,061,920 Investment in equity-method subsidiaries................... 68,742 -- -- 11,667 80,409 -- 80,409 Capital expenditures............. 33,755 -- 3,024 -- 36,779 -- 36,779 1996 Revenues......................... $1,110,684 $ -- $133,495 $ -- $1,244,179 $(11,484) $1,232,695 Intersegment revenues............ 11,484 -- -- -- 11,484 -- 11,484 Net interest expense............. 23,763 -- 2,200 -- 25,963 -- 25,963 Depreciation and amortization.... 66,125 -- 1,661 1,170 68,956 -- 68,956 Equity income (loss)............. 9,496 -- -- -- 9,496 -- 9,496 Income taxes..................... (7,509) -- 296 3,106 (4,107) -- (4,107) Segment net income (loss)........ (5,283) -- 606 5,335 658 -- 658 Segment assets................... 1,245,892 -- 47,884 703,114 1,996,890 (278,111) 1,718,779 Investment in equity-method subsidiaries................... 65,297 -- -- 12,106 77,403 -- 77,403 Capital expenditures............. 31,188 -- 4,248 -- 35,436 -- 35,436
- --------------- * Results prior to April 13, 1998 are not reported in WHX consolidations and therefore have been omitted from this comparison. The following is sales and long-lived asset information by geographic area as of and for the years ended December 31,: GEOGRAPHIC INFORMATION
REVENUES LONG-LIVED ASSETS(1) ---------------------------------- ------------------------------ 1996 1997 1998 1996 1997 1998 ---------- -------- ---------- -------- -------- -------- United States................................... $1,232,695 $642,096 $1,596,831 $832,815 $819,069 $887,659 Foreign......................................... -- -- 48,667 -- -- 16,396 ---------- -------- ---------- -------- -------- -------- $1,232,695 $642,096 $1,645,498 $832,815 $819,069 $904,055 ========== ======== ========== ======== ======== ========
48 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Foreign revenue is based on the country in which the legal subsidiary is domiciled. Revenue from no single foreign country was material to the consolidated revenues of the Company. - --------------- (1) Includes property, plant and equipment and investments in affiliates. During 1996 one customer accounted for 11.5% of total revenues. NOTE S -- ACQUISITION OF HANDY & HARMAN AND OTHER The fair value of the assets acquired and liabilities assumed in 1998 acquisitions are as follows:
HANDY & HARMAN OTHER -------------- --------- (DOLLARS IN THOUSANDS) Current assets.............................................. $ 269,374 $ 2,188 Property, plant & equipment................................. 124,148 503 Other long-term assets...................................... 155,426 -- Goodwill.................................................... 291,931 10,121 Current liabilities......................................... (120,790) (157) Debt........................................................ (229,600) (4,320) Other long-term liabilities................................. (74,635) -- --------- ------- Purchase price, net of cash acquired........................ $ 415,854 $ 8,335 ========= =======
The fair value of property, plant and equipment was determined as of the date of acquisition by independent appraisal. NOTE T -- QUARTERLY INFORMATION (UNAUDITED) Financial results by quarter for the two fiscal years ended December 31, 1997 and 1998 are as follows:
BASIC EARNINGS BASIC DILUTED (LOSS) EARNINGS EARNINGS PER SHARE (LOSS) (LOSS) GROSS EXTRA- NET BEFORE PER SHARE PER SHARE NET PROFIT ORDINARY INCOME EXTRAORDINARY ON NET ON NET SALES (LOSS) ITEMS (LOSS) ITEMS INCOME INCOME -------- -------- -------- -------- ------------- --------- --------- (DOLLARS, EXCEPT PER SHARE, IN THOUSANDS) 1997:(1) 1st Quarter............ $113,632 $(27,520) $ -- $(40,724) $(1.92) $(1.92) $(1.92) 2nd Quarter............ 128,472 (17,043) -- (31,107) (1.58) (1.58) (1.58) 3rd Quarter............ 144,612 (28,314) -- (91,387) (4.49) (4.49) (4.49) 4th Quarter............ 255,380 (5,749) (25,990) (36,544) (.79) (2.11) (2.11) 1998:(2) 1st Quarter............ 304,078 34,421 -- 1,088 (.21) (.21) (.21) 2nd Quarter............ 464,455 88,523 -- 14,067 .48 .48 .39 3rd Quarter............ 459,563 79,313 2,241 24,023 .91 1.03 .68 4th Quarter............ 417,402 66,810 -- 2,493 (.15) (.15) (.15)
- --------------- Diluted loss per share would be the same as basic loss per share in loss quarters because conversion of stock options, convertible Series A and Series B Preferred Stock or redeemable Common Stock would be anti-dilutive. (1) The financial results of the Company for all four quarters of 1997 were adversely affected by the strike. Negative impacts of the strike included the volume effect of lower production on fixed cost absorption, higher levels of external steel purchases, start-up costs and a higher-cost mix of products shipped. (2) 1998 results reflect the acquisition of H&H from April 13, 1998. 49 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to the information appearing under the heading "Election of Directors" in the Company's definitive proxy statement for the 1999 Annual Meeting of Stockholders. ITEM 11. MANAGEMENT REMUNERATION Incorporated by reference to the information appearing under the heading "Executive Compensation" in the Company's definitive proxy statement for the 1999 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the information appearing under the heading "Security Ownership" in the Company's definitive proxy statement for the 1999 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to the information appearing under the heading "Certain Relationships and Related Transactions" in the Company's definitive proxy statement for the 1999 Annual Meeting of Stockholders. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 2. Audited Financial Statements of Wheeling-Nisshin, Inc. The following audited Financial Statements of Wheeling-Nisshin, Inc. are presented because Wheeling-Nisshin is considered a significant subsidiary as defined under SEC Regulations. 50 52 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Wheeling-Nisshin, Inc.: In our opinion, the accompanying balance sheets and the related statements of income, shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Wheeling-Nisshin, Inc. (the Company) at December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, 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 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. PricewaterhouseCoopers L.L.P. Pittsburgh, Pennsylvania February 16, 1999 51 53 WHEELING-NISSHIN, INC. BALANCE SHEETS DECEMBER 31, 1998 AND 1997
1998 1997 --------- --------- (DOLLARS IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents................................. $ 21,278 $ 22,313 Investments............................................... 48,659 28,500 Trade accounts receivable, net of allowance for bad debts of $250 in 1998 and 1997 (Note 8)...................... 10,262 16,364 Inventories (Note 3)...................................... 13,797 16,793 Prepaid income taxes...................................... 1,507 139 Deferred income taxes (Note 6)............................ 2,654 2,342 Other current assets...................................... 432 622 -------- -------- Total current assets.............................. 98,589 87,073 Property, plant and equipment, net (Note 4)................. 111,788 124,787 Debt issuance costs, net of accumulated amortization of $1,792 in 1998 and $1,704 in 1997......................... 109 197 Other assets................................................ 602 719 -------- -------- Total assets...................................... $211,088 $212,776 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 5,381 $ 10,684 Due to affiliates (Note 8)................................ 3,968 3,356 Accrued interest.......................................... 237 367 Other accrued liabilities................................. 3,970 3,260 Accrued profit sharing.................................... 6,290 4,644 Current portion of long-term debt (Note 5)................ 6,775 6,835 -------- -------- Total current liabilities......................... 26,621 29,146 Long-term debt, less current portion (Note 5)............... 4,824 11,645 Deferred income taxes (Note 6).............................. 26,271 25,262 Other long-term liabilities (Note 9)........................ 2,500 2,500 -------- -------- Total liabilities................................. 60,216 68,553 -------- -------- Commitments and contingencies (Note 8 and 9)................ Shareholders' equity: Common stock, no par value; authorized, issued and outstanding, 7,000 shares.............................. 71,588 71,588 Retained earnings......................................... 79,284 72,635 -------- -------- Total shareholders' equity............................. 150,872 144,223 -------- -------- Total liabilities and shareholders' equity........ $211,088 $212,776 ======== ========
The accompanying notes are an integral part of the financial statements. 52 54 WHEELING-NISSHIN, INC. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 -------- -------- -------- (DOLLARS IN THOUSANDS) Net Sales (Note 8).......................................... $379,415 $396,278 $375,658 Cost of goods sold (Note 8)................................. 341,877 365,967 335,071 -------- -------- -------- Gross profit........................................... 37,538 30,311 40,587 Selling, general and administrative expenses................ 6,957 5,608 6,546 -------- -------- -------- Operating profit....................................... 30,581 24,703 34,041 -------- -------- -------- Other income (expense): Interest and other income................................. 3,002 2,203 2,539 Interest expense.......................................... (985) (1,398) (1,909) -------- -------- -------- 2,017 805 630 -------- -------- -------- Income before income taxes............................. 32,598 25,508 34,671 Provision for income taxes (Note 6)......................... 11,949 9,435 13,110 Net income............................................. $ 20,649 $ 16,073 $ 21,561 ======== ======== ======== Earnings per share.......................................... $ 2.95 $ 2.30 $ 3.08 ======== ======== ========
The accompanying notes are an integral part of the financial statements. 53 55 WHEELING-NISSHIN, INC. STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
RETAINED COMMON STOCK EARNINGS TOTAL ------------ -------- -------- (DOLLARS IN THOUSANDS) 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 Net income.................................................. -- 16,073 16,073 Cash dividends ($1 per share)............................... -- (7,000) (7,000) ------- -------- -------- Balance at December 31, 1997................................ 71,588 72,635 144,223 Net income.................................................. -- 20,649 20,649 Cash dividends ($2 per share)............................... -- (14,000) (14,000) ------- -------- -------- Balance at December 31, 1998................................ $71,588 $ 79,284 $150,872 ======= ======== ========
The accompanying notes are an integral part of the financial statements. 54 56 WHEELING-NISSHIN, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1998 1997 1996 -------- -------- -------- (DOLLARS IN THOUSANDS) Cash flows from operating activities: Net income................................................ $ 20,649 $ 16,073 $ 21,561 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 13,396 13,065 12,952 Loss on disposal of land............................... 6 -- -- Deferred income taxes.................................. 697 1,141 5,330 Net change in operating assets and liabilities: Decrease (increase) in trade accounts receivable..... 6,102 3,401 (730) Decrease (increase) in inventories................... 2,996 5,440 (3,467) (Increase) decrease in prepaid and accrued income taxes............................................. (1,368) (3,322) (51) Decrease (increase) in other assets.................. 190 197 (636) (Decrease) increase in accounts payable.............. (5,303) (10,542) 12,846 Increase (decrease) in due to affiliates............. 612 3,356 (6,036) Decrease in accrued interest......................... (130) (130) (173) (Decrease) increase in other accrued liabilities..... 2,356 (1,989) 945 -------- -------- -------- Net cash provided by operating activities......... 40,203 26,690 42,541 -------- -------- -------- Cash flows from investing activities: Capital expenditures, net................................. (222) (959) (1,173) Proceeds from sale of land................................ 24 -- -- Purchase of investments................................... (44,214) (43,700) (19,900) Maturity of investments................................... 24,055 35,100 -- -------- -------- -------- Net cash used in investing activities............. (20,357) (9,559) (21,073) -------- -------- -------- Cash flows from financing activities: Payments on long-term debt................................ (6,881) (6,835) (11,361) Payment of dividends...................................... (14,000) (7,000) (7,000) -------- -------- -------- Net cash used in financing activities............. (20,881) (13,835) (18,361) -------- -------- -------- Net increase (decrease) in cash and cash equivalents........ (1,035) 3,296 3,107 Cash and cash equivalents: Beginning of the year..................................... 22,313 19,017 15,910 -------- -------- -------- End of the year........................................... $ 21,278 $ 22,313 $ 19,017 ======== ======== ======== Supplemental cash flow disclosures: Cash paid during the year for: Interest............................................... $ 1,115 $ 1,528 $ 2,082 ======== ======== ======== Income taxes........................................... $ 12,622 $ 11,616 $ 7,831 ======== ======== ======== Supplemental schedule of noncash investing and financing activities: Acquisition of property, plant and equipment included in other long-term liabilities (Note 9)................... $ -- $ 2,500 $ -- ======== ======== ========
The accompanying notes are an integral part of the financial statements. 55 57 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. At December 31, 1998, Nisshin Holding Incorporated, a wholly-owned subsidiary of Nisshin Steel Co., Ltd., (Nisshin), and Wheeling-Pittsburgh Corporation (Wheeling-Pittsburgh), a wholly owned subsidiary of WHX Corporation, 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 the 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 deposit and commercial paper, are classified as held-to-maturity and are recorded at cost. The certificates of deposit amounted to $0 and $28,500 at December 31, 1998 and 1997, respectively, and are maintained at one financial institution. Commercial paper amounted to $48,659 and $0 at December 31, 1998 and 1997, respectively. 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 other income. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets. 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. 56 58 WHEELING-NISSHIN, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Income Taxes: The Company uses SFAS No. 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: In 1997, the Company adopted SFAS No. 128, "Earnings per Share." This statement requires the disclosure of basic and diluted earnings per share and revises the method required to calculate these amounts. 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:
1998 1997 ------- ------- Raw materials............................................... $ 7,576 $ 5,335 Finished goods.............................................. 5,711 10,115 ------- ------- $13,287 $15,450 ------- ------- LIFO reserve................................................ 510 1,343 ------- ------- $13,797 $16,793 ======= =======
During 1998, the Company revised its LIFO valuation approach to valuing inventories at December 31, 1998. The effect of this change was to decrease inventories and income before income taxes by approximately $1,593 and net income by approximately $1,009. Additionally, during 1998, certain inventory quantities were reduced resulting in a liquidation of LIFO inventories, the effect of which decreased net income by approximately $102. 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following at December 31:
1998 1997 -------- -------- Buildings.................................................. $ 34,674 $ 34,665 Land improvements.......................................... 3,097 3,097 Machinery and equipment.................................... 165,569 164,893 Office equipment........................................... 3,262 3,725 -------- -------- 206,602 206,380 Less accumulated depreciation and amortization............. (95,816) (82,625) -------- -------- 110,786 123,755 Land....................................................... 1,002 1,032 -------- -------- $111,788 $124,787 ======== ========
Depreciation expense was $13,191, $12,846 and $12,715 in 1998, 1997, and 1996, respectively. 57 59 WHEELING-NISSHIN, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. LONG-TERM DEBT Long-term debt consists of the following at December 31:
1998 1997 ------- ------- Industrial revenue bonds for the second production line accruing interest at .625% 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 was 6.66% at December 31, 1998 and 6.53% at December 31, 1997. The bonds are payable in 17 equal semi-annual installments of $3,353 plus interest through March 2000... $11,529 $18,235 West Virginia Economic Development Authority (WVEDA) loan accruing interest at 4%, payable in monthly installments of $2 including interest through January 2001 was repaid in 1998................................................... -- 67 Capital lease obligations accruing interest at rates ranging from 10% to 13.8%, payable in monthly installments through January 2000.............................................. 70 178 ------- ------- 11,599 18,480 Less current portion........................................ 6,775 6,835 ------- ------- $ 4,824 $11,645 ======= =======
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 1998, 1997 and 1996. The annual maturities on all long-term debt for each of the five years ending December 31 are: $6,775 in 1999; $4,824 in 2000; and $0 thereafter. 6. INCOME TAXES The provision for income taxes for the years ended December 31 consist of:
1998 1997 1996 ------- ------ ------- Current: U.S. Federal...................................... $10,543 $7,771 $ 7,366 State............................................. 709 523 414 Deferred............................................ 697 1,141 5,330 ------- ------ ------- $11,949 $9,435 $13,110 ======= ====== =======
Reconciliation of the federal statutory and effective tax rates for 1998, 1997 and 1996 are as follows:
1998 1997 1996 ---- ---- ---- Federal statutory rate...................................... 35.0% 35.0% 35.0% State income taxes.......................................... 1.6 1.5 1.2 Other, net.................................................. 0.1 0.5 1.6 ---- ---- ---- 36.7% 37.0% 37.8% ==== ==== ====
58 60 WHEELING-NISSHIN, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The deferred tax assets and liabilities recorded on the balance sheets as of December 31 are as follows:
1998 1997 ------- ------- Deferred tax assets: Accrued expenses.......................................... $ 1,143 $ 1,120 Other..................................................... 1,511 1,222 ------- ------- 2,654 2,342 ------- ------- Deferred tax liabilities: Depreciation and amortization............................. 22,729 23,781 Other..................................................... 3,542 1,481 ------- ------- 26,271 25,262 ------- ------- $23,617 $22,920 ======= =======
The Company has received two separate tax credits for new business investment and jobs expansion (Supercredits) in West Virginia. The Supercredits may only be applied to offset the West Virginia income tax liability generated by the specific business expansion that created the credit. The first Supercredit was granted in 1988 and expired in 1997. However, the Company has approximately $2,500 of credit carryforwards attributed to the 1988 investment that may be used to offset the company's West Virginia income tax liability for the three taxable years ended 2000. The second Supercredit granted in 1993 can be used to offset up to $5,958 annually of West Virginia income tax attributable to the 1993 investment through the 2002 tax year. A portion on any unused credit may be carried forward for three taxable years thereafter. A valuation allowance for the entire amount of the Supercredits has been recognized in the accompanying financial statements. Accordingly, as the Supercredits are utilized, a benefit is recognized through a reduction of the current state income tax provision. Such benefit amounted to approximately $1,120 in 1998, $876 in 1997 and $1,058 in 1996. 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 $490 in 1998, $415 in 1997 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. The profit-sharing expense, which includes the profit-sharing contribution and the related employer payroll taxes, was $6,290 in 1998, $4,644 in 1997 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 was $68 for 1998, 1997 and 1996. Accrued postretirement benefits were approximately $203 and $135 at December 31, 1998 and 1997, respectively. 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 $164,473, $24,533 and $161,380 of raw materials and processing services from Wheeling-Pittsburgh in 1998, 1997 and 1996, 59 61 WHEELING-NISSHIN, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) respectively. The amounts due Wheeling-Pittsburgh for such purchases are included in due to affiliates in the accompanying balance sheets. The Company sells products to Wheeling-Pittsburgh. Such sales totaled $1,916, $6,408, and $6,511 in 1998, 1997 and 1996, respectively, of which $228 and $880 remained unpaid at December 31, 1998 and 1997, respectively, and are included in trade accounts receivable in the accompanying balance sheets. The Company also sells products to Unimast, Inc., an affiliate of Wheeling-Pittsburgh. Such sales totaled $333, $435 and $1,537 in 1998, 1997 and 1996, respectively, of which $0 and $10 remained unpaid at December 31, 1998 and 1997, respectively, and were included in trade accounts receivable in the accompanying balance sheets. 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 had 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. The motions for counsel fees plus interest were granted by the court to the plaintiffs in June 1997. The Company filed appeals from the judgments to the Superior Court of Pennsylvania in 1997. Post-judgment interest accrues during the appeal period. Additionally, the Company has posted a bond approximating $12,000 that will be held by the court pending the appeals. On December 31, 1998, a three-judge panel of the Superior Court ruled in favor of the Company's appeals vacating the October 2, 1996 adverse verdict and the award of counsel fees and remanded the case for a new trial. The original plaintiffs have requested the Superior Court hear reargument of the case. The Company has been advised by its Special Counsel that it has various legal bases for relief, if a new trial were to be held; however, since litigation is subject to many uncertainties, the Company is presently unable to predict the outcome of this matter. In 1997, the Company recorded a liability in the amount of $2,500 related to these matters, which was capitalized in property, plant and equipment as cost overruns in the accompanying balance sheets. There is at least a reasonable possibility that the ultimate resolution of these matters may have a material effect on the Company's results of operations or cash flows in the year of final determination. Any portion of the ultimate resolution for interest, penalties and counsel fees will be charged to results of operations. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS: The estimated fair values and the methods used to estimate those values are disclosed below: Investments: The fair values of commercial paper and certificates of deposit were $48,844 and $28,890 at December 31, 1998 and 1997, respectively. These amounts were determined based on the investment cost plus interest receivable at December 31, 1998 and 1997. 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. 60 62 (a) 3. Exhibits 2.1 Confirmation Order of the United States Bankruptcy Court for the Western District of Pennsylvania, dated December 18, 1990, containing the Amended Joint Plan of Reorganization of Wheeling-Pittsburgh Steel Corporation, dated October 18, 1990, as modified and approved -- Incorporated herein by reference to Exhibit 2.1 to WPC's Form 8-K filed December 28, 1990. 2.2 Form of Plan and Agreement of Merger, dated as of July 26, 1994 among WPC, WHX and WHEELING-PITTSBURGH STEEL CORPORATION Merger Co. -- Incorporated herein by reference to Exhibit 2.2. to Company's Form S-4 Registration Statement (No. 33-53591). 3.1 Certificate of Incorporation of the Company -- Incorporated herein by reference to Exhibit 3.2 to the Company's Form S-4 Registration Statement (No. 33-53591). 3.2 Amended and Restated By-laws of the Company -- Incorporated herein by reference to Exhibit 3.2 to the 1997 Form 10-K. 4.1 Indenture ("Senior Note Indenture"), between WPC and Bank One, Columbus, NA, as Trustee -- Incorporated herein by reference to Exhibit 4.1 to WPC's Form S-4 Registration Statement (No. 333-43867). 4.2 Term Loan Agreement dated as of November 20, 1997 between Wheeling-Pittsburgh Corporation and DLJ Capital Funding, Inc., as syndication agent, and the lenders party thereto -- Incorporated herein by reference to Exhibit 4.2 to the 1997 Form 10-K. 4.3 Amendment No. 1 to Term Loan Agreement dated as of December 31, 1997 between Wheeling-Pittsburgh Corporation and DLJ Capital Funding, Inc., as syndication agent, and the Lenders party thereto -- Incorporated herein by reference to Exhibit 4.3 to the 1997 Form 10-K. 4.4 Second Amended and Restated Credit Agreement dated December 28, 1995, among WPSC, the lenders party thereto, and Citibank, N.A., as Agent -- Incorporated herein by reference to Exhibit 10.11 to the 1995 Form 10-K. 4.5 Amendment No. 1 to the Second Amended and Restated Credit Agreement dated as of December 30, 1996 among WPSC, the lenders party thereto and Citibank, N.A. as Agent -- Incorporated herein by reference to Exhibit 10.13 to the 1996 Form 10-K. 4.6 Amendment No. 2 to the Second Amended and Restated Credit Agreement dated as of June 30, 1997 among WPSC, the lenders party thereto and Citibank, N.A., as Agent -- Incorporated herein by reference to Exhibit 4.6 to the 1997 Form 10-K. 4.7 Amendment No. 3 to the Second Amended and Restated Credit Agreement dated as of September 30, 1997 among WPSC, the lenders party thereto and Citibank, N.A., as Agent -- Incorporated herein by reference to Exhibit 4.7 to the 1997 Form 10-K. 4.8 Amendment No. 4 to the Second Amended and Restated Credit Agreement dated as of November 19, 1997 among WPSC, the lenders party thereto and Citibank, N.A., as Agent -- Incorporated herein by reference to Exhibit 4.8 to the 1997 Form 10-K. 4.9 Amendment No. 5 to the Second Amended and Restated Credit Agreement dated as of November 28, 1997 among WPSC, the lenders party thereto and Citibank, N.A., as Agent -- Incorporated herein by reference to Exhibit 4.9 to the 1997 Form 10-K. *4.10 Amendment No. 6 to the Second Amended and Restated Credit Agreement dated as of September 30, 1998 among WPSC, the lenders party thereto and Citibank, N.A., as Agent. *4.11 Credit Agreement dated as of July 30, 1998 among Handy & Harman, Handy & Harman of Canada, Limited, Handy & Harman Europe Limited, Rigby-Maryland (Stainless) Limited and Indiana Tube Danmark A/S and the Initial Lenders, Initial Issuing Banks and Swing Line Bank named therein and Citicorp USA, Inc. as collateral agent and administrative agent. 10.1 Form of Key Employee Deferred Compensation Agreement -- Incorporated herein by reference to Exhibit 10.1 to the 1990 10-K. 10.2 Cooperation Agreement dated February 7, 1984 between the Company and Nisshin Steel Co., Ltd. -- Incorporated herein by reference to Exhibit 10.24 to the Company's Form S-1 Registration Statement No. 2-89295 as filed with the Securities and Exchange Commission on February 7, 1984. 10.3 Close Corporation and Shareholder's Agreement effective as of March 24, 1994, by and among Dong Yang Tinplate America Corp., WPC, Nittetsu Shoji American, Inc. and Ohio Coatings Company -- Incorporated herein by reference to Exhibit 10.3 to the 1997 Form 10-K.
61 63 10.4 Second Amended and Restated Shareholders Agreement dated as of November 12, 1990 between the Company and Nisshin Steel Co. Ltd. -- Incorporated herein by reference to Exhibit 10.9 to the 1990 10-K. 10.5 Management Agreement dated as of January 3, 1991 between the Company and WPN Corp. -- Incorporated herein by reference to Exhibit 10.11 to the 1990 10-K. 10.6 Amendment No. 1 to Management Agreement dated as of January 1, 1993 between the Company and WPN Corp.-Incorporated herein by reference to Exhibit 10.8 to the Company's Form S-2 Registration Statement filed February 23, 1993 (the "February Form S-2"). 10.7 Amendment No. 2 to Management Agreement dated as of April 11, 1994 between the Company and WPN Corp. -- Incorporated herein by reference to Exhibit 10.9 to the 1994 Form 10-K. 10.8 Amendment No. 3 to Management Agreement dated as of April 1, 1996 between the Company and WPN Corporation -- Incorporated herein by reference to Exhibit 10.9 to the 1996 Form 10-K. *10.9 Amendment No. 4 to Management Agreement dated as of April 13, 1998 between the Company and WPN Corporation. 10.10 1991 Incentive and Nonqualified Stock Option Plan of the Company -- Incorporated herein by reference to Exhibit 10.13 to the Company's Form S-2 Registration Statement (No. 33-43139). 10.11 1993 Directors and Non-Employee Officers Stock Option Plan -- Incorporated herein by reference to Exhibit 4.D to WPC's Form S-8 filed April 8, 1994. 10.12 1997 Directors Stock Option Plan -- Incorporated herein by reference to Exhibit 10.11 to the 1997 Form 10-K. *10.13 WPN Corp. Stock Option Grant Letter dated July 29, 1993. 10.14 WPN Corp. Stock Option Grant Letter dated August 4, 1997 -- Incorporated herein by reference to Exhibit 10.12 to the 1997 Form 10-K. 10.15 Pooling and Servicing Agreement dated as of August 1, 1994, among Wheeling-Pittsburgh Funding, Inc., WPSC and Bank One, Columbus, NA -- Incorporated herein by reference to Exhibit 4.13 to the WPC's Form S-1 Registration Statement dated February 24, 1995. *10.16 Agreement by and between Handy & Harman and Arnold Nance dated May 1, 1998 (as amended by Amendment No. 1 to Employment Agreement dated December 21, 1998). *10.17 Agreement dated as of April 23, 1998 by and between the Company and James G. Bradley. *10.18 Agreement dated as of April 17, 1998 by and between the Company and Robert D. LeBlanc. *10.19 Amended and Restated Agreement dated as of December 24, 1998 by and between the Company and Paul J. Mooney. *21.1 Subsidiaries of Registrant. *23.1 Consent of PricewaterhouseCoopers LLP *27. Financial Data Sheet
- --------------- * filed herewith. (b) REPORTS ON FORM 8-K. NONE 62 64 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has signed this report by the undersigned, thereunto duly authorized in the City of New York, State of New York on March 17, 1999. WHX CORPORATION By /s/ JAMES G. BRADLEY March 18, 1999 - ----------------------------------------------------- ----------------------------------------------------- James G. Bradley, Executive Vice President of WHX Date Corporation and President and Chief Executive Officer of Wheeling-Pittsburgh Steel Corporation (Co-Principal Executive Officer) By /s/ ROBERT D. LEBLANC March 18, 1999 - ----------------------------------------------------- ----------------------------------------------------- Robert D. LeBlanc, Executive Vice President of WHX Date Corporation and President and Chief Executive Officer of Handy & Harman (Co-Principal Executive Officer)
POWER OF ATTORNEY WHX Corporation and each of the undersigned do hereby appoint Ronald LaBow and Marvin Olshan, and each of them severally, its or his true and lawful attorney to execute on behalf of WHX Corporation and the undersigned any and all amendments to this Annual Report on Form 10-K and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; each of such attorneys shall have the power to act hereunder with or without the other. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. By /s/ ARNOLD G. NANCE March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Arnold G. Nance, Vice President -- Date Finance (Principal Accounting Officer) By /s/ RONALD LABOW March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Ronald LaBow, Chairman of the Board Date By /s/ NEIL D. ARNOLD March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Neil D. Arnold, Director Date By /s/ PAUL W. BUCHA March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Paul W. Bucha, Director Date By /s/ ROBERT A. DAVIDOW March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Robert A. Davidow, Vice Chairman Date By /s/ WILLIAM GOLDSMITH March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- William Goldsmith, Director Date By /s/ MARVIN L. OLSHAN March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Marvin L. Olshan, Director Date By /s/ ROBERT D. LEBLANC March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Robert D. LeBlanc, Director & Date Executive Vice President (Co-Principal Executive Officer) By /s/ RAYMOND S. TROUBH March 18, 1999 - ------------------------------------------------- ----------------------------------------------------- Raymond S. Troubh, Director Date
63 EX-4.10 2 A#6 TO 2ND AMENDED & RESTATED CREDIT AGREEMENT 1 AMENDMENT NO. 6 TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of September 30, 1998 AMENDMENT NO. 6 TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is entered into by WHEELING-PITTSBURGH STEEL CORPORATION, a Delaware corporation (the "BORROWER"), the banks, financial institutions and other institutional lenders parties to the Credit Agreement referred to below (collectively, the "LENDERS") and CITIBANK, N.A., as agent (the "AGENT"). PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders, Agent and Issuing Bank have entered into a Second Amended and Restated Credit Agreement dated as of December 28, 1995 (as amended, supplemented or otherwise modified through the date hereof, the "CREDIT AGREEMENT"). Capitalized terms not otherwise defined in this Amendment have the meanings specified in the Credit Agreement. (2) The Borrower anticipates that Unimast will receive financing on a stand-alone basis and will pledge its assets to secure such financing (the "UNIMAST FINANCING"). (3) The Borrower has requested that the Lenders agree to release Unimast as a Guarantor under the Guaranty and as a Grantor under the Guarantor Security Agreement upon the consummation of the Unimast Financing. (4) The Lenders have agreed to amend the Credit Agreement as hereinafter set forth. SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4(a), (b) and (c), hereby amended as follows: (a) The definition of "Guarantor" in Section 1.1 is amended by deleting the phrase "PCC, Wheeling Construction or Unimast" and substituting therefor the phrase "PCC or Wheeling Construction". (b) The definition of "Unimast" in Section 1.1 is deleted in full. 2 (c) The definition of "Adjusted EBITDA" in Section 1.1 is amended in full to read as follows: "ADJUSTED EBITDA" means, for any person for any period, the EBITDA for such person PLUS, to the extent included as expense in the calculation of EBITDA, the pension and other long term post-retirement/employment benefit charges ("Employee Expenses"); minus cash payments for such Employee Expenses. (d) Section 5.1 is amended by deleting the amounts set opposite the following dates and substituting therefor the amount set forth below opposite each such date: September 30, 1998 178,800,000 December 31, 1998 174,300,000 March 31, 1999 176,800,000 June 30, 1999 184,900,000 (e) Section 5.2 is amended by deleting the amounts set opposite the following dates and substituting therefor the amount set forth below apposite each such date: September 30, 1998 7.29:1.00 December 31, 1998 7.82:1.00 March 31, 1999 8.00:1.00 June 30, 1999 7.66:1.00 (f) Section 5.3 is amended by deleting the ratios set opposite the following dates and substituting therefor the word or ratio set forth below opposite each such date: September 30, 1998 N/A December 31, 1998 N/A March 31, 1999 0.61:1.00 June 30, 1999 0.75:1.00 2 3 (g) Section 5.4 is amended by deleting the amounts set opposite the following dates and substituting therefor the amount set forth below apposite each such date: September 30, 1998 (130,000,000) October 31, 1998 (130,100,000) November 30, 1998 (130,000,000) December 31, 1998 (130,000,000) January 31, 1999 (135,000,000) February 28, 1999 (135,000,000) March 31, 1999 (140,000,000) April 30, 1999 (140,000,000) May 31, 1999 (140,000,000) June 30, 1999 (140,000,000) and thereafter (h) Section 5.5 is amended by deleting the amounts set opposite the following dates and substituting therefor the amount set forth below apposite each such date: September 30, 1998 127,300,000 December 31, 1998 140,700,000 March 31, 1999 151,200,000 June 30, 1999 169,500,000 and thereafter (i) Section 8.1(k) is deleted in full and inserted in its place is "(k) [Intentionally deleted]". SECTION 2. WAIVER. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4(a) and (b), the Lenders, notwithstanding anything in the contrary contained in Section 7.5 of the Credit Agreement, hereby consent to the merger of Champion Metal Products, Inc. into Wheeling Construction Products, Inc. and subsequent merger of Wheeling Construction Products, Inc. into Borrower. SECTION 3. RELEASE. (a) Effective as of the date of the Unimast Loan Agreement and subject to the satisfaction of the conditions precedent set forth in Section 4, the Lenders hereby (i) release Unimast as a Guarantor under the Guaranty, (ii) release Unimast as a Grantor under the Guarantor Security Agreement and the assets of Unimast from the security 3 4 interests granted thereby and (iii) release the pledge of the Guarantor Intercompany Note of Unimast from the Borrower Pledge Agreement. (b) The Agent agrees that it will, at the Borrower's expense, and upon the release of the Collateral specified in paragraph (a) of this Section 3, execute and deliver to the Borrower such documents as the Borrower shall reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Guarantor Security Agreement and Borrower Pledge Agreement, as applicable. SECTION 4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective as of the date first above written on the Business Day when, and only when, the following conditions shall have been satisfied: (a) The Agent shall have received counterparts of this Amendment executed by the Borrower, each other Loan Party and all of Lenders or, as to any of the Lenders, advice satisfactory to the Agent that such Lenders have executed this Amendment; (b) The Agent shall have received a certificate signed by a duly authorized officer of the Borrower stating that: (i) The representations and warranties contained in the Credit Agreement and each Loan Document are correct on and as of the date of such certificate as though made on and as of the date hereof other than any such representations or warranties that, by their terms, refer to a date other than the date of such certificate; and (ii) No event has occurred and is continuing that constitutes a Default or an Event of Default. (c) The Unimast Financing shall have been consummated. The effectiveness of this Amendment is conditioned upon the accuracy of the factual matters described herein. This Amendment is subject to the provisions of Section 10.1 of the Credit Agreement. SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS. (a) On and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in each of the Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended by this Amendment. 4 5 (b) The Credit Agreement and each of the Loan Documents, as specifically amended by this Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender, the Agent, or the Issuing Bank under the Credit Agreement or any Loan Document, nor constitute a waiver of any provision of the Credit Agreement or any Loan Document. SECTION 6. COSTS AND EXPENSES. The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the Agent) in accordance with the terms of Section 10.4(a) of the Credit Agreement. SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 8. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. 5 6 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER WHEELING-PITTSBURGH STEEL CORPORATION By: /s/ Paul J. Mooney ---------------------------- Name: Paul J. Mooney Title: Executive Vice President AGENT CITIBANK, N.A., as Agent By: /s/ illegible ---------------------------- Name: Title: LENDERS CITICORP USA, INC. By: /s/ illegible ---------------------------- Name: Title: CORESTATES BANK, N.A. By: /s/ Myron Landau --------------------------- Name: Myron Landau Title: Vice President 6 7 BANKAMERICA BUSINESS CREDIT, INC. By: /s/ Walter T. Shellman -------------------------------- Name: Walter T. Shellman Title: Vice President STAR BANK, N.A. By: /s/ Mike Elbert -------------------------------- Name: Mike Elbert Title: Vice President NATIONSBANK, N.A. By: /s/ Melba B. Orzon -------------------------------- Name: Melba B. Orzon Title: Vice President NATIONAL CITY COMMERCIAL FINANCE, INC. By: /s/ John P. Dunn -------------------------------- Name: John P. Dunn Title: Vice President CONSENTED TO AND ACKNOWLEDGED: WHEELING-PITTSBURGH CORPORATION By: /s/ Paul J. Mooney -------------------------------- Name: Paul J. Mooney Title: Executive Vice President 7 8 WHEELING CONSTRUCTION PRODUCTS, INC. By: /s/ Paul J. Mooney ---------------------------------- Name: Paul J. Mooney Title: Vice President & Treasurer PITTSBURGH-CANFIELD CORPORATION By: /s/ Paul J. Mooney ---------------------------------- Name: Paul J. Mooney Title: Vice President & Treasurer UNIMAST INCORPORATED By: /s/ John W. Testa -------------------------------- Name: John W. Testa Title: Secretary 8 EX-4.11 3 CREDIT AGREEMENT 1 EXECUTION COPY CREDIT AGREEMENT Dated as of July 30, 1998 Among HANDY & HARMAN HANDY & HARMAN OF CANADA, LIMITED HANDY & HARMAN EUROPE LIMITED RIGBY-MARYLAND (STAINLESS) LIMITED and INDIANA TUBE DANMARK A/S as Borrowers and THE INITIAL LENDERS, INITIAL ISSUING BANKS AND SWING LINE BANK NAMED HEREIN as Initial Lenders, Initial Issuing Banks and Swing Line Bank and CITICORP USA, INC. as Collateral Agent and CITICORP USA, INC. as Administrative Agent 2 T A B L E O F C O N T E N T S Section Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01. Certain Defined Terms..................................................1 1.02. Computation of Time Periods; Other Definitional Provisions............38 1.03. Accounting Terms......................................................38 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES, THE LETTERS OF CREDIT AND THE BANKERS' ACCEPTANCES 2.01. The Advances and the Letters of Credit................................38 2.02. Making the Advances...................................................41 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit....45 2.04. Drawings of Bankers' Acceptances......................................46 2.05. Repayment of Advances.................................................50 2.06. Termination or Reduction of the Commitments...........................53 2.07. Prepayments...........................................................55 2.08. Interest..............................................................58 2.09. Fees..................................................................61 2.10. Conversion of Advances................................................62 2.11. Renewal and Conversion of Bankers' Acceptances........................63 2.12. Increased Costs, Etc..................................................66 2.13. Payments and Computations.............................................68 2.14. Taxes.................................................................70 2.15. Sharing of Payments, Etc..............................................73 2.16. Use of Proceeds.......................................................74 2.17. Defaulting Lenders....................................................75 ARTICLE III CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT 3.01. Conditions Precedent to Initial Extension of Credit...................78 3 ii Section Page 3.02. Conditions Precedent to Initial Borrowing by Danmark..................85 3.03. Conditions Precedent to Each Borrowing, Drawing and Issuance and Renewal...........................................86 3.04. Determinations Under Section 3.01.....................................87 ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.01. Representations and Warranties of the Borrowers.......................88 ARTICLE V COVENANTS OF THE BORROWERS 5.01. Affirmative Covenants.................................................95 5.02. Negative Covenants...................................................103 5.03. Reporting Requirements...............................................115 5.04. Financial Covenants..................................................120 ARTICLE VI EVENTS OF DEFAULT 6.01. Events of Default....................................................125 6.02. Actions in Respect of the Letters of Credit and Bankers' Acceptances upon Default..........................................128 ARTICLE VII COMPANY GUARANTY SECTION 7.01. Guaranty.....................................................129 SECTION 7.02. Guaranty Absolute............................................130 SECTION 7.03. Waiver.......................................................131 SECTION 7.04. Continuing Guaranty; Assignments.............................131 SECTION 7.05. Subrogation..................................................131 4 iii Section Page ARTICLE VIII THE AGENTS 8.01. Authorization and Action.............................................132 8.02. Agents' Reliance, Etc................................................132 8.03. Citicorp and Affiliates..............................................133 8.04. Lender Party Credit Decision.........................................133 8.05. Indemnification......................................................133 8.06. Successor Agents.....................................................135 8.07. Sub-Agents...........................................................136 ARTICLE IX MISCELLANEOUS 9.01. Amendments, Etc......................................................136 9.02. Notices, Etc.........................................................137 9.03. No Waiver; Remedies..................................................138 9.04. Costs and Expenses...................................................138 9.05. Right of Set-off.....................................................140 9.06. Binding Effect.......................................................140 9.07. Assignments and Participations.......................................141 9.08. Execution in Counterparts............................................144 9.09. No Liability of the Issuing Banks....................................144 9.10. Release of Collateral................................................145 9.11. Jurisdiction, Etc....................................................145 9.13. Judgment.............................................................146 9.14. Governing Law........................................................146 9.15. Substitution of Currency.............................................146 9.16. Waiver of Jury Trial.................................................147 9.17. Power of Attorney....................................................147 5 iv Section Page SCHEDULES Schedule I - Commitments and Applicable Lending Offices Schedule II - Inactive Subsidiaries Schedule 3.01(a)(ix) - Good Standing Certificates Schedule 3.01(a)(xix) - Local Counsel Schedule 4.01(b) - Subsidiaries Schedule 4.01(p) - Plans, Multiemployer Plans and Welfare Plans Schedule 4.01(q) - Environmental Disclosure Schedule 4.01(r) - Open Years Schedule 4.01(t) - Existing Debt Schedule 4.01(u) - Surviving Debt Schedule 4.01(v) - Liens Schedule 4.01(w) - Owned Real Property Schedule 4.01(x) - Leased Real Property Schedule 4.01(y) - Investments Schedule 4.01(z) - Intellectual Property Schedule 5.02(g) - Precious Metal Inventory EXHIBITS Exhibit A-1 - Form of Term A Note Exhibit A-2 - Form of Term B Note Exhibit A-3 - Form of Delayed Draw Note Exhibit A-4 - Form of Multicurrency Note Exhibit A-5 - Form of Revolving Credit Note Exhibit A-6 - Form of Draft Exhibit B-1 - Form of Notice of Borrowing Exhibit B-2 - Form of Notice of Drawing Exhibit C - Form of Assignment and Acceptance Exhibit D - Form of Security Agreement Exhibit E - Form of Domestic Subsidiary Guaranty Exhibit F - Form of Foreign Subsidiary Guaranty Exhibit G - Form of Mortgage Exhibit H - Form of Canadian Security Agreement Exhibit I-1 - Form of Deed of Charge Exhibit I-2 - Form of Deed of Charge Over Shares Exhibit J - Form of Solvency Certificate Exhibit K - Form of Opinion of Counsel to the Loan Parties Exhibit L - Form of Opinion of Local Counsel to the Loan Parties 6 v Section Page Exhibit M - Form of Borrowing Base Certificate Exhibit N - Form of Subordination Agreement Exhibit O - Form of Intercreditor Agreement 7 CREDIT AGREEMENT Dated as of July 30, 1998 Handy & Harman, a New York corporation (the "Company"), Handy & Harman of Canada, Limited, an Ontario corporation (the "Canadian Borrower"), Handy & Harman Europe Limited, a limited company incorporated under the laws of England and Wales ("HHEL"), Rigby-Maryland (Stainless) Limited, a limited company incorporated under the laws of England and Wales ("Rigby") and Indiana Tube Danmark A/S, a corporation organized under the laws of Denmark ("Danmark" and together with the Canadian Borrower, HHEL and Rigby, the "Foreign Borrowers"), the banks, financial institutions and other institutional lenders listed on the signature pages hereof as the Initial Lenders (the "Initial Lenders"), the banks listed on the signature pages hereof as the Initial Issuing Banks (the "Initial Issuing Banks") and the Swing Line Bank (as hereinafter defined), Citicorp USA, Inc. ("Citicorp"), as collateral agent (together with any successor collateral agent appointed pursuant to Article VII, the "Collateral Agent"), and Citicorp, as administrative agent (together with any successor administrative agent appointed pursuant to Article VII, the "Administrative Agent") and, together with the Collateral Agent, the "Agents") for the Lender Parties (as hereinafter defined), agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted EBITDA" means, for any period, the sum, without duplication and determined on a Consolidated basis, of (a) EBITDA and (b) equity advances and capital contributions to the Company or any of its Subsidiaries not exceeding $8,000,000 in any 12-month period from WHX Corporation and its Subsidiaries. "Administrative Agent" has the meaning specified in the recital of parties to this Agreement. "Administrative Agent's Account" means (a) in the case of Advances denominated in Dollars, the account of the Administrative Agent maintained by the Administrative Agent at Citibank at its office at Two Penn's Way, Suite 200, New Castle, Delaware 19720, Account No. 36852248, Attention: Onat Acet, (b) in the case of Advances denominated in any Foreign Currency, the account of the applicable Sub-Agent designated in writing from time to time by the Administrative Agent to the Borrowers and the Lender Parties for such purpose and (c) in any such case, such other account of the 8 2 Administrative Agent as is designated in writing from time to time by the Administrative Agent to the Borrowers and the Lender Parties for such purpose. "Advance" means a Term A Advance, a Term B Advance, a Delayed Draw Advance, a Multicurrency Advance, a Revolving Credit Advance, a Swing Line Advance or a Letter of Credit Advance. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or executive officer of such Person. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") of a Person means the possession, direct or indirect, of the power to vote 10% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agents" has the meaning specified in the recital of parties to this Agreement. "Agreement Value" means, for any Hedge Agreement on any date of determination, an amount equal to the greater of (a) the amount, if any, that would be payable by any Loan Party or any of its Subsidiaries as the "settlement amount" as though such Hedge Agreement were terminated on such date and as though such Loan Party or Subsidiary were the defaulting party, calculated pursuant to the Master Agreement (Multi currency - Cross Border), or any successor thereto, published by the International Swaps and Derivatives Association, Inc. and (b) mark-to-market, in which the unrealized gain (or loss) on such Hedge Agreement is calculated as the amount by which the present value of the future cash flows to be received exceeds (or is less than) the present value of the future cash flows to be paid pursuant to such Hedge Agreement. "Applicable Lending Office" means, with respect to each Lender Party, such Lender Party's Domestic Lending Office in the case of a Base Rate Advance, such Lender Party's Eurocurrency Lending Office in the case of a Eurocurrency Rate Advance, such Lender Party's Local Rate Lending Office in the case of a Local Rate Advance (other than a Local Rate Advance denominated in Canadian Dollars) and, in the case of any Multicurrency Advance denominated in Canadian Dollars, such Lender Party's Canadian Domestic Lending Office and, in the case of a Drawing, such Lender Party's BA Lending Office. "Applicable Margin" means (a) in the case of the Term A Facility, the Delayed Draw Facility, the Multicurrency Facility, the Revolving Credit Facility, Letter of Credit 9 3 fees and Drawing Fees, a percentage per annum determined by reference to the Total Leverage Ratio as set forth below:
Total Leverage Ratio Base Rate Advances/ Eurocurrency Letter of Local Rate Advances Rate Credit Fees/ Advances Drawing Fees ================================================================================================================== Level 1 greater than or equal to 4.50: 1.50% 2.25% 2.00% 1.0 - ------------------------------------------- --------------------------- ------------------------ ----------------- Level 2 less than 4.50:1.00 but greater 1.25% 2.00% 1.75% than or equal to 4.00:1.00 - ------------------------------------------- --------------------------- ------------------------ ----------------- Level 3 less than 4.00:1.00 but greater 1.00% 1.75% 1.50% than or equal to 3.50:1.00 - ------------------------------------------- --------------------------- ------------------------ ----------------- Level 4 less than 3.50:1.00 but greater 0.75% 1.50% 1.25% than or equal to 3.00:1.00 - ------------------------------------------- --------------------------- ------------------------ ----------------- Level 5 less than 3.00:1.00 but greater 0.50% 1.25% 1.00% than or equal to 2.50:1.00 - ------------------------------------------- --------------------------- ------------------------ ----------------- Level 6 0.25% 1.00% 0.75% - ------- less than 2.50:1.00 =========================================== =========================== ======================== =================
and (b) in the case of the Term B Facility, a percentage per annum determined by reference to the Total Leverage Ratio as set forth below: 10 4
Total Leverage Ratio Base Rate Advances Eurocurrency Rate Advances ================================================================================================================== Level 1 greater than or equal to 4.50: 2.00% 2.75% 1.0 - ---------------------------------------- ------------------------------- --------------------------------------- Level 2 less than 4.50:1.00 but greater 1.75% 2.50% than or equal to 4.00:1.00 - ---------------------------------------- ------------------------------- --------------------------------------- Level 3 less than 4.00:1.00 but greater 1.50% 2.50% than or equal to 3.50:1.00 - ---------------------------------------- ------------------------------- --------------------------------------- Level 4 less than 3.50:1.00 but greater 1.50% 2.25% than or equal to 3.00:1.00 - ---------------------------------------- ------------------------------- --------------------------------------- Level 5 less than 3.00:1.00 but greater 1.00% 2.125% than or equal to 2.50:1.00 - ---------------------------------------- ------------------------------- --------------------------------------- Level 6 0.75% 2.00% - ------- less than 2.50:1.00 ======================================== =============================== =======================================
The Applicable Margin for each Advance shall be determined by reference to the Total Leverage Ratio in effect from time to time; provided, however, that (A) (x) until the financial statements for the Fiscal Year ended December 31, 1998 are delivered pursuant to Section 5.02(b), the Applicable Margin shall be at Level 3 and (y) no change in the Applicable Margin shall be effective until the first Business Day of the calendar month commencing immediately after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and a certificate of a Designated Officer of the Company demonstrating the Total Leverage Ratio and (B) after the Fiscal Year ended December 31, 1998, the Applicable Margin shall be at Level 1 for so long as the Company has not submitted to the Administrative Agent the information described in clause (A)(y) of this proviso as and when required under Section 5.03(b) or (c), as the case may be. "Applicable Percentage" means a percentage per annum determined by reference to the Total Leverage Ratio as set forth below: 11 5 Total Leverage Ratio Applicable Percentage ======================================== =============================== Level 1 greater than or equal to 4.50: 0.50% 1.0 - ---------------------------------------- ------------------------------- Level 2 less than 4.50:1.00 but greater 0.50% than or equal to 4.00:1.00 - ---------------------------------------- ------------------------------- Level 3 less than 4.00:1.00 but greater 0.50% than or equal to 3.50:1.00 - ---------------------------------------- ------------------------------- Level 4 less than 3.50:1.00 but greater 0.375% than or equal to 3.00:1.00 - ---------------------------------------- ------------------------------- Level 5 less than 3.00:1.00 but greater 0.375% than or equal to 2.50:1.00 ======================================== =============================== Level 6 0.25% less than 2.50:1.00 ======================================== =============================== The Applicable Percentage shall be determined by reference to the Total Leverage Ratio in effect from time to time; provided, however, that (A) (x) until the financial statements for the Fiscal Year ended December 31, 1998 are delivered pursuant to Section 5.02(b), the Applicable Percentage shall be at Level 3 and (y) no change in the Applicable Percentage shall be effective until the first Business Day of the calendar month commencing immediately after the date on which the Administrative Agent receives the financial statements required to be delivered pursuant to Section 5.03(b) or (c), as the case may be, and a certificate of a Designated Officer of the Company demonstrating the Total Leverage Ratio and (B) after the Fiscal Year ended December 31, 1998, the Applicable Percentage shall be at Level 1 for so long as the Company has not submitted to the Administrative Agent the information described in clause (A)(y) of this proviso as and when required under Section 5.03(b) or (c), as the case may be. "Appropriate Lender" means, at any time, with respect to (a) any of the Term A Facility, Term B Facility, Delayed Draw Facility, Multicurrency Facility or Revolving Credit Facility, a Lender that has a Commitment with respect to such Facility at such time, 12 6 (b) the Letter of Credit Facility, (i) any Issuing Bank and (ii) if the other Revolving Credit Lenders have made Letter of Credit Advances pursuant to Section 2.03(c) that are outstanding at such time, each such other Revolving Credit Lender and (c) the Swing Line Facility, (i) the Swing Line Bank and (ii) if the other Revolving Credit Lenders have made Swing Line Advances pursuant to Section 2.02(b) that are outstanding at such time, each such other Revolving Credit Lender. "Arranger" means Citicorp Securities, Inc. "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender Party and an Eligible Assignee, and accepted by the Administrative Agent, in accordance with Section 9.07 and in substantially the form of Exhibit C hereto. "Available Amount" of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing). "BA Lending Office" means, with respect to each Multicurrency Lender, the office of such Lender set forth as its "BA Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender or such other office of such Lender in Canada as such Lender may from time to time specify to the Canadian Borrower and the Administrative Agent for such purpose. "BA Rate" means, for all Bankers' Acceptances comprising part of the same Drawing, the average rate (calculated on an annual basis of a year of 365 days and rounded up to the nearest multiple of 1/4 of 1%, if such average is not such a multiple) for Canadian Dollar Bankers' Acceptances having a comparable term that appears on the Reuters Screen CDOR Page (or such other page as is a replacement page for such bankers' acceptances) at 10:00 A.M. (Toronto time) or, if such rate is not available at such time, the applicable discount rate in respect of such Bankers' Acceptances shall be the discount rate (calculated on an annual basis of a year of 365 days) and rounded up to the nearest multiple of 1/4 of 1%, quoted by the Canadian Reference Lender at 9:30 a.m. (Toronto time) on the date of such Drawing as the discount rate at which the Canadian Reference Lender would purchase, on such date, its own bankers' acceptances having an aggregate Face Amount equal to and with a term to maturity the same as the Bankers' Acceptances to be acquired by the Canadian Reference Lender as part of such Drawing. The BA Rate for each Bankers' Acceptance comprising part of the same Drawing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Canadian Reference Lender on the date of the applicable Drawing, subject, however, to the provisions of Section 2.08. 13 7 "Banker's Acceptance" has the meaning specified in Section 2.01(h). "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the highest of: (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank's base rate; (b) the sum (adjusted to the nearest 1/4 of 1% or, if there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average (adjusted to the basis of a year of 360 days) being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for Citibank with respect to liabilities consisting of or including (among other liabilities) three-month U.S. dollar non-personal time deposits in the United States, plus (iii) the average during such three-week period of the annual assessment rates estimated by Citibank for determining the then current annual assessment payable by Citibank to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of Citibank in the United States; and (c) 1/2 of 1% per annum above the Federal Funds Rate. "Base Rate Advance" means an Advance that bears interest as provided in Section 2.08(a)(i). "Borrower" means any of the Company or any Foreign Borrower. "Borrower's Account" means (a) with respect to the Company, the account of the Company maintained by the Company with The Bank of New York at its office at 101 14 8 Barclay Street, New York, New York, Account No. 823-0037-036, (b) with respect to the Canadian Borrower, the account of such Borrower maintained by such Borrower with The Bank of Nova Scotia at its office in Toronto, Ontario, Canada, Account No. 85761- 14, (c) with respect to HHEL, the account of such Borrower maintained by such Borrower with Barclays Bank PLC at its office at Business Center, 51 Mosley Street, Manchester, England, Account No. 20553410231827, (d) with respect to Rigby, the account of such Borrower maintained by such Borrower with Den Danske Bank at its office at 6000 Koding, Account No. 3211205148, and (e) with respect to Danmark, the account of such Borrower maintained by such Borrower with _______________ at its office at ____________________, New York, New York _____, Account No. __________, or, in any case, such other account as such Borrower shall specify in writing to the Administrative Agent. "Borrowing" means a Term A Borrowing, a Term B Borrowing, a Delayed Draw Borrowing, a Multicurrency Borrowing, a Revolving Credit Borrowing or a Swing Line Borrowing. "Borrowing Base Certificate" means a certificate in substantially the form of Exhibit M hereto, duly certified by a Designated Officer of the Company. "Business Day" means a day of the year on which banks are not required or authorized by law to close in New York City and, if the applicable Business Day relates to any Eurocurrency Rate Advances, on which dealings are carried on in the London interbank market and banks are open for business in London and in the country of issue of the currency of such Eurocurrency Rate Advance (or, in the case of an Advance denominated in the euro, in Frankfurt, Germany), if the applicable Business Day relates to any Local Rate Advances, on which banks are open for business in the country of issue of the currency of such Local Rate Advance and, if the applicable Business Day relates to Bankers' Acceptances, on which banks are open for business in Toronto, Ontario, Canada. "Canadian Cash Collateral Account" has the meaning specified in the Canadian Security Agreement. "Canadian Dollars" and the "CN$" sign each means the lawful currency of Canada. "Canadian Domestic Lending Office" means, with respect to any Multicurrency Lender, the office of such Lender specified as its "Canadian Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender, as the case may be, or such other office of such Lender in 15 9 Canada as such Lender may from time to time specify to the Canadian Borrower and the Administrative Agent. "Canadian Prime Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of: (a) the rate (rounded upward to the nearest whole multiple of 1/4 of 1% per annum), which the principal office of the Canadian Reference Lender in Toronto, Ontario announces publicly from time to time as its prime rate for determining rates of interest on commercial loans in Canadian Dollars made by it in Canada; and (b) 3/4 of 1% per annum above the rate quoted for 30-day Canadian Dollar bankers' acceptances of Citibank Canada that appears on the Reuters Screen CDOR Page (or any replacement page) as of 10:00 a.m. (Toronto, Ontario time) on the date of determination. "Canadian Prime Rate Advance" means a Multicurrency Advance made in Canadian Dollars that bears interest as provided in Section 2.08(a)(iii). "Canadian Reference Lender" means Citibank Canada; provided that, if the foregoing shall cease to be a Multicurrency Lender, the term "Canadian Reference Lender" shall no longer include such Multicurrency Lender and shall thereafter include such Canadian Lender as the Agent shall designate as a replacement Canadian Reference Lender, which designation shall be made with the consent of such replacement Canadian Reference Lender and the Canadian Borrower, which consent shall not be unreasonably withheld or delayed and provided further that if any Multicurrency Lenders are banks set forth in Schedule I of the Bank Act (Canada), the Canadian Reference Lender will be such a Schedule I bank. "Canadian Security Agreement" has the meaning specified in Section 3.01(a)(v). "Capital Expenditures" means, for any Person for any period, the sum of, without duplication, (a) all expenditures made, directly or indirectly, by such Person or any of its Subsidiaries during such period for equipment, fixed assets, real property or improvements, or for replacements or substitutions therefor or additions thereto, that have been or should be, in accordance with GAAP, reflected as additions to property, plant or equipment on a Consolidated balance sheet of such Person or have a useful life of more than one year plus (b) the aggregate principal amount of all Debt (including Obligations under Capitalized Leases) assumed or incurred in connection with any such expenditures, but not including interest capitalized during construction or any Investments permitted 16 10 pursuant to Section 5.02(f) related to acquisitions. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such insurance proceeds, as the case may be. "Capitalized Leases" means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases. "Cash Collateral Account" has the meaning specified in the Security Agreement. "Cash Equivalents" means any of the following, to the extent owned by the Company or any of its Subsidiaries free and clear of all Liens other than Liens created under the Collateral Documents and having a maturity of not greater than one year from the date of issuance thereof: (a) direct obligations of the Government of the United States or the United Kingdom or any agency or instrumentality thereof or obligations unconditionally guaranteed or insured by the full faith and credit of the Government of the United States or the United Kingdom, (b) certificates of deposit of, time deposits with or bankers' acceptances of, any commercial bank that is a Lender Party or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c) below, is organized or licensed under the laws of the United States or any State thereof and has combined capital and surplus of at least $1 billion, (c) commercial paper in an aggregate amount of no more than $5,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State of the United States or the laws of the United Kingdom and rated at least "Prime-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc., (d) repurchase obligations with a term of not more than thirty days for underlying securities of the type described in clauses (a) and (b) above entered into with any financial institution meeting the qualifications specified in clause (b) above, in an aggregate amount of no more than $5,000,000 at any one time outstanding and (e) money market mutual funds substantially all of the assets of which are invested primarily in assets of the types described in clauses (a) through (d) above. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time. "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency. 17 11 "Change of Control" means the occurrence of any of the following: (a) WHX Corporation and any of its wholly-owned Subsidiaries shall have ceased to own beneficial ownership of Voting Stock of the Company representing 60% of the combined voting power of all Voting Stock of the Company; or (b) during any period of up to 24 consecutive months, commencing after the date of this Agreement, individuals who at the beginning of such 24-month period were directors of the Company shall cease, without the consent of WHX Corporation, to constitute a majority of the board of directors of the Company; or (c) any Person or two or more Persons acting in concert other than WHX Corporation shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of control over Voting Stock of the Company (or other securities convertible into such Voting Stock) representing 40% or more of the combined voting power of all Voting Stock of the Company. "Citibank" means Citibank, N.A. "Collateral" means all "Collateral" referred to in the Collateral Documents and all other property that is or is intended to be subject to any Lien in favor of the Collateral Agent for the benefit of the Secured Parties. "Collateral Agent" has the meaning specified in the recital of parties to this Agreement. "Collateral Documents" means the Security Agreement, the Canadian Security Agreement, the Mortgages, the Deed of Charge, the Deed of Charge over Shares and any other agreement that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Secured Parties. "Commitment" means a Term A Commitment, a Term B Commitment, a Delayed Draw Commitment, a Multicurrency Commitment, a Revolving Credit Commitment or a Letter of Credit Commitment. "Consolidated" refers to the consolidation of accounts in accordance with GAAP. "Contingent Obligation" means, with respect to any Person, any Obligation or arrangement of such Person to guarantee or intended to guarantee any Debt, leases, dividends or other payment Obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the Obligation of a primary obligor, (b) the Obligation to 18 12 make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement or (c) any Obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith. "Conversion", "Convert" and "Converted" each refer to a conversion of Advances of one Type into Advances of the other Type pursuant to Section 2.08(d), 2.10 or 2.12. "Conversion Date" means July 30, 2000. "Danmark Effective Date" has the meaning specified in Section 3.02. "Debt" of any Person means, without duplication (a) all indebtedness of such Person for borrowed money, (b) all Obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 60 days incurred in the ordinary course of such Person's business), (c) all Obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all Obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Obligations of such Person as lessee under Capitalized Leases, (f) all Obligations of such Person under acceptance, letter of credit or similar facilities, (g) all Obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock of or other ownership or profit interest in such Person or any other Person or any warrants, rights or options to acquire such capital stock, valued, in the case of Redeemable Preferred Stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all Obligations of such Person in respect of Hedge Agreements, 19 13 valued at the Agreement Value thereof, (i) all Obligations contingent or otherwise, of such Person for production payments from property operated by or on behalf of such person and other similar arrangements with respect to natural resources, (j) all Contingent Obligations of such Person and (k) all indebtedness and other payment Obligations referred to in clauses (a) through (j) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment Obligations; provided that "Debt" shall not include Obligations under the Precious Metals Leasing. "Debt for Borrowed Money" of any Person means all items that, in accordance with GAAP, would be classified as indebtedness on a Consolidated balance sheet of such Person. "Deed of Charge over Shares" has the meaning specified in Section 3.01(a)(vi). "Default" means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both. "Defaulted Advance" means, with respect to any Lender Party at any time, the portion of any Advance required to be made by such Lender Party to any Borrower pursuant to Section 2.01 or 2.02 at or prior to such time that has not been made by such Lender Party or by the Administrative Agent for the account of such Lender Party pursuant to Section 2.02(e) as of such time. In the event that a portion of a Defaulted Advance shall be deemed made pursuant to Section 2.17(a), the remaining portion of such Defaulted Advance shall be considered a Defaulted Advance originally required to be made pursuant to Section 2.01 on the same date as the Defaulted Advance so deemed made in part. "Defaulted Amount" means, with respect to any Lender Party at any time, any amount required to be paid by such Lender Party to any Agent or any other Lender Party hereunder or under any other Loan Document at or prior to such time that has not been so paid as of such time, including, without limitation, any amount required to be paid by such Lender Party to (a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a portion of a Swing Line Advance made by the Swing Line Bank, (b) any Issuing Bank pursuant to Section 2.03(c) to purchase a portion of a Letter of Credit Advance made by such Issuing Bank, (c) the Administrative Agent pursuant to Section 2.02(e) to reimburse the Administrative Agent for the amount of any Advance made by the Administrative Agent for the account of such Lender Party, (d) any other Lender Party pursuant to Section 2.15 to purchase any participation in Advances owing to such other Lender Party 20 14 and (e) any Agent or any Issuing Bank pursuant to Section 8.05 to reimburse such Agent or such Issuing Bank for such Lender Party's ratable share of any amount required to be paid by the Lender Parties to such Agent or such Issuing Bank as provided therein. In the event that a portion of a Defaulted Amount shall be deemed paid pursuant to Section 2.17(b), the remaining portion of such Defaulted Amount shall be considered a Defaulted Amount originally required to be paid hereunder or under any other Loan Document on the same date as the Defaulted Amount so deemed paid in part. "Defaulting Lender" means, at any time, any Lender Party that, at such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take any action or be the subject of any action or proceeding of a type described in Section 6.01(f). "Default Termination Notice" has the meaning specified in Section 2.01(g). "Delayed Draw Advance" has the meaning specified in Section 2.01(c). "Delayed Draw Borrowing" means a borrowing consisting of simultaneous Delayed Draw Advances of the same Type made by the Delayed Draw Lenders. "Delayed Draw Commitment" means, with respect to any Delayed Draw Lender at any time, the Dollar amount set forth opposite such Lender's name on Schedule I hereto under the caption "Delayed Draw Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Delayed Draw Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Delayed Draw Facility" means, at any time, the aggregate amount of the Delayed Draw Lenders' Delayed Draw Commitments at such time. "Delayed Draw Lender" means any Lender that has a Delayed Draw Commitment. "Delayed Draw Note" means a promissory note of the Company payable to the order of any Delayed Draw Lender, in substantially the form of Exhibit A-3 hereto, evidencing the indebtedness of the Company to such Lender resulting from the Delayed Draw Advance made by such Lender, as amended. "Delayed Draw Reduction Amount" has the meaning specified in Section 2.07(b)(ix). 21 15 "Designated Officer" means the Chief Financial Officer, Controller, Treasurer or any other officer designated by the Company from time to time to the Administrative Agent as authorized to deliver the Borrowing Base Certificate or to otherwise provide certifications required hereunder. "Dollars" and the "$" sign each means lawful currency of the United States of America. "Domestic Lending Office" means, with respect to any Lender Party, the office of such Lender Party specified as its "Domestic Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party, as the case may be, or such other office of such Lender Party as such Lender Party may from time to time specify to the Company and the Administrative Agent. "Domestic Subsidiary" means any Subsidiary other than a Foreign Subsidiary. "Domestic Subsidiary Guarantors" means all wholly-owned Domestic Subsidiaries of the Company (other than any Inactive Subsidiary) and each other Domestic Subsidiary of the Company that shall be required to execute and deliver a guaranty pursuant to Section 5.01(j). "Domestic Subsidiary Guaranty" has the meaning specified in Section 3.01(a)(iii). "Draft" means a blank bill of exchange, within the meaning of the Bills of Exchange Act (Canada), drawn by the Canadian Borrower on any Multicurrency Lender, in substantially the form of Exhibit A-6, and which, except as otherwise provided herein, has not been completed or accepted by such Lender. "Drawing" means the simultaneous acceptance of Drafts and purchase of Bankers' Acceptances by the Multicurrency Lenders, in accordance with Section 2.04(a). "Drawing Fee" means, with respect to each Bankers' Acceptance, an amount equal to (a) the Applicable Percentage in effect on the date of the Drawing or renewal, as the case may be, of such Bankers' Acceptance multiplied by (b) the Face Amount of such Bankers' Acceptance, calculated on the basis of the term to maturity of such Bankers' Acceptance and a year of 365 days. "Drawing Purchase Price" means, with respect to each Bankers' Acceptance to be purchased and/or accepted by any Multicurrency Lender at any time, the amount (adjusted to the nearest whole cent or, if there is no nearest whole cent, the next higher whole cent) 22 16 obtained by dividing (a) the aggregate Face Amount of such Bankers' Acceptance, by (b) the sum of (i) one and (ii) the product of (A) the BA Rate in effect at such time (expressed as a decimal fraction) multiplied by (B) a fraction the numerator of which is the number of days in the term to maturity of such Bankers' Acceptance and the denominator of which is 365 days. "EBITDA" means, for any period, the sum, without duplication and determined on a Consolidated basis, of (a) net income (or net loss), (b) interest expense, (c) income tax expense, (d) depreciation expense, (e) amortization expense, (f) lease expense under the Precious Metals Leasing, (g) extraordinary, unusual or nonrecurring (including change of control charges) losses deducted in calculating net income, (h) any increase in the long term liability in respect of other post-retirement benefit or pension benefit to the extent included in the calculation of net income ("Employee Liability"), (i) any decrease in pension asset to the extent included in the calculation of net income ("Pension Asset") and (j) other non-cash charges (including without limitation, the lower of cost or market adjustment with respect to Precious Metal Inventory) less (i) interest income, (ii) income tax credit, (iii) extraordinary, unusual or nonrecurring gains included in calculating net income and (iv) any decrease in the Employee Liability; and (v) any increase in the Pension Asset, in each case of the Company and its Subsidiaries, determined in accordance with GAAP for such period. "Eligible Assignee" means (a) with respect to any Facility (other than the Letter of Credit Facility), (i) a Lender; (ii) an Affiliate of a Lender; (iii) a commercial bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (iv) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof, and having total assets in excess of $3,000,000,000; (v) a commercial bank organized under the laws of any other country that is a member of the OECD or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this clause (v); (vi) the central bank of any country that is a member of the OECD; (vii) with respect to any Lender that is a fund that invests in bank loans, any other fund or trust or entity that invests in bank loans and is advised or managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor; and (viii) any other Person regularly engaged in the business of investing in bank loans and approved by the Administrative Agent and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Company, such approval not to be unreasonably withheld or delayed, and (b) with respect to the Letter of Credit Facility, a Person that is an Eligible Assignee under subclause (iii) or (v) of clause (a) of this definition and is 23 17 approved by the Administrative Agent and, unless a Default has occurred and is continuing at the time any assignment is effected pursuant to Section 9.07, the Company, such approval not to be unreasonably withheld or delayed; provided, however, that neither any Loan Party nor any Affiliate of a Loan Party shall qualify as an Eligible Assignee under this definition. "Eligible Collateral" means, collectively, Eligible Inventory and Eligible Receivables. "Eligible Inventory" means only such Inventory of the Loan Parties as the Administrative Agent, in its reasonable discretion consistent with its customary business practices and generally applicable criteria for comparable secured financings, shall from time to time elect to consider Eligible Inventory for purposes of this Agreement. The value of such Inventory shall be determined by the Administrative Agent in its reasonable discretion consistent with its customary business practices and generally applicable criteria for comparable secured financings, taking into consideration, among other factors, the lower of its cost and its market value determined in accordance with GAAP and, in the case of Precious Metal Inventory, market value. "Eligible Receivables" means only such Receivables of the Loan Parties as the Administrative Agent, in its reasonable discretion consistent with its customary business practices and generally applicable criteria for comparable secured financings, shall from time to time elect to consider Eligible Receivables for purposes of this Agreement. The value of such Receivables shall be determined by the Administrative Agent in its reasonable discretion consistent with its customary business practices and generally applicable criteria for comparable secured financings, taking into consideration, among other factors, their book value determined in accordance with GAAP. "Environmental Action" means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, any Environmental Permit or Hazardous Material or arising from alleged injury or threat to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief. "Environmental Law" means any Federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the 24 18 environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under any Environmental Law. "Equivalent" in Dollars of any Foreign Currency on any date means the equivalent in Dollars of such Foreign Currency determined by using the quoted spot rate at which the Sub-Agent's principal office in London offers to exchange Dollars for such Foreign Currency in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement, and the "Equivalent" in any Foreign Currency of Dollars means the equivalent in such Foreign Currency of Dollars determined by using the quoted spot rate at which the Sub-Agent's principal office in London offers to exchange such Foreign Currency for Dollars in London prior to 4:00 P.M. (London time) (unless otherwise indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Internal Revenue Code. "ERISA Event" means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043(c) of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived or extended by the PBGC or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in 25 19 Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan. "Eurocurrency Lending Office" means, with respect to any Lender Party, the office of such Lender Party specified as its "Eurocurrency Lending Office" opposite its name on Schedule I hereto or in the Assignment and Acceptance pursuant to which it became a Lender Party (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender Party as such Lender Party may from time to time specify to the Borrowers and the Administrative Agent. "Eurocurrency Liabilities" has the meaning specified in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Eurocurrency Rate" means, for any Interest Period for all Eurocurrency Rate Advances comprising part of the same Borrowing, an interest rate per annum equal to the rate per annum obtained by dividing (a) the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in Dollars or the relevant Foreign Currencies are offered by the principal office of each of the Reference Banks in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in an amount substantially equal to such Reference Bank's Eurocurrency Rate Advance comprising part of such Borrowing to be outstanding during such Interest Period (or, if such Reference Bank shall not have such a Eurocurrency Rate Advance, $1,000,000) and for a period equal to such Interest Period by (b) a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage for such Interest Period. The Eurocurrency Rate for any Interest Period for each Eurocurrency Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "Eurocurrency Rate Advance" means an Advance that bears interest as provided in Section 2.08(a)(ii). "Eurocurrency Rate Reserve Percentage" for any Interest Period for all Eurocurrency Rate Advances comprising part of the same Borrowing means the reserve 26 20 percentage applicable two Business Days before the first day of such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or with respect to any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Rate Advances is determined) having a term equal to such Interest Period. "Events of Default" has the meaning specified in Section 6.01. "Excess Cash Flow" means, for any period, Consolidated EBITDA minus (a) cash Capital Expenditures, (b) non-deferred income tax expense, (c) cash interest payable on all Debt for Borrowed Money (net of cash interest income), (d) payments under Precious Metals Leasing other than for the acquisition of metals and (e) scheduled principal amounts of all Debt for Borrowed Money actually paid, in each case, of or by the Company and its Subsidiaries during such period. "Existing Debt" means Debt of each Loan Party and its Subsidiaries outstanding immediately before but not immediately after giving effect to the consummation of the transactions contemplated by the Transaction Documents. "Face Amount" means, with respect to any Bankers' Acceptance, the amount payable to the holder of such Bankers' Acceptance on its then existing Maturity Date. "Facility" means the Term A Facility, the Term B Facility, the Delayed Draw Facility, the Multicurrency Facility, the Revolving Credit Facility, the Swing Line Facility or the Letter of Credit Facility. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Final Maturity Date" means July 30, 2006. 27 21 "Fiscal Year" means a fiscal year of the Company and its Consolidated Subsidiaries ending on December 31 in any calendar year. "Deed of Charge" has the meaning specified in Section 3.01(a)(vi). "Fixed Charge Coverage Ratio" means, at any date of determination, the ratio of (a) Consolidated Adjusted EBITDA minus Capital Expenditures to (b) the sum of (i) cash interest expense on all Debt for Borrowed Money (net of cash interest income) plus (ii) payments under the Precious Metals Leasing other than for the acquisition of metals plus (iii) scheduled principal amounts of all Debt for Borrowed Money actually paid, in each case, of or by the Company and its Subsidiaries during the four consecutive fiscal quarters most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be. "Foreign Borrower" has the meaning specified in the recital of parties to this Agreement. "Foreign Currency" means the lawful currency of Canada, the lawful currency of the United Kingdom, the lawful currency of the Kingdom of Denmark, the lawful currency of the European Economic and Monetary Union and such other lawful currencies that are freely transferable or convertible into Dollars as may be agreed by all of the Multicurrency Lenders from time to time. "Foreign Subsidiary" means a Subsidiary organized under the laws of a jurisdiction other than the United States or any State thereof. "Foreign Subsidiary Guarantors" means all Foreign Subsidiaries of the Company (other than Electro-Connection Finishers, Danmark and any Inactive Subsidiary) and each other Foreign Subsidiary of the Company that shall be required to execute and deliver a guaranty pursuant to Section 5.01(j). "Foreign Subsidiary Guaranty" has the meaning specified in Section 3.01(a)(iii). "GAAP" has the meaning specified in Section 1.03. "Guaranteed Obligations" has the meaning specified in Section 7.01. "Guaranties" means the Domestic Subsidiary Guaranty and the Foreign Subsidiary Guaranty. 28 22 "Guarantors" means the Domestic Subsidiary Guarantors and the Foreign Subsidiary Guarantors. "Hazardous Materials" means (a) petroleum or petroleum products, by-products or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law. "Hedge Agreements" means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity future or option contracts and other hedging agreements. "Hedge Bank" means any Lender Party or an Affiliate of a Lender Party in its capacity as a party to a Secured Hedge Agreement. "Inactive Subsidiary" means any Subsidiary listed on Schedule II and any other direct or indirect Subsidiary of the Company with assets less than $2,500,000 as may be certified from time to time by a Designated Officer of the Company to the Administrative Agent. "Indemnified Party" has the meaning specified in Section 9.04(b). "Information Memorandum" means the prospectus dated May 14, 1998 used by WHX Corporation in connection with the offer to exchange its 10-1/2% Senior Exchange Notes Due 2005 for its 10-1/2% Senior Notes Due 2005. "Initial Extension of Credit" means the earlier to occur of the initial Borrowing and the initial issuance of a Letter of Credit hereunder. "Initial Issuing Banks" has the meaning specified in the recital of parties to this Agreement. "Initial Lenders" has the meaning specified in the recital of parties to this Agreement. "Insufficiency" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "Intercreditor Agreement" means an Intercreditor Agreement substantially in the form of Exhibit O hereto between WHX Corporation or its Subsidiary, Fleet Precious 29 23 Metals Inc. and the Administrative Agent, as amended from time to time in accordance with this Agreement. "Interest Coverage Ratio" means, at any date of determination, the ratio of (a) Consolidated Adjusted EBITDA to (b) cash interest payable on all Debt for Borrowed Money and payments under the Precious Metals Leasing other than for the acquisition of metals, in each case, of or by the Company and its Subsidiaries during the four consecutive fiscal quarters most recently ended for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be. "Interest Period" means, for each Eurocurrency Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Eurocurrency Rate Advance or the date of the Conversion of any Base Rate Advance into such Eurocurrency Rate Advance, and ending on the last day of the period selected by the applicable Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by such Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, two, three or six months, as such Borrower may, upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Day prior to the first day of such Interest Period, select; provided, however, that: (a) no Borrower may select any Interest Period with respect to any Eurocurrency Rate Advance under a Facility that ends after any principal repayment installment date for such Facility unless, after giving effect to such selection, the aggregate principal amount of Base Rate Advances, Local Rate Advances and of Eurocurrency Rate Advances having Interest Periods that end on or prior to such principal repayment installment date for such Facility shall be at least equal to the aggregate principal amount of Advances under such Facility due and payable on or prior to such date; (b) Interest Periods commencing on the same date for Eurocurrency Rate Advances comprising part of the same Borrowing shall be of the same duration; (c) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and 30 24 (d) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "Inventory" means all Inventory referred to in Section 1(b) of the Security Agreement. "Investment" in any Person means any loan or advance to such Person, any purchase or other acquisition of any capital stock or other ownership or profit interest, warrants, rights, options, obligations or other securities or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person or any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (j) or (k) of the definition of "Debt" in respect of such Person. "Issuing Banks" means each Initial Issuing Bank and any other Revolving Credit Lender approved as an Issuing Bank by the Administrative Agent and any Eligible Assignee to which a Letter of Credit Commitment hereunder has been assigned pursuant to Section 9.07 so long as each such Revolving Credit Lender or each such Eligible Assignee expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Administrative Agent of its Applicable Lending Office and the amount of its Letter of Credit Commitment (which information shall be recorded by the Administrative Agent in the Register). "L/C Cash Collateral Account" has the meaning specified in the Security Agreement. "L/C Related Documents" has the meaning specified in Section 2.05(h)(ii). "Lender Party" means any Lender, any Issuing Bank or the Swing Line Bank. "Lenders" means the Initial Lenders and each Person that shall become a Lender hereunder pursuant to Section 9.07 for so long as such Initial Lender or Person, as the case may be, shall be a party to this Agreement. 31 25 "Letter of Credit Advance" means an advance made by any Issuing Bank or any Revolving Credit Lender pursuant to Section 2.03(c). "Letter of Credit Agreement" has the meaning specified in Section 2.03(a). "Letter of Credit Commitment" means, with respect to any Issuing Bank at any time, the Dollar amount set forth opposite such Issuing Bank's name on Schedule I hereto under the caption "Letter of Credit Commitment" or, if such Issuing Bank has entered into one or more Assignment and Acceptances, set forth for such Issuing Bank in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Issuing Bank's "Letter of Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Letter of Credit Facility" means, at any time, an amount equal to the lesser of (a) the aggregate amount of the Issuing Banks' Letter of Credit Commitments at such time and (b) $30,000,000, as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Letters of Credit" has the meaning specified in Section 2.01(g). "Lien" means any lien, security interest or other charge or encumbrance of any kind, or any other similar type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property. "Loan Documents" means (a) for purposes of this Agreement and the Notes and any amendment, supplement or modification hereof or thereof, (i) this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral Documents and (v) each Letter of Credit Agreement and (b) for purposes of the Guaranties and the Collateral Documents and for all other purposes other than for purposes of this Agreement and the Notes, (i) this Agreement, (ii) the Notes, (iii) the Guaranties, (iv) the Collateral Documents, (v) each Letter of Credit Agreement and (vi) each Secured Hedge Agreement, in each case as amended. "Loan Parties" means the Borrowers and the Guarantors. "Loan Value" means, with respect to any Eligible Collateral, an amount equal to a percentage of the value of any item of Eligible Collateral determined by the Administrative Agent in its reasonable discretion consistent with its customary business practices and generally applicable criteria for comparable secured financings. By way of example only, and without limiting the discretion of the Administrative Agent to determine any such 32 26 percentage to be applicable, the Administrative Agent may determine to apply, with respect to all Eligible Collateral, the sum of up to the following amounts and, with respect to a particular category of Eligible Collateral, up to the following amount for such category of Eligible Collateral: (a) with respect to Eligible Receivables, up to 85% of the value of Eligible Receivables; (b) with respect to Eligible Inventory (other than Precious Metal Eligible Inventory), up to 55% of the value of such Eligible Inventory; and (c) with respect to Precious Metal Eligible Inventory, up to 80% of the value of such Precious Metal Eligible Inventory. "Local Rate" means (a) with respect to any Multicurrency Advance denominated in any Foreign Currency (other than Canadian Dollars), the rate of interest from time to time publicly announced by Citibank in the jurisdiction of issuance of such Foreign Currency as its base rate (or its equivalent thereof) for loans denominated in such Foreign Currency at the principal lending office of Citibank in the jurisdiction of issuance of such Foreign Currency, and (b) with respect to any Multicurrency Advance denominated in Canadian Dollars, the Canadian Prime Rate. "Local Rate Advance" shall mean each Multicurrency Advance hereunder at such time as it is made or being maintained at a rate of interest based upon the Local Rate for the relevant Foreign Currency. "Local Rate Lending Office" means, with respect to any Multicurrency Lender for any Foreign Currency (other than Canadian Dollars) the office of such Lender specified by such Lender to the Borrowers and the Administrative Agent from time to time for such Foreign Currency and, in the case of any Multicurrency Lender for Canadian Dollars, such Lender's Canadian Domestic Lending Office. "Management Agreement" means the Management Agreement dated as of April 13, 1998 between the Company and WHX Corporation or its Affiliates, as amended from time to time to the extent permitted under the Loan Documents. "Margin Stock" has the meaning specified in Regulation U. "Material Adverse Change" means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole. "Material Adverse Effect" means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and its Subsidiaries, taken as a whole, (b) the rights and remedies of any Agent or any Lender Party under any Transaction Document or (c) the ability of any Loan Party 33 27 to perform its Obligations under any Transaction Document to which it is or is to be a party. "Maturity Date" means, for each Bankers' Acceptance comprising part of the same Drawing, the date on which the Face Amount of such Bankers' Acceptance becomes due and payable in accordance with the provisions set forth below, which shall be a Business Day occurring one, two or three months or, if available to all Multicurrency Lenders purchasing Bankers' Acceptances in connection with the applicable Drawing, six months after the date on which such Bankers' Acceptance is purchased and/or accepted as part of any Drawing, as the Canadian Borrower may select upon notice received by the Administrative Agent not later than 10:00 a.m. (New York City time) on a Business Day at least three Business Days prior to the date on which such Bankers' Acceptance is to be accepted and purchased (whether as a new Drawing, by renewal or by Conversion); provided, however, that: (a) such Borrower may not select any Maturity Date for any Bankers' Acceptance that occurs after the scheduled Termination Date; (b) the Maturity Date for all Bankers' Acceptances comprising part of the same Drawing shall occur on the same date; and (c) whenever the Maturity Date for any Bankers' Acceptance would otherwise occur on a day other than a Business Day, such Maturity Date shall be extended to occur on the next succeeding Business Day. "Mortgages" has the meaning specified in Section 3.01(a)(iv). "Mortgage Policies" has the meaning specified in Section 3.01(a)(iv)(B). "Multicurrency Advance" has the meaning specified in Section 2.01(d). "Multicurrency Borrowing" means a borrowing consisting of simultaneous Multicurrency Advances in the same currency of the same Type made by the Multicurrency Lenders. "Multicurrency Commitment" means, with respect to any Multicurrency Lender at any time, the Dollar amount set forth opposite such Lender's name on Schedule I hereto under the caption "Multicurrency Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Multicurrency 34 28 Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Multicurrency Facility" means, at any time, the aggregate amount of the Multicurrency Lenders' Multicurrency Commitments at such time. "Multicurrency Lender" means any Lender that has a Multicurrency Commitment and a Revolving Credit Commitment. "Multicurrency Note" means a promissory note of the Company payable to the order of any Multicurrency Lender, in substantially the form of Exhibit A-4 hereto, evidencing the aggregate indebtedness of the Company to such Lender resulting from the Multicurrency Advances made by such Lender, as amended. "Multicurrency Reduction Amount" has the meaning specified in Section 2.07(b)(xi). "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "Net Cash Proceeds" means, with respect to any sale, lease, transfer or other disposition of any asset or the sale or issuance of any Debt or capital stock or other ownership or profit interest (including, without limitation, any capital contribution), any securities convertible into or exchangeable for capital stock or other ownership or profit interest or any warrants, rights, options or other securities to acquire capital stock or other ownership or profit interest by any Person, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with such transaction after deducting therefrom only (without duplication) (a) reasonable and customary brokerage commissions, underwriting fees and discounts, legal fees, finder's fees and other similar fees and commissions, (b) the amount of taxes payable in connection with or as a result of such transaction (including payments required under the Tax Agreement) and 35 29 (c) the amount of any Debt secured by a Lien on such asset that, by the terms of the agreement or instrument governing such Debt, is required to be repaid upon such disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid to a Person that is not an Affiliate of such Person or any Loan Party or any Affiliate of any Loan Party and are properly attributable to such transaction or to the asset that is the subject thereof; provided, however, that in the case of taxes that are deductible under clause (b) above but for the fact that, at the time of receipt of such cash, such taxes have not been actually paid or are not then payable, such Loan Party or such Subsidiary may deduct an amount (the "Reserved Amount") equal to the amount reserved in accordance with GAAP for such Loan Party's or such Subsidiary's reasonable estimate of such taxes, other than taxes for which such Loan Party or such Subsidiary is indemnified, provided further, however, that, at the time such taxes are paid, an amount equal to the amount, if any, by which the Reserved Amount for such taxes exceeds the amount of such taxes actually paid shall constitute "Net Cash Proceeds" of the type for which such taxes were reserved for all purposes hereunder. "Note" means a Term A Note, a Term B Note, a Delayed Draw Note, a Multicurrency Note or a Revolving Credit Note. "Notice of Borrowing" has the meaning specified in Section 2.02(a). "Notice of Drawing" has the meaning specified in Section 2.04(a). "Notice of Issuance" has the meaning specified in Section 2.03(a). "Notice of Renewal" has the meaning specified in Section 2.01(g). "Notice of Swing Line Borrowing" has the meaning specified in Section 2.02(b). "Notice of Termination" has the meaning specified in Section 2.01(g). "NPL" means the National Priorities List under CERCLA. "Obligation" means, with respect to any Person, any payment, performance or other obligation of such Person of any kind, including, without limitation, any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any proceeding referred to in Section 6.01(f). Without limiting the generality of the foregoing, the Obligations of any 36 30 Loan Party under the Loan Documents include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees and disbursements, indemnities and other amounts payable by such Loan Party under any Loan Document and (b) the obligation of such Loan Party to reimburse any amount in respect of any of the foregoing that any Lender Party, in its reasonable discretion, may elect to pay or advance on behalf of such Loan Party. "OECD" means the Organization for Economic Cooperation and Development. "Open Year" has the meaning specified in Section 4.01(r)(ii). "Other Taxes" has the meaning specified in Section 2.14(b). "Payment Office" means, for any Foreign Currency, such office of Citibank as shall be from time to time selected by the Administrative Agent and notified by the Administrative Agent to the Borrowers and the Lender Parties. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Encumbrances" has the meaning specified in the Mortgages. "Permitted Liens" means: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 5.01(b); (b) Liens imposed by law, such as materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 60 days; (c) pledges or deposits to secure obligations under workers' compensation laws or similar legislation or to secure public or statutory obligations; and (d) Permitted Encumbrances. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means a Single Employer Plan or a Multiple Employer Plan. "Pledged Debt" has the meaning specified in the Security Agreement. "Precious Metal Eligible Inventory" means Eligible Inventory consisting of any precious metals including, without limitation, gold, silver, palladium and platinum group metals. 37 31 "Precious Metal Inventory" means Inventory consisting of any precious metals including, without limitation, gold, silver, palladium and platinum group metals. "Precious Metals Leasing" means a precious metals leasing or other facility designed to provide the Company or any of its Subsidiaries with precious metals to be used in its business operations. "Preferred Stock" means, with respect to any corporation, capital stock issued by such corporation that is entitled to a preference or priority over any other capital stock issued by such corporation upon any distribution of such corporation's assets, whether by dividend or upon liquidation. "Pro Rata Share" of any amount means, with respect to any Revolving Credit Lender at any time, the product of such amount times a fraction the numerator of which is the amount of such Lender's Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.06 or 6.01, such Lender's Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the Revolving Credit Facility at such time (or, if the Commitments shall have been terminated pursuant to Section 2.06 or 6.01, the Revolving Credit Facility as in effect immediately prior to such termination). "Receivables" means all Receivables referred to in Section 1(c) of the Security Agreement. "Redeemable" means, with respect to any capital stock or other ownership or profit interest, Debt or other right or Obligation, any such right or Obligation that (a) the issuer has undertaken to redeem at a fixed or determinable date or dates, whether by operation of a sinking fund or otherwise, or upon the occurrence of a condition not solely within the control of the issuer or (b) is redeemable at the option of the holder. "Reduction Amount" has the meaning specified in Section 2.07(b)(viii). "Reference Banks" means Citibank and such other Lenders as shall be appointed from time to time by the Company with the consent of the Administrative Agent. "Register" has the meaning specified in Section 9.07(d). "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. 38 32 "Related Documents" means the Management Agreement, any intercompany notes issued pursuant to Section 5.02(b)(ii), the Tax Agreement and the Intercreditor Agreement. "Required Lenders" means, at any time, Lenders (voting as a single class) owed or holding at least a majority in interest of the sum of (a) the aggregate principal amount (based, in the case of Multicurrency Advances, on the Equivalent in Dollars at such time) of the Advances outstanding at such time, (b) the aggregate Available Amount of all Letters of Credit outstanding at such time, (c) the aggregate unused Commitments under the Delayed Draw Facility at such time, (d) the aggregate Unused Revolving Credit Commitments at such time and (e) the aggregate Unused Multicurrency Commitments at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time, there shall be excluded from the determination of Required Lenders at such time (A) the aggregate principal amount (based, in the case of Multicurrency Advances, on the Equivalent in Dollars at such time) of the Advances owing to such Lender (in its capacity as a Lender) and outstanding at such time, (B) such Lender's Pro Rata Share of the aggregate Available Amount of all Letters of Credit outstanding at such time, (C) the aggregate unused Term A Commitments, Term B Commitments, Delayed Draw Commitments and Multicurrency Commitments of such Lender at such time and (D) the Unused Revolving Credit Commitment of such Lender at such time. For purposes of this definition, the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank and the Available Amount of each Letter of Credit shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments. "Responsible Officer" means any officer of any Loan Party. "Revolving Credit Advance" has the meaning specified in Section 2.01(e). "Revolving Credit Borrowing" means a borrowing consisting of simultaneous Revolving Credit Advances of the same Type made by the Revolving Credit Lenders. "Revolving Credit Commitment" means, with respect to any Revolving Credit Lender at any time, the Dollar amount set forth opposite such Lender's name on Schedule I hereto under the caption "Revolving Credit Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Revolving Credit Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. 39 33 "Revolving Credit Facility" means, at any time, the aggregate amount of the Revolving Credit Lenders' Revolving Credit Commitments at such time. "Revolving Credit Lender" means any Lender that has a Revolving Credit Commitment. "Revolving Credit Note" means a promissory note of the Company payable to the order of any Revolving Credit Lender, in substantially the form of Exhibit A-5 hereto, evidencing the aggregate indebtedness of the Company to such Lender resulting from the Revolving Credit Advances made by such Lender, as amended. "Secured Hedge Agreement" means any Hedge Agreement required or permitted under clause (i)(A) or (iii)(G) of Section 5.02(b) that is entered into by and between any Loan Party and any Hedge Bank. "Secured Obligations" has the meaning specified in the Security Agreement. "Secured Parties" means the Agents, the Lender Parties and the Hedge Banks. "Security Agreement" has the meaning specified in Section 3.01(a)(ii). "Senior Leverage Ratio" means, at any date of determination, the ratio of (a) Consolidated Debt for Borrowed Money (other than Subordinated Debt) minus (b) the sum of (i) cash and Cash Equivalents and (ii) an amount equal to forty percent of the fair market value of the Precious Metal Inventory, in each case of the Company and its Subsidiaries as at the end of the most recently ended fiscal quarter of the Company for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, to Consolidated Adjusted EBITDA of the Company and its Subsidiaries for the twelve-month period ended as at the end of such fiscal quarter. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Solvent" and "Solvency" mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person, 40 34 (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay such debts and liabilities as they mature and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Sub-Agent" means, in the case of Bankers' Acceptances and Multicurrency Advances denominated in Canadian Dollars, Citibank Canada and, in the case of Multicurrency Advances denominated in any other Foreign Currency, Citibank, N.A. "Subordinated Debt" means any Debt of the Company that is subordinated to the Obligations of the Company under the Loan Documents substantially on the terms and conditions set forth in Exhibit N hereto with such other terms and conditions that may be reasonably acceptable to the Administrative Agent or otherwise or as permitted by Section 5.02(b)(i)(B). "Subsidiary" of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries. "Subsidiary Guaranty" has the meaning specified in Section 3.01(a)(iii). "Surviving Debt" means Debt of each Loan Party and its Subsidiaries outstanding immediately before and after giving effect to the transactions contemplated by the Transaction Documents. "Swing Line Advance" means an advance made by (a) the Swing Line Bank pursuant to Section 2.01(f) or (b) any Revolving Credit Lender pursuant to Section 2.02(b). 41 35 "Swing Line Bank" means Citicorp. "Swing Line Borrowing" means a borrowing consisting of a Swing Line Advance made by the Swing Line Bank pursuant to Section 2.01(f) or the Revolving Credit Lenders pursuant to Section 2.02(b). "Swing Line Facility" has the meaning specified in Section 2.01(f). "Tax Agreement" means the Tax Sharing Agreement between WHX Corporation and the Company, dated as of April 13, 1998, as amended, to the extent permitted under the Loan Documents. "Tax Certificate" has the meaning specified in Section 5.03(k) "Taxes" has the meaning specified in Section 2.14(a). "Term A Advance" has the meaning specified in Section 2.01(a). "Term A Borrowing" means a borrowing consisting of simultaneous Term A Advances of the same Type made by the Term A Lenders. "Term A Commitment" means, with respect to any Term A Lender at any time, the Dollar amount set forth opposite such Lender's name on Schedule I hereto under the caption "Term A Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Term A Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Term A Facility" means, at any time, the aggregate amount of the Term A Lenders' Term A Commitments at such time. "Term A Lender" means any Lender that has a Term A Commitment. "Term A Note" means a promissory note of the Company payable to the order of any Term A Lender, in substantially the form of Exhibit A-1 hereto, evidencing the indebtedness of the Company to such Lender resulting from the Term A Advance made by such Lender, as amended. "Term B Advance" has the meaning specified in Section 2.01(b). 42 36 "Term B Borrowing" means a borrowing consisting of simultaneous Term B Advances of the same Type made by the Term B Lenders. "Term B Commitment" means, with respect to any Term B Lender at any time, the Dollar amount set forth opposite such Lender's name on Schedule I hereto under the caption "Term B Commitment" or, if such Lender has entered into one or more Assignment and Acceptances, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(d) as such Lender's "Term B Commitment", as such amount may be reduced at or prior to such time pursuant to Section 2.06. "Term B Facility" means, at any time, the aggregate amount of the Term B Lenders' Term B Commitments at such time. "Term B Lender" means any Lender that has a Term B Commitment. "Term B Note" means a promissory note of the Company payable to the order of any Term B Lender, in substantially the form of Exhibit A-2 hereto, evidencing the indebtedness of the Company to such Lender resulting from the Term B Advance made by such Lender, as amended. "Termination Date" means the earlier of July 30, 2004, and the date of termination in whole of the Revolving Credit Commitments, the Letter of Credit Commitments and the Multicurrency Commitments pursuant to Section 2.06 or 6.01. "Total Leverage Ratio" means, at any date of determination, the ratio of (a) Consolidated Debt for Borrowed Money minus (b) the sum of (i) cash and Cash Equivalents and (ii) an amount equal to forty percent of the fair market value of the Precious Metal Inventory, in each case of the Company and its Subsidiaries as at the end of the most recently ended fiscal quarter of the Company for which financial statements are required to be delivered to the Lender Parties pursuant to Section 5.03(b) or (c), as the case may be, to Consolidated Adjusted EBITDA of the Company and its Subsidiaries for the twelve-month period ended as at the end of such fiscal quarter. "Transaction Documents" means, collectively, the Loan Documents and the Related Documents. "Type" refers to the distinction between Advances bearing interest at the Base Rate, Advances bearing interest at the applicable Local Rate and Advances bearing interest at the Eurocurrency Rate. 43 37 "Unused Asset Sale Proceeds Amount" means the aggregate amount of Net Cash Proceeds required to be prepaid pursuant to Section 2.06(b)(ii) prior to the time such amount is prepaid or reinvested in accordance with the terms of such Section unless such amount shall be deposited in the Cash Collateral Account pending such prepayment or reinvestment. "Unused Multicurrency Commitment" means, with respect to any Multicurrency Lender at any time (a) such Lender's Multicurrency Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Multicurrency Advances made by such Lender (or the Equivalent thereof in Dollars, if applicable), (ii) the Dollar Equivalent of the aggregate Face Amount of all Bankers' Acceptances purchased and/or accepted by such Lender and outstanding at such time and (iii) such Lender's ratable share of the amount of the Multicurrency Facility then reserved pursuant to Section 2.01(i). "Unused Revolving Credit Commitment" means, with respect to any Revolving Credit Lender at any time, (a) such Lender's Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Credit Advances, Swing Line Advances and Letter of Credit Advances made by such Lender (in its capacity as a Lender) and outstanding at such time plus (ii) such Lender's Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit outstanding at such time, (B) the aggregate principal amount of all Letter of Credit Advances made by the Issuing Banks pursuant to Section 2.03(c) and outstanding at such time, (C) the aggregate principal amount of all Swing Line Advances made by the Swing Line Bank pursuant to Section 2.01(f) and outstanding at such time and (D) the Unused Asset Sale Proceeds Amount plus (iii) in the case of a Revolving Credit Lender that is a Multicurrency Lender, such Lender's Multicurrency Commitment. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "Welfare Plan" means a welfare plan, as defined in Section 3(1) of ERISA, that is maintained for employees of any Loan Party or in respect of which any Loan Party could have liability. "Withdrawal Liability" has the meaning specified in Part I of Subtitle E of Title IV of ERISA. 44 38 SECTION 1.02. Computation of Time Periods; Other Definitional Provisions. In this Agreement and the other Loan Documents in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding". References in the Loan Documents to any agreement or contract "as amended" shall mean and be a reference to such agreement or contract as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with its terms. SECTION 1.03. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements referred to in Section 4.01(g) ("GAAP"). ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES, THE LETTERS OF CREDIT AND THE BANKERS' ACCEPTANCES SECTION 2.01. The Advances and the Letters of Credit. (a) The Term A Advances. Each Term A Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "Term A Advance") to the Company on the date of the Initial Extension of Credit in an amount not to exceed such Lender's Term A Commitment at such time. The Term A Borrowing shall consist of Term A Advances made simultaneously by the Term A Lenders ratably according to their Term A Commitments. Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed. (b) The Term B Advances. Each Term B Lender severally agrees, on the terms and conditions hereinafter set forth, to make a single advance (a "Term B Advance") to the Company on the date of the Initial Extension of Credit in an amount not to exceed such Lender's Term B Commitment at such time. The Term B Borrowing shall consist of Term B Advances made simultaneously by the Term B Lenders ratably according to their Term B Commitments. Amounts borrowed under this Section 2.01(b) and repaid or prepaid may not be reborrowed. (c) The Delayed Draw Advances. Each Delayed Draw Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each, a "Delayed Draw Advance") to the Company from time to time on any Business Day during the period from the date hereof until the Conversion Date in an amount not to exceed such Lender's unused Delayed Draw Commitment at such time. Each Delayed Draw Borrowing shall be in an aggregate amount of $2,500,000 or an integral multiple of $500,000 in excess thereof and shall 45 39 consist of Delayed Draw Advances made simultaneously by the Delayed Draw Lenders ratably according to their Delayed Draw Commitments. Amounts borrowed under this Section 2.01(c) and repaid or prepaid may not be reborrowed. (d) The Multicurrency Advances. Each Multicurrency Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Multicurrency Advance") to the Company or any Foreign Borrower from time to time on any Business Day during the period from the date hereof until the Termination Date in an aggregate amount (based on the Equivalent in Dollars determined on the date of delivery of the applicable Notice of Borrowing) not to exceed at any time outstanding such Multicurrency Lender's Unused Multicurrency Commitment at such time. Each Multicurrency Borrowing shall be in an aggregate amount of $50,000 or an integral multiple of $10,000 in excess thereof (or the Equivalent thereof in any Foreign Currency determined on the date of delivery of the applicable Notice of Borrowing) and shall consist of Multicurrency Advances of the same Type, in the same currency and made on the same day by the Multicurrency Lenders ratably according to their respective Multicurrency Commitments. Within the limits of each Multicurrency Lender's Unused Multicurrency Commitment in effect from time to time, the Company and the Foreign Borrowers may borrow under this Section 2.01(d), prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(d). (e) The Revolving Credit Advances. Each Revolving Credit Lender severally agrees, on the terms and conditions hereinafter set forth, to make advances (each a "Revolving Credit Advance") to the Company from time to time on any Business Day during the period from the date hereof until the Termination Date in an amount for each such Advance not to exceed such Lender's Unused Revolving Credit Commitment at such time. Each Revolving Credit Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Credit Advances made simultaneously by the Revolving Credit Lenders ratably according to their Revolving Credit Commitments. Within the limits of each Revolving Credit Lender's Unused Revolving Credit Commitment in effect from time to time, the Company may borrow under this Section 2.01(e), prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(e). (f) The Swing Line Advances. The Company may request the Swing Line Bank to make, and the Swing Line Bank may, if in its reasonable discretion it elects to do so, make, on the terms and conditions hereinafter set forth, Swing Line Advances to the Company from time to time on any Business Day during the period from the date hereof until the Termination Date (i) in an aggregate amount not to exceed at any time outstanding $10,000,000 (the "Swing Line Facility") and (ii) in an amount for each such Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance shall be used for the purpose of funding the payment of principal of any other Swing Line Advance. Each Swing Line Borrowing shall be in 46 40 an amount of $100,000 or an integral multiple of $10,000 in excess thereof and shall be made as a Base Rate Advance. Within the limits of the Swing Line Facility and within the limits referred to in clause (ii) above, so long as the Swing Line Bank, in its reasonable discretion, elects to make Swing Line Advances, the Company may borrow under this Section 2.01(f), repay pursuant to Section 2.05(g) or prepay pursuant to Section 2.07(a) and reborrow under this Section 2.01(f). (g) Letters of Credit. Each Issuing Bank severally agrees, on the terms and conditions hereinafter set forth, to issue letters of credit (the "Letters of Credit") for the account of the Company from time to time on any Business Day during the period from the date hereof until 60 days before the Termination Date in an aggregate Available Amount (i) for all Letters of Credit issued by such Issuing Bank not to exceed at any time the lesser of (x) the Letter of Credit Facility at such time and (y) such Issuing Bank's Letter of Credit Commitment at such time and (ii) for each such Letter of Credit not to exceed the Unused Revolving Credit Commitments of the Revolving Credit Lenders at such time. No Letter of Credit shall have an expiration date (including all rights of the Company or the beneficiary to require renewal) later than the earlier of 60 days before the Termination Date and one year after the date of issuance thereof , but may by its terms be renewable annually upon notice (a "Notice of Renewal") given to the Issuing Bank that issued such Letter of Credit and the Administrative Agent on or prior to any date for notice of renewal set forth in such Letter of Credit but in any event at least three Business Days prior to the date of the proposed renewal of such Letter of Credit and upon fulfillment of the applicable conditions set forth in Article III unless such Issuing Bank has notified the Company (with a copy to the Administrative Agent) on or prior to the date for notice of termination set forth in such Letter of Credit but in any event at least 30 Business Days prior to the date of automatic renewal of its election not to renew such Letter of Credit (a "Notice of Termination"); provided that the terms of each Letter of Credit that is automatically renewable annually shall (x) require the Issuing Bank that issued such Letter of Credit to give the beneficiary named in such Letter of Credit notice of any Notice of Termination, (y) permit such beneficiary, upon receipt of such notice, to draw under such Letter of Credit prior to the date such Letter of Credit otherwise would have been automatically renewed and (z) not permit the expiration date (after giving effect to any renewal) of such Letter of Credit in any event to be extended to a date later than 60 days before the Termination Date. If either a Notice of Renewal is not given by the Company or a Notice of Termination is given by the relevant Issuing Bank pursuant to the immediately preceding sentence, such Letter of Credit shall expire on the date on which it otherwise would have been automatically renewed; provided, however, that even in the absence of receipt of a Notice of Renewal the relevant Issuing Bank may in its discretion, unless instructed to the contrary by the Administrative Agent or the Company, deem that a Notice of Renewal had been timely delivered and in such case, a Notice of Renewal shall be deemed to have been so delivered for all purposes under this Agreement. Each Letter of Credit shall contain a provision authorizing the Issuing Bank that issued such Letter of Credit to deliver to the beneficiary of such Letter of Credit, upon the occurrence and during the continuance of an Event of Default, a notice (a "Default Termination Notice") terminating such Letter of Credit and giving such beneficiary 15 days to 47 41 draw such Letter of Credit. Within the limits of the Letter of Credit Facility, and subject to the limits referred to above, the Company may request the issuance of Letters of Credit under this Section 2.01(g), repay any Letter of Credit Advances resulting from drawings thereunder pursuant to Section 2.03(c) and request the issuance of additional Letters of Credit under this Section 2.01(g). (h) Drawings. Each Multicurrency Lender severally agrees, on the terms and conditions hereinafter set forth, to accept Drafts (each Draft so accepted, a "Bankers' Acceptance") for the account of the Canadian Borrower, and to purchase such Bankers' Acceptances from time to time on any Business Day during the period from the date hereof until the Termination Date having a Face Amount (determined in the Equivalent thereof in Dollars) for all such Bankers' Acceptances purchased by such Lender at the time of such Drawing not to exceed such Lender's Unused Multicurrency Commitment at such time. Each Drawing shall be comprised solely of Canadian Dollars, shall be in an aggregate Face Amount which, together with any Canadian Prime Rate Advances made in connection with such Drawing, equals CN$50,000 or an integral multiple of CN$10,000 in excess thereof and shall consist of the creation and purchase of Bankers' Acceptances at or about the same time by the Multicurrency Lenders ratably in accordance with their respective Multicurrency Commitments. Within the limits of each Multicurrency Lender's Unused Multicurrency Commitment in effect from time to time, amounts drawn by the Canadian Borrower under this Section 2.01(h) and repaid or prepaid from time to time may be redrawn by the Canadian Borrower under this Section 2.01(h). (i) Set Aside of Multicurrency Commitments in Respect of Overdraft Facilities. Each Multicurrency Lender's ratable share of an aggregate amount of Multicurrency Commitments equal to $5,000,000 (or such lesser amount as may be designated by the Company to the Administrative Agent) shall be reserved against the Multicurrency Facility to ensure that sufficient funds may be made available to any Foreign Borrower for the repayment of any overdraft facility made available to such Foreign Borrower by any Lender as the same becomes due and payable. SECTION 2.02. Making the Advances. (a) Except as otherwise provided in Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later than (x) 12:00 Noon (New York City time) on the third Business Day prior to the date of the proposed Borrowing (other than a Multicurrency Borrowing) in the case of a Borrowing consisting of Eurocurrency Rate Advances, or the Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, (y) 4:00 P.M. (London time) on the third Business Day prior to the date of the proposed Borrowing in the case of a Multicurrency Borrowing denominated in a currency other than Canadian Dollars consisting of Eurocurrency Rate Advances, or the first Business Day prior to the date of the proposed Borrowing in the case of a Multicurrency Borrowing denominated in a currency other than Canadian Dollars consisting of Local Rate Advances (or, in the case of Advances denominated in a Foreign Currency where 48 42 market practice differs, in accordance with the custom for such Foreign Currency), or (z) 12:00 Noon (Toronto time) on the first Business Day prior to the date of the proposed Borrowing in the case of a Multicurrency Borrowing consisting of Canadian Prime Rate Advances by the applicable Borrower to the Administrative Agent (and in the case of a Multicurrency Borrowing, simultaneously to the applicable Sub-Agent), which shall give to each Appropriate Lender prompt notice thereof by telex or telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by telephone, confirmed immediately in writing, or telex or telecopier, in substantially the form of Exhibit B-1 hereto, specifying therein the requested (i) date of such Borrowing, (ii) Facility under which such Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such Borrowing, (v) in the case of a Borrowing consisting of Eurocurrency Rate Advances, initial Interest Period for each such Advance and (vi) in the case of a Multicurrency Borrowing, currency for each such Advance. Each Appropriate Lender shall, before 12:00 Noon (New York City time) on the date of such Borrowing, in the case of a Borrowing consisting of Advances denominated in Dollars, and before 12:00 Noon (London time) on the date of such Borrowing, in the case of a Multicurrency Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the applicable Administrative Agent's Account, in same day funds, such Lender's ratable portion of such Borrowing in accordance with the respective Commitments under the applicable Facility of such Lender and the other Appropriate Lenders, provided that the Multicurrency Lenders may otherwise agree to fund such Borrowing disproportionately. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Company by crediting the applicable Borrower's Account; provided, however, that, in the case of any Revolving Credit Borrowing, the Administrative Agent shall first make a portion of such funds equal to the aggregate principal amount of any Swing Line Advances and Letter of Credit Advances made by the Swing Line Bank or any Issuing Bank, as the case may be, and by any other Revolving Credit Lender and outstanding on the date of such Revolving Credit Borrowing, plus interest accrued and unpaid thereon to and as of such date, available to the Swing Line Bank or such Issuing Bank, as the case may be, and such other Revolving Credit Lenders for repayment of such Swing Line Advances and Letter of Credit Advances. (b) Each Swing Line Borrowing shall be made on notice, given not later than 12:00 Noon (New York City time) on the date of the proposed Swing Line Borrowing, by the Company to the Swing Line Bank and the Administrative Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing") shall be by telephone, confirmed immediately in writing, or telex or telecopier, specifying therein the requested (i) date of such Borrowing, (ii) amount of such Borrowing and (iii) maturity of such Borrowing (which maturity shall be no later than the fifteenth day after the requested date of such Borrowing). If, in its sole discretion, it elects to make the requested Swing Line Advance, the Swing Line Bank will make the amount thereof available to the Administrative Agent at the Administrative Agent's Account, in same day funds. After the Administrative Agent's receipt of such funds and upon fulfillment of 49 43 the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to the Company by crediting the applicable Borrower's Account. Upon written demand by the Swing Line Bank, with a copy of such demand to the Administrative Agent, each other Revolving Credit Lender shall purchase from the Swing Line Bank, and the Swing Line Bank shall sell and assign to each such other Revolving Credit Lender, such other Lender's Pro Rata Share of such outstanding Swing Line Advance as of the date of such demand, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of the Swing Line Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Swing Line Advance to be purchased by such Lender. The Company hereby agrees to each such sale and assignment. Each Revolving Credit Lender agrees to purchase its Pro Rata Share of an outstanding Swing Line Advance on (i) the Business Day on which demand therefor is made by the Swing Line Bank, provided that notice of such demand is given not later than 12:00 Noon (New York City time) on such Business Day or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by the Swing Line Bank to any other Revolving Credit Lender of a portion of a Swing Line Advance, the Swing Line Bank represents and warrants to such other Lender that the Swing Line Bank is the legal and beneficial owner of such interest being assigned by it, but makes no other representation or warranty and assumes no responsibility with respect to such Swing Line Advance, the Loan Documents or any Loan Party. If and to the extent that any Revolving Credit Lender shall not have so made the amount of such Swing Line Advance available to the Administrative Agent, such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by the Swing Line Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the Administrative Agent such amount for the account of the Swing Line Bank on any Business Day, such amount so paid in respect of principal shall constitute a Swing Line Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Swing Line Advance made by the Swing Line Bank shall be reduced by such amount on such Business Day. (c) Anything in subsection (a) above to the contrary notwithstanding, (i) no Borrower may select Eurocurrency Rate Advances for the initial Borrowing hereunder or for any Borrowing if the aggregate amount of such Borrowing is less than $10,000,000, in the case of Term A Borrowings and Term B Borrowings, or $2,500,000 (or the Equivalent thereof in Dollars), in the case of Revolving Credit Borrowings, Multicurrency Borrowings and Delayed Draw Borrowings, or if the obligation of the Appropriate Lenders to make Eurocurrency Rate Advances shall then be suspended pursuant to Section 2.08(d)(ii), 2.10 or 2.12, (ii) for the period from the date hereof to October 30, 1998 (or such earlier date as shall be specified in its sole discretion by the Administrative Agent in a written notice to the Borrowers and the Lenders) no Borrower may select Eurocurrency Rate Advances having an Interest Period other than one month and (iii) the Term A Advances may not be outstanding as part of more than five separate 50 44 Borrowings consisting of Eurocurrency Rate Advances, the Term B Advances may not be outstanding as more than six separate Borrowings consisting of Eurocurrency Rate Advances, the Delayed Draw Advances may not be outstanding as more than five separate Borrowings consisting of Eurocurrency Rate Advances, the Multicurrency Advances may not be outstanding as more than six separate Borrowings consisting of Eurocurrency Rate Advances and the Revolving Credit Advances may not be outstanding as part of more than ten separate Borrowings consisting of Eurocurrency Rate Advances. (d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall be irrevocable and binding on the applicable Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurocurrency Rate Advances, the applicable Borrower shall indemnify each Appropriate Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a result of such failure, is not made on such date. (e) Unless the Administrative Agent shall have received notice from an Appropriate Lender prior to the date of any Borrowing under a Facility under which such Lender has a Commitment that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the applicable Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount and to pay interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of such Borrower, the higher of (A) the interest rate applicable at such time under Section 2.08 to Advances comprising such Borrowing and (B) the cost of funds incurred by the Administrative Agent in respect of such amount and (ii) in the case of such Lender, (A) the Federal Funds Rate in the case of Advances denominated in Dollars or (B) the cost of funds incurred by the Administrative Agent in respect of such amount in the case of Advances denominated in Foreign Currencies. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender's Advance as part of such Borrowing for all purposes. 51 45 (f) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon notice, given not later than Noon (New York City time) on the third Business Day prior to the date of the proposed issuance of such Letter of Credit, by the Company to any Issuing Bank, which shall give to the Administrative Agent and each Revolving Credit Lender prompt notice thereof by telex or telecopier. Each such notice of issuance of a Letter of Credit (a "Notice of Issuance") shall be by telephone, confirmed immediately in writing, or telex or telecopier, specifying therein the requested (A) date of such issuance (which shall be a Business Day), (B) Available Amount of such Letter of Credit, (C) expiration date of such Letter of Credit, (D) name and address of the beneficiary of such Letter of Credit and (E) form of such Letter of Credit, and shall be accompanied by such application and agreement for letter of credit as such Issuing Bank may specify to the Company for use in connection with such requested Letter of Credit (a "Letter of Credit Agreement"). If the requested form of such Letter of Credit is acceptable to such Issuing Bank in its sole discretion, such Issuing Bank will, upon fulfillment of the applicable conditions set forth in Article III, make such Letter of Credit available to the Company at its office referred to in Section 9.02 or as otherwise agreed with the Company in connection with such issuance. In the event and to the extent that the provisions of any Letter of Credit Agreement shall conflict with this Agreement, the provisions of this Agreement shall govern. (b) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Administrative Agent on the first Business Day of each week a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the previous week and drawings during such week under all Letters of Credit issued by such Issuing Bank, (B) to each Revolving Credit Lender on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all Letters of Credit issued by such Issuing Bank and (C) to the Administrative Agent and each Revolving Credit Lender on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank. (c) Drawing and Reimbursement. The payment by any Issuing Bank of a draft drawn under any Letter of Credit shall constitute for all purposes of this Agreement the making by such Issuing Bank of a Letter of Credit Advance, which shall be a Base Rate Advance, in the amount of such draft. Upon written demand by any Issuing Bank with an outstanding Letter of 52 46 Credit Advance, with a copy of such demand to the Administrative Agent, each Revolving Credit Lender shall purchase from such Issuing Bank, and such Issuing Bank shall sell and assign to each such Revolving Credit Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit Advance as of the date of such purchase, by making available for the account of its Applicable Lending Office to the Administrative Agent for the account of such Issuing Bank, by deposit to the Administrative Agent's Account, in same day funds, an amount equal to the portion of the outstanding principal amount of such Letter of Credit Advance to be purchased by such Lender. Promptly after receipt thereof, the Administrative Agent shall transfer such funds to such Issuing Bank. The Company hereby agrees to each such sale and assignment. Each Revolving Credit Lender agrees to purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business Day on which demand therefor is made by the Issuing Bank which made such Advance, provided that notice of such demand is given not later than 11:00 A.M. (New York City time) on such Business Day, or (ii) the first Business Day next succeeding such demand if notice of such demand is given after such time. Upon any such assignment by an Issuing Bank to any Revolving Credit Lender of a portion of a Letter of Credit Advance, such Issuing Bank represents and warrants to such other Lender that such Issuing Bank is the legal and beneficial owner of such interest being assigned by it, free and clear of any liens, but makes no other representation or warranty and assumes no responsibility with respect to such Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the extent that any Revolving Credit Lender shall not have so made the amount of such Letter of Credit Advance available to the Administrative Agent, such Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on demand such amount together with interest thereon, for each day from the date of demand by such Issuing Bank until the date such amount is paid to the Administrative Agent, at the Federal Funds Rate for its account or the account of such Issuing Bank, as applicable. If such Lender shall pay to the Administrative Agent such amount for the account of such Issuing Bank on any Business Day, such amount so paid in respect of principal shall constitute a Letter of Credit Advance made by such Lender on such Business Day for purposes of this Agreement, and the outstanding principal amount of the Letter of Credit Advance made by such Issuing Bank shall be reduced by such amount on such Business Day. (d) Failure to Make Letter of Credit Advances. The failure of any Lender to make the Letter of Credit Advance to be made by it on the date specified in Section 2.03(c) shall not relieve any other Lender of its obligation hereunder to make its Letter of Credit Advance on such date, but no Lender shall be responsible for the failure of any other Lender to make the Letter of Credit Advance to be made by such other Lender on such date. SECTION 2.04. Drawings of Bankers' Acceptances. (a) Request for Drawing. Each Drawing shall be made on notice, given not later than 11:00 A.M. (Toronto time) on a Business Day at least two Business Days prior to the date of the proposed Drawing, by the Canadian Borrower to the Administrative Agent, which shall give each Multicurrency Lender prompt notice thereof by telex or telecopier. Each notice of a Drawing (a "Notice of Drawing") 53 47 shall be in writing (including by telex or telecopier), in substantially the form of Exhibit B-2 hereto, and shall be confirmed by telephone immediately by the Canadian Borrower, specifying therein the requested (i) date of such Drawing (which shall be a Business Day), (ii) aggregate Face Amount of such Drawing and (iii) initial Maturity Date for each Bankers' Acceptance comprising part of such Drawing; provided, however, that, if the Administrative Agent determines in good faith (which determination shall be conclusive and binding upon the Canadian Borrower) that the Drafts to be accepted and purchased as part of any Drawing cannot, due solely to the requested aggregate Face Amount thereof, be accepted and/or purchased ratably by the Multicurrency Lenders in accordance with Section 2.01(h), (provided that the Multicurrency Lenders may otherwise agree to fund such Drawing disproportionately), then the aggregate Face Amount of such Drawing (or the Face Amount of Bankers' Acceptances to be created by any Multicurrency Lender) shall be reduced to such lesser amount as the Administrative Agent determines will permit such Drafts comprising part of such Drawing to be so accepted and purchased and, unless the Canadian Borrower shall have given written notice to the contrary to the Administrative Agent, each Multicurrency Lender shall fund the difference between such Lender's ratable portion of the original aggregate Face Amount of such Drawing and the Face Amount of the Bankers' Acceptances to be created by such Lender after giving effect to such reduction in the form of a Canadian Prime Rate Advance, which shall be deemed for all purposes hereof to be a Multicurrency Advance made pursuant to Section 2.01(h). The Administrative Agent agrees that it will, as promptly as practicable, notify the Canadian Borrower of the unavailability of Bankers' Acceptances and, if applicable, of the date and the amount of each Canadian Prime Rate Advance to be made or actually made in accordance with the immediately preceding sentence. Each Draft in connection with any requested Drawing (A) shall be in a minimum amount of CN$100,000 or an integral multiple of CN$100,000 in excess thereof, and (B) shall be dated the date of the proposed Drawing. Each Multicurrency Lender shall, before 1:00 p.m. (Toronto time) on the date of each Drawing, complete one or more Drafts in accordance with the related Notice of Drawing, accept such Drafts and purchase the Bankers' Acceptances created thereby for the Drawing Purchase Price and shall, before 1:00 p.m. (Toronto time) on such date, make available for the account of its Applicable Lending Office to the Administrative Agent at its appropriate Administrative Agent's Account, in same day funds, the Drawing Purchase Price payable by such Lender for such Drawing less the Drawing Fee payable to such Lender with respect thereto under Section 2.09(d). Upon the fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make the funds it has received from the Multicurrency Lenders available to the Canadian Borrower by crediting the relevant Borrower's Account or at the applicable Payment Office, as the case may be. (b) Limitations on Drawings. Anything in Section 2.04(a) to the contrary notwithstanding, the Canadian Borrower may not select a Drawing if the obligation of the Multicurrency Lenders to purchase and accept Bankers' Acceptances shall then be suspended pursuant to Section 2.04(d) or 2.12. 54 48 (c) Binding Effect of Notices of Drawing. Each Notice of Drawing shall be irrevocable and binding on the Canadian Borrower. In the case of any proposed Drawing, the Canadian Borrower shall indemnify each Multicurrency Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill on or before the date specified in the Notice of Drawing for such Drawing the applicable conditions set forth in Article III, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Drawing Purchase Price to be paid by such Lender as part of such Drawing when, as a result of such failure, such Drawing is not made on such date. (d) Circumstances Making Bankers' Acceptances Unavailable. (i) If, with respect to any proposed Drawing, the Administrative Agent determines in good faith that circumstances affecting the money markets at the time any related Notice of Drawing is delivered or is outstanding will result in no market for the Bankers' Acceptances to be created in connection with such Drawing or an insufficient demand for such Bankers' Acceptances to allow the Lenders creating such Bankers' Acceptances to sell or trade the Bankers' Acceptances to be created and purchased or discounted by them hereunder in connection with such Drawing, then, upon notice to the Canadian Borrower and the Multicurrency Lenders thereof, (A) the Notice of Drawing with respect to such proposed Drawing shall be canceled and the Drawing requested therein shall not be made and (B) the right of the Canadian Borrower to request a Drawing shall be suspended until the Administrative Agent shall notify such Borrower that the circumstances causing such suspension no longer exist. In the case of any such cancellation of a Notice of Drawing, unless the Canadian Borrower shall give written notice to the contrary to the Administrative Agent, the cancellation of any such Notice of Drawing shall be deemed to be the giving by the Canadian Borrower of a Notice of Borrowing for Multicurrency Advances consisting of Canadian Prime Rate Advances in an aggregate principal amount equal to the aggregate Face Amount of such proposed Drawing and the Multicurrency Lenders shall, subject to the terms and conditions hereof applicable to the making of Multicurrency Advances, make such Advances available to the Canadian Borrower, if practicable, on the same Business Day, and otherwise on the next Business Day. The Administrative Agent agrees that it will, as promptly as practicable, notify the Canadian Borrower of the unavailability of Bankers' Acceptances and, if applicable, of the date and the amount of each Canadian Prime Rate Advance to be made or actually made in accordance with the immediately preceding sentence. (ii) Upon the occurrence and during the continuance of any Default, the obligation of the Multicurrency Lenders to purchase and/or accept Bankers' Acceptances shall be suspended. (e) Assumptions of the Administrative Agent. Unless the Administrative Agent shall have received notice from a Multicurrency Lender prior to the date of any Drawing that such Lender will not make available to it such Lender's ratable share of the Drawing Purchase 55 49 Price of such Drawing in accordance with Section 2.04(a), the Administrative Agent may assume that such Lender has made such ratable share available to it on the date of such Drawing in accordance with Section 2.04(a) and the Administrative Agent may, in reliance upon such assumption, make available to the Canadian Borrower on such date a corresponding amount. If and to the extent that any such Lender shall not have so made such ratable share available to the Administrative Agent, such Lender and the Canadian Borrower severally agree to repay or pay to the Administrative Agent forthwith on demand such corresponding amount, together with interest thereon, for each day from the date such amount is made available to such Borrower until the date such amount is repaid or paid to the Administrative Agent, at (i) in the case of the Canadian Borrower, a rate per annum equal to the BA Rate used in calculating the Drawing Purchase Price with respect to such Drawing, and (ii) in the case of such Lender, the cost of funds incurred by the Administrative Agent in respect of such amount. If such Lender shall pay to the Administrative Agent such corresponding amount, such amount so paid shall constitute such Lender's Bankers' Acceptance as part of such Drawing for all purposes under this Agreement. (f) Presigned Draft Forms. To enable the Multicurrency Lenders to create Bankers' Acceptances in accordance with Section 2.01(h) and this Section 2.04, the Canadian Borrower shall supply each Multicurrency Lender, upon the Canadian Borrower's execution of this Agreement, with such number of Drafts provided to the Canadian Borrower by the Administrative Agent as the Administrative Agent may from time to time reasonably request, duly endorsed and executed on behalf of the Canadian Borrower by any one or more of its duly authorized officers. Each Multicurrency Lender shall exercise such care in the custody and safekeeping of any Drafts in its possession from time to time as it would exercise in the custody and safekeeping of similar property owned by it. The signatures of officers of the Canadian Borrower on Drafts may be mechanically reproduced in facsimile and Bankers' Acceptances bearing such facsimile signatures shall be binding upon the Canadian Borrower as if they had been manually signed by such officers. Notwithstanding that any of the individuals whose manual or facsimile signature appears on any Draft as one of such officers may no longer hold office at the date of such draft or at the date of its acceptance by a Lender hereunder or at any time thereafter, any Draft or Bankers' Acceptance so signed shall be valid and binding upon, and enforceable against, the Canadian Borrower. (g) Distribution of Bankers' Acceptances. Bankers' Acceptances purchased by a Multicurrency Lender in accordance with the terms of Section 2.01(h) and this Section 2.04 may, in such Lender's sole discretion, be held by such Lender for its own account until the applicable Maturity Date or sold, rediscounted or otherwise disposed of by it at any time prior thereto in any relevant market therefor. (h) Failure to Fund in Respect of Drawings. The failure of any Multicurrency Lender to fund the Drawing Purchase Price to be funded by it as part of any Drawing shall not relieve any other Multicurrency Lender of its obligation hereunder to fund its Drawing Purchase 56 50 Price on the date of such Drawing, but no Multicurrency Lender shall be responsible for the failure of any other Multicurrency Lender to fund the Drawing Purchase Price to be funded by such other Multicurrency Lender on the date of any Drawing. SECTION 2.05. Repayment of Advances. (a) Term A Advances. The Company shall repay to the Administrative Agent for the ratable account of the Term A Lenders the aggregate outstanding principal amount of the Term A Advances on the following dates in the amounts indicated (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.07): Date Amount ---- ------ September 30, 1998 $ 1,500,000 December 31, 1998 1,500,000 March 31, 1999 1,500,000 June 30, 1999 1,500,000 September 30, 1999 2,000,000 December 31, 1999 2,000,000 March 31, 2000 2,000,000 June 30, 2000 2,000,000 September 30, 2000 2,000,000 December 31, 2000 2,000,000 March 31, 2001 2,000,000 June 30, 2001 2,000,000 September 30, 2001 2,000,000 December 31, 2001 2,000,000 March 31, 2002 2,000,000 June 30, 2002 2,000,000 September 30, 2002 2,500,000 December 31, 2002 2,500,000 March 31, 2003 2,500,000 June 30, 2003 2,500,000 September 30, 2003 2,500,000 December 31, 2003 2,500,000 March 31, 2004 2,500,000 June 30, 2004 2,500,000 57 51 provided, however, that the final principal installment shall be repaid on June 30, 2004 and in any event shall be in an amount equal to the aggregate principal amount of the Term A Advances outstanding on such date. (b) Term B Advances. The Company shall repay to the Administrative Agent for the ratable account of the Term B Lenders the aggregate outstanding principal amount of the Term B Advances on the following dates in amounts determined as a percentage of the aggregate amount of Term B Advances outstanding on September 30, 1998 as indicated below (which amounts shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.07): Date Percentage ---- ---------- July 31, 1999 1% July 31, 2000 1% July 31, 2001 1% July 31, 2002 1% July 31, 2003 1% July 31, 2004 1% July 31, 2005 20% July 30, 2006 74% provided, however, that the final principal installment shall be repaid on July 30, 2006 and in any event shall be in an amount equal to the aggregate principal amount of the Term B Advances outstanding on such date. (c) Delayed Draw Advances. The Company shall repay to the Administrative Agent for the ratable account of the Delayed Draw Lenders (i) on each March 31, June 30, September 30 and December 31, commencing September 30, 2000, an amount equal to 1/16 of the aggregate outstanding principal amount of the Delayed Draw Advances outstanding on the Conversion Date (after giving effect to any prepayments required by Section 2.07(b)(i) or (ii) and which amount shall be reduced as a result of the application of further prepayments in accordance with the order of priority set forth in the applicable paragraph of section 2.07) and (ii) on June 30, 2004 an amount equal to the aggregate principal amount of the Delayed Draw Advances outstanding on such date. (d) Multicurrency Advances. Each Foreign Borrower shall repay to the Administrative Agent for the ratable account of the Multicurrency Lenders on the Termination Date the aggregate outstanding principal amount of the Multicurrency Advances then outstanding. 58 52 (e) Bankers' Acceptances. The Canadian Borrower shall, subject to Sections 2.11(a) and 2.11(b), pay to the Administrative Agent for the ratable account of the Multicurrency Lenders on the Maturity Date of any Bankers' Acceptances an amount equal to the aggregate Face Amount of all such Bankers' Acceptances maturing on such date. Any payment by the Canadian Borrower of any Bankers' Acceptances in accordance with this Section 2.05(e) shall, to the extent of such payment, satisfy the obligations of the Canadian Borrower under the Bankers' Acceptances to which it relates and, in the case of a Bankers' Acceptance, the Lender that has accepted such Bankers' Acceptance shall, to the extent of such payment to such Lender, thereafter be solely responsible for the payment thereof. (f) Revolving Credit Advances. The Company shall repay to the Administrative Agent for the ratable account of the Revolving Credit Lenders on the Termination Date the aggregate outstanding principal amount of the Revolving Credit Advances then outstanding. (g) Swing Line Advances. The Company shall repay to the Administrative Agent for the account of the Swing Line Bank and each other Revolving Credit Lender that has made a Swing Line Advance the outstanding principal amount of each Swing Line Advance made by each of them on the earlier of the maturity date specified in the applicable Notice of Swing Line Borrowing (which maturity shall be no later than the fifteenth day after the requested date of such Borrowing) and the Termination Date. (h) Letter of Credit Advances. (i) The Company shall repay to the Administrative Agent for the account of each Issuing Bank and each other Revolving Credit Lender that has made a Letter of Credit Advance on the earlier of the second Business Day after the date on which such Advance was made and the Termination Date the outstanding principal amount of each Letter of Credit Advance made by each of them. (ii) The Obligations of the Company under this Agreement, any Letter of Credit Agreement and any other agreement or instrument relating to any Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement, such Letter of Credit Agreement and such other agreement or instrument under all circumstances, including, without limitation, the following circumstances: (A) any lack of validity or enforceability of any Loan Document, any Letter of Credit Agreement, any Letter of Credit or any other agreement or instrument relating thereto (all of the foregoing being, collectively, the "L/C Related Documents"); (B) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations of the Company in respect of any L/C Related Document 59 53 or any other amendment or waiver of or any consent to departure from all or any of the L/C Related Documents; (C) the existence of any claim, set-off, defense or other right that the Company may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for which any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with the transactions contemplated by the L/C Related Documents or any unrelated transaction; (D) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (E) payment by any Issuing Bank under a Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; (F) any exchange, release or non-perfection of any Collateral or other collateral, or any release or amendment or waiver of or consent to departure from the Guaranties or any other guarantee, for all or any of the Obligations of the Company in respect of the L/C Related Documents; or (G) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Company or a guarantor. SECTION 2.06. Termination or Reduction of the Commitments. (a) Optional. The Company may, upon at least five Business Days' notice to the Administrative Agent, terminate in whole or reduce in part the unused portions of the Delayed Draw Commitments, the Letter of Credit Facility, the Unused Revolving Credit Commitments and the Unused Multicurrency Commitments; provided, however, that each partial reduction of a Facility (i) shall be in an aggregate amount of $1,000,000 or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably among the Appropriate Lenders in accordance with their Commitments with respect to such Facility. (b) Mandatory. (i) On the date of the Term A Borrowing, after giving effect to the Term A Borrowing, and from time to time thereafter upon each repayment or prepayment of the Term A Advances, the aggregate Term A Commitments of the Term A Lenders shall be automatically and permanently reduced, on a pro rata basis, by an amount equal to the amount by which the aggregate Term A Commitments immediately prior to such reduction exceed the aggregate unpaid principal amount of the Term A Advances then outstanding. 60 54 (ii) On the date of the Term B Borrowing, after giving effect to the Term B Borrowing, and from time to time thereafter upon each repayment or prepayment of the Term B Advances, the aggregate Term B Commitments of the Term B Lenders shall be automatically and permanently reduced, on a pro rata basis, by an amount equal to the amount by which the aggregate Term B Commitments immediately prior to such reduction exceed the aggregate unpaid principal amount of the Term B Advances then outstanding. (iii) The Delayed Draw Facility shall be automatically and permanently reduced, on a pro rata basis, (A) on the date of each Delayed Draw Borrowing, by an amount equal to the amount of such Borrowing, from time to time on and after the Conversion Date upon each repayment or prepayment of the Delayed Draw Advances, by an amount equal to the amount by which the aggregate Delayed Draw Commitments of the Delayed Draw Lenders immediately prior to such reduction exceed the aggregate unpaid principal amount of the Delayed Draw Advances then outstanding and (B) on the date on which prepayment thereof is required to be made pursuant to Section 2.07(b)(i),(ii) or (iii) prior to the Conversion Date in an amount equal to the applicable Delayed Draw Reduction Amount. (iv) The Letter of Credit Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Letter of Credit Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. (v) The Swing Line Facility shall be permanently reduced from time to time on the date of each reduction in the Revolving Credit Facility by the amount, if any, by which the amount of the Swing Line Facility exceeds the Revolving Credit Facility after giving effect to such reduction of the Revolving Credit Facility. (vi) The Revolving Credit Facility shall be automatically and permanently reduced, on a pro rata basis, (A) on each date on which prepayment thereof is required to be made pursuant to Section 2.07(b)(i), (ii) or (iii) in an amount equal to the applicable Reduction Amount and (B) on the date of receipt by the Company or any of its Subsidiaries of the Net Cash Proceeds of any sale, lease, transfer or other disposition of any asset of the Company or any of its Subsidiaries in each case by an amount equal to the amount, if any, of such Net Cash Proceeds that concurrently with the receipt thereof (x) shall not have been deposited by the Company into the Cash Collateral Account, (y) shall not have been applied to prepay Advances or (z) shall not have been applied in accordance with Section 8(c) of the Security Agreement, provided that each such reduction of the Revolving Credit Facility shall be made ratably among the Revolving Credit Lenders in accordance with their Revolving Credit Commitments. (vii) The Multicurrency Facility shall be automatically and permanently reduced, on a pro rata basis, (A) on each date on which prepayment thereof is required to be made 61 55 pursuant to Section 2.07(b)(i), (ii) or (iii) in an amount equal to the applicable Multicurrency Reduction Amount, provided that each such reduction of the Multicurrency Facility shall be made ratably among the Multicurrency Lenders in accordance with their Multicurrency Commitments. SECTION 2.07. Prepayments. (a) Optional. Each Borrower may, upon notice not later than 11:00 A.M. (New York City time) on the day of such prepayment in the case of Base Rate Advances and at least two Business Days prior to such prepayment in the case of Eurocurrency Rate Advances, in each case to the Administrative Agent stating the proposed date and aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding aggregate principal amount of the Advances comprising part of the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the aggregate principal amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof (or the Equivalent thereof in a Foreign Currency) and (y) if any prepayment of a Eurocurrency Rate Advance is made on a date other than the last day of an Interest Period for such Advance, such Borrower shall also pay any amounts owing pursuant to Section 9.04(c). Each such prepayment of Term A Advances, Term B Advances and, after the Conversion Date, Delayed Draw Advances shall be applied to the installments thereof in the order specified by the Company. (b) Mandatory. (i) The Company shall, on the 90th day following the end of each Fiscal Year, prepay an aggregate principal amount of the Advances comprising part of the same Borrowings in an amount equal to (A) to the extent that the Total Leverage Ratio exceeds 4.00:1.00, 75% and (B) to the extent that the Total Leverage Ratio is less than 4.00:1.00 but is greater than 3.00:1.00, 50% of the amount, in the case of any payments made in any year after 1999, of Excess Cash Flow for such Fiscal Year and, in the case of any payment made in 1999, of Excess Cash Flow for the period from April 13, 1998 through the end of the Fiscal Year ending December 31, 1998. Each such prepayment shall be applied as set forth in clause (vii) below. (ii) (A) The Company shall, on the date that is 270 days after the date of receipt of the Net Cash Proceeds by the Company or any of its Subsidiaries from the sale, lease, transfer or other disposition of any assets of the Company or any of its Subsidiaries (other than (x) any sale, lease, transfer or other disposition of assets pursuant to any clause of Section 5.02(e) other than clause (iii) thereof or (y) an aggregate amount of Net Cash Proceeds less than $2,500,000 in any Fiscal Year of the Company), prepay an aggregate principal amount of the Advances comprising part of the same Borrowings in an amount equal to that portion of such Net Cash Proceeds that has not been reinvested in the business of the Company and its Subsidiaries prior to such 270th day. Each such prepayment shall be applied as set forth in clause (vii) below. (B) The Company shall, on the date of receipt of the Net Cash Proceeds by the Company or any of its Subsidiaries from the sale, lease, transfer or other disposition of any assets 62 56 of the Company or any of its Subsidiaries pursuant to Section 5.02(e)(viii), prepay an aggregate principal amount of Advances comprising part of the same Borrowings in an amount equal to such Net Cash Proceeds. Each such prepayment shall be applied as set forth in clause (vii) below. (C) The Company shall, on the date of receipt of the Net Cash Proceeds by the Company or any of its Subsidiaries (x) from the sale or issuance of Subordinated Debt or (y) the receipt of any capital contribution from WHX Corporation or any of its Subsidiaries or from the sale or issuance of any equity securities permitted by Section 5.02(g)(iii), prepay an aggregate principal amount of Advances comprising part of the same Borrowings in an amount equal to such Net Cash Proceeds. Each such prepayment shall be applied as set forth in clause (vii) below. (iii) The Company shall, on the date of receipt of the Net Cash Proceeds by the Company or any of its Subsidiaries from the incurrence or issuance by the Company or any of its Subsidiaries of any Debt (other than Debt incurred or issued pursuant to Section 5.02(b)), prepay an aggregate principal amount of the Advances comprising part of the same Borrowings in an amount equal to the amount of such Net Cash Proceeds. Each such prepayment shall be applied as set forth in clause (vii) below. (iv) The Company shall, on each Business Day, prepay an aggregate principal amount of the Revolving Credit Advances comprising part of the same Borrowings, the Letter of Credit Advances and the Swing Line Advances in an amount equal to the amount by which (A) the sum of the aggregate principal amount of (x) the Revolving Credit Advances, (y) the Letter of Credit Advances and (z) the Swing Line Advances then outstanding plus the aggregate Available Amount of all Letters of Credit then outstanding exceeds (B) the lesser of the Revolving Credit Facility and the excess of (1) the sum of the Loan Values of the Eligible Collateral over (2) the amount referred to in clause (v)(A) below on such Business Day. (v) The Foreign Borrowers shall, on each Business Day, prepay an aggregate principal amount of the Multicurrency Advances comprising part of the same Borrowings equal to the amount by which (A) the sum of (x) the aggregate principal amount of the Multicurrency Advances and (y) the aggregate Face Amount of Bankers' Acceptances then outstanding exceeds (B) the lesser of the Multicurrency Facility and the excess of (1) the sum of the Loan Values of the Eligible Collateral over (2) the amount referred to in clause (iv)(A) above on such Business Day. (vi) The Company shall, on each Business Day, pay to the Administrative Agent for deposit in the L/C Cash Collateral Account an amount sufficient to cause the aggregate amount on deposit in such L/C Cash Collateral Account to equal the amount by which the aggregate Available Amount of all Letters of Credit then outstanding exceeds the Letter of Credit Facility on such Business Day. 63 57 (vii) (A) Prepayments made pursuant to clauses (i), (ii)(A), (ii)(B) and (iii) above shall be applied as follows: first, ratably to the Term A Facility, the Term B Facility and, on and after the Conversion Date, the Delayed Draw Facility, in each case ratably to the principal installments thereof, and second, to the extent that no Term A Advances, Term B Advances or, after the Conversion Date, Delayed Draw Advances remain outstanding, permanently to reduce the Revolving Credit Facility and, prior to the Conversion Date, the Delayed Draw Facility as set forth in clause (viii) or (ix) below, as applicable. (B) Prepayments made pursuant to clause (ii)(C) above shall be applied as follows: first, 75% ratably to the Term A Facility, the Term B Facility and, on and after the Conversion Date, the Delayed Draw Facility, in each case ratably to the principal installments thereof, and 25%, at the Company's election, (1) ratably to the Term A Facility, the Term B Facility and, on and after the Conversion Date, the Delayed Draw Facility, in each case ratably to the principal installments thereof or (2) to prepay the Revolving Credit Facility as set forth in clause (viii) below (without giving effect to clause (y) thereof), and second, to the extent that no Term A Advances, Term B Advances or, after the Conversion Date, Delayed Draw Advances remain outstanding, 75% permanently to ratably reduce the Revolving Credit Facility and the Multicurrency Facility and, prior to the Conversion Date, the Delayed Draw Facility as set forth in clause (viii), (ix) or (xi) below, as applicable, and 25%, to prepay the Revolving Credit Facility as set forth in clause (viii) below (without giving effect to clause (y) thereof) . (viii) Prepayments of the Revolving Credit Facility made pursuant to clause (i), (ii), (iii) or (iv) above shall be first applied to prepay Letter of Credit Advances then outstanding until such Advances are paid in full, second applied to prepay Swing Line Advances then outstanding until such Advances are paid in full and third applied to prepay Revolving Credit Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full; and, in the case of prepayments of the Revolving Credit Facility required pursuant to clause (i), (ii) or (iii) above, (x) the amount remaining (if any) after the prepayment in full of the Revolving Credit Advances then outstanding (the sum of such prepayment amounts and remaining amount being referred to herein as the "Reduction Amount") may be retained by the Company and (y) the Revolving Credit Facility shall be permanently reduced as set forth in Section 2.06(b)(vi). 64 58 (ix) Prepayments of the Delayed Draw Facility before the Conversion Date made pursuant to clause (i), (ii) or (iii) above shall be applied to prepay Delayed Draw Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full; and the amount remaining (if any) after the prepayment in full of the Delayed Draw Advances then outstanding (the sum of such prepayment amounts and remaining amount being referred to herein as the "Delayed Draw Reduction Amount") may be retained by the Company and the Delayed Draw Facility shall be permanently reduced as set forth in Section 2.06(b)(iii). (x) If the Administrative Agent notifies the Foreign Borrowers that, on any interest payment date, the Equivalent in Dollars (determined on the third Business Day prior to such interest payment date) of the aggregate principal amount of all Multicurrency Advances then outstanding exceeds 103% of the aggregate Multicurrency Commitments of the Multicurrency Lenders on such date, the Foreign Borrowers shall, within two Business Days after receipt of such notice, prepay the outstanding principal amount of any Multicurrency Advances owing by the Foreign Borrowers in an aggregate amount sufficient to reduce such sum to an amount not to exceed 100% of the aggregate Multicurrency Commitments of the Multicurrency Lenders on such date. (xi) Prepayments of the Multicurrency Facility made pursuant to clause (i), (ii), (iii) or (v) above shall be applied to prepay Multicurrency Advances then outstanding comprising part of the same Borrowings until such Advances are paid in full; and, in the case of prepayments of the Multicurrency Facility required pursuant to clause (i), (ii) or (iii) above, (x) the amount remaining (if any) after the prepayment in full of the Multicurrency Advances then outstanding (the sum of such prepayment amounts and remaining amount being referred to herein as the "Multicurrency Reduction Amount") may be retained by the Company and (y) the Multicurrency Facility shall be permanently reduced as set forth in Section 2.06(b)(vii). (xii) All prepayments under this subsection (b) shall be made together with accrued interest to the date of such prepayment on the principal amount prepaid. SECTION 2.08. Interest. (a) Scheduled Interest. Each Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum: (i) Base Rate Advances. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (A) the Base Rate in effect from time to time plus (B) the Applicable Margin in effect from time to time, payable in arrears monthly on the first day of each month during such periods and on the date such Base Rate Advance shall be Converted or paid in full. 65 59 (ii) Eurocurrency Rate Advances. During such periods as such Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of (A) the Eurocurrency Rate for such Interest Period for such Advance plus (B) the Applicable Margin in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurocurrency Rate Advance shall be Converted or paid in full. (iii) Local Rate Advances. During such periods as such Advance is a Local Rate Advance, a rate per annum equal at all times to the sum of (A) the Local Rate in effect from time to time plus (B) the Applicable Margin for Local Rate Advances in effect from time to time, payable in arrears quarterly on the first day of each October, January, April and July during such periods and on the date such Local Rate Advance shall be Converted or paid in full. (b) Default Interest. Upon the occurrence and during the continuance of a Default, each Borrower shall pay interest on (i) the unpaid principal amount of each Advance owing by it to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by law, the amount of any interest, fee or other amount payable under the Loan Documents that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid, in the case of interest, on the Type of Advance on which such interest has accrued pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and, in all other cases, on Base Rate Advances pursuant to clause (a)(i) above. (c) Notice of Interest Period and Interest Rate. Promptly after receipt of a Notice of Borrowing pursuant to Section 2.02(a), a notice of Conversion pursuant to Section 2.10 or a notice of selection of an Interest Period pursuant to the terms of the definition of "Interest Period", the Administrative Agent shall give notice to the applicable Borrower and each Appropriate Lender of the applicable Interest Period and the applicable interest rate determined by the Administrative Agent for purposes of clause (a)(i) or (a)(ii) above, and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under clause (a)(ii) above. (d) Interest Rate Determination. (i) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurocurrency Rate. If any one or more of the Reference Banks shall not furnish such timely information to the 66 60 Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (ii) If fewer than two Reference Banks are able to furnish timely information to the Administrative Agent for determining the Eurocurrency Rate for any Eurocurrency Rate Advances, (A) the Administrative Agent shall forthwith notify the applicable Borrower and the Lenders that the interest rate cannot be determined for such Eurocurrency Rate Advances, (B) each such Advance will automatically, on the last day of the then existing Interest Period therefor, (1) if such Eurocurrency Rate Advance is denominated in Dollars, be prepaid by the Company or be automatically Converted into a Base Rate Advance and (2) if such Eurocurrency Rate Advance is denominated in any Foreign Currency, be prepaid by the Foreign Borrowers or be automatically Converted into a Local Rate Advance of such Foreign Currency (or if such Advance is then a Base Rate Advance or a Local Rate Advance, will continue as a Base Rate Advance or a Local Rate Advance), and (C) the obligation of the Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify the applicable Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e) BA Rate Determination. (i) If the Reuters Screen CDOR Page is not available for the timely determination of the BA Rate, the Canadian Reference Lender agrees to furnish to the Administrative Agent timely information for the purpose of determining the BA Rate. (ii) If the Reuters Screen CDOR Page is not available for the timely determination of the BA Rate, and the Canadian Reference Lender is not able to furnish timely information to the Administrative Agent for determining the BA Rate for any Bankers' Acceptances, (A) the Administrative Agent shall forthwith notify the Canadian Borrower and the Lenders that the interest rate cannot be determined for such Bankers' Acceptances, and (B) the obligation of the Lenders to make, or to renew, Bankers' Acceptances shall be suspended until the Administrative Agent shall notify the Canadian Borrower and the Lenders that the circumstances causing such suspension no longer exist. 67 61 (f) Interest Act (Canada). Whenever a rate of interest hereunder is calculated on the basis of a year (the "deemed year") which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year. (g) Nominal Rates; No Deemed Reinvestment. The principle of deemed reinvestment of interest shall not apply to any interest calculation under this Agreement; all interest payments to be made hereunder shall be paid without allowance or deduction for reinvestment or otherwise, before and after maturity, default and judgment. The rates of interest specified in this Agreement are intended to be nominal rates and not effective rates. Interest calculated hereunder shall be calculated using the nominal rate method and not the effective rate method of calculation. (h) Interest Paid by the Canadian Borrower. Notwithstanding any provision of this Agreement, in no event shall the aggregate "interest" (as defined in Section 347 of the Criminal Code (Canada)) payable by the Canadian Borrower under this Agreement exceed the effective annual rate of interest on the "credit advanced" (as defined in the Section) under this Agreement lawfully permitted by that Section and, if any payment, collection or demand pursuant to this Agreement in respect of "interest" (as defined in that Section) is determined to be contrary to the provisions of that Section, such payment, collection or demand shall be deemed to have been made by mutual mistake of the Canadian Borrower and the Lenders and the amount of such payment or collection shall be refunded to the Canadian Borrower. For the purposes of this Agreement, the effective annual rate of interest shall be determined in accordance with generally accepted actuarial practices and principles over the relevant term and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Lenders will be prima facie evidence of such rate. SECTION 2.09. Fees. (a) Commitment Fee. The Company shall pay to the Administrative Agent for the account of the Lenders a commitment fee, from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender until the Termination Date, payable in arrears on the date of the initial Borrowing hereunder, thereafter monthly on the first day of each month, commencing August 1, 1998, and on the Termination Date, at the rate of the Applicable Percentage on the average daily unused portion of each Appropriate Lender's Delayed Draw Commitment and its Unused Multicurrency Commitment and on the sum of the average daily Unused Revolving Credit Commitment of such Lender plus its Pro Rata Share of the average daily outstanding Swing Line Advances during such month; provided, however, that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender. 68 62 (b) Letter of Credit Fees, Etc. (i) The Company shall pay to the Administrative Agent for the account of each Revolving Credit Lender a commission, payable in arrears quarterly on the first day of each March, June, September and December, commencing September 1, 1998, and on the Termination Date, on such Lender's Pro Rata Share of the average daily aggregate Available Amount during such quarter of all Letters of Credit outstanding from time to time at the rate of the Applicable Margin for Letter of Credit fees. (ii) The Company shall pay to each Issuing Bank, for its own account, such commissions, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Company and such Issuing Bank shall agree. (c) Agents' Fees. The Company shall pay to each Agent for its own account such fees as may from time to time be agreed between the Company and such Agent. (d) Drawing Fees. The Canadian Borrower shall, on the date of each Drawing and on the date of each renewal of any outstanding Bankers' Acceptances, pay to the Administrative Agent, in Canadian Dollars, for the ratable account of the Multicurrency Lenders accepting Drafts and purchasing Bankers' Acceptances, the Drawing Fee with respect to such Bankers' Acceptances. The Canadian Borrower irrevocably authorizes each such Lender to deduct the Drawing Fee payable with respect to each Bankers' Acceptance of such Lender from the Drawing Purchase Price payable by such Lender in respect of such Bankers' Acceptance in accordance with Section 2.04 and to apply such amount so withheld to the payment of such Drawing Fee for the account of the Canadian Borrower and, to the extent such Drawing Fee is so withheld and legally permitted to be so applied, the Canadian Borrower's obligations under the preceding sentence in respect of such Drawing Fee shall be satisfied. SECTION 2.10. Conversion of Advances. (a) Optional. Each Borrower may on any Business Day, upon notice given to the Administrative Agent not later than Noon (New York City time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12, Convert all or any portion of the Advances of one Type comprising the same Borrowing into Advances of the other Type; provided, however, that any Conversion of Eurocurrency Rate Advances into Base Rate Advances or Local Rate Advances shall be made only on the last day of an Interest Period for such Eurocurrency Rate Advances and shall not change the currency in which such Advances are denominated, any Conversion of Base Rate Advances or Local Rate Advances into Eurocurrency Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(c), no Conversion of any Advances shall result in more separate Borrowings than permitted under Section 2.02(c) and each Conversion of Advances comprising part of the same Borrowing under any Facility shall be made ratably among the Appropriate Lenders in accordance with their Commitments under such Facility. Each such notice of Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Advances to be Converted and (iii) if such Conversion is 69 63 into Eurocurrency Rate Advances, the duration of the initial Interest Period for such Advances. Each notice of Conversion shall be irrevocable and binding on the Borrower giving such notice. (b) Mandatory. (i) On the date on which the aggregate unpaid principal amount of Eurocurrency Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, in the case of Term A Borrowings and Term B Borrowings or $2,500,000, in the case of Revolving Credit Borrowings, Multicurrency Borrowings and Delayed Draw Borrowings, such Advances shall automatically (i) if such Eurocurrency Rate Advances are denominated in Dollars, Convert into Base Rate Advances and (ii) if such Eurocurrency Rate Advances are denominated in a Foreign Currency, be Converted into Local Rate Advances of such Foreign Currency. (ii) If any Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify such Borrower and the Appropriate Lenders, whereupon each such Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period therefor, (A) if such Eurocurrency Rate Advances are denominated in Dollars, Convert into Base Rate Advances and (B) if such Eurocurrency Rate Advances are denominated in a Foreign Currency, be Converted into a Local Rate Advance of such Foreign Currency. (iii) Upon the occurrence and during the continuance of any Default, (A) each Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period therefor, (1) if such Eurocurrency Rate Advances are denominated in Dollars, Convert into Base Rate Advances and (2) if such Eurocurrency Rate Advances are denominated in a Foreign Currency, be Converted into a Local Rate Advance of such Foreign Currency and (B) the obligation of the Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances and the obligation of the Multicurrency Lenders to create or renew Bankers' Acceptances shall be suspended. SECTION 2.11. Renewal and Conversion of Bankers' Acceptances. (a) Optional Renewal. The Canadian Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 12:00 Noon (New York City time) on a Business Day at least two Business Days prior to the date of the proposed renewal and subject to the provisions of Section 2.12, renew all or any portion of the Bankers' Acceptances comprising part of the same Drawing; provided, however, that: (i) any renewal of Bankers' Acceptances shall be made only on the then existing Maturity Date for such Bankers' Acceptances; 70 64 (ii) each renewal of Bankers' Acceptances comprising part of the same Drawing shall be made ratably among the Multicurrency Lenders holding such Bankers' Acceptances in accordance with the respective amount of such Bankers' Acceptances so held; and (iii) no renewal of any Bankers' Acceptance may be made at any time that a Default has occurred and is continuing. Each such notice of renewal shall, within the restrictions set forth above, specify (A) the date of such renewal (which shall be the then existing Maturity Date of such Bankers' Acceptances and shall be a Business Day), (B) the Bankers' Acceptances to be renewed, (C) if less than all of the Bankers' Acceptances comprising part of any Drawing are to be renewed, the aggregate Face Amount for such renewal and (D) the term to maturity of the renewed Bankers' Acceptances (which shall comply with the definition of "Maturity Date" in Section 1.01); provided, however, that, if the Administrative Agent determines in good faith (which determination shall be conclusive and binding upon the Canadian Borrower) that the Bankers' Acceptances cannot, due solely to the requested aggregate Face Amount thereof, be renewed ratably by the Multicurrency Lenders, the aggregate Face Amount of such renewal (or the Face Amount of Bankers' Acceptances to be created by any Multicurrency Lender) shall be reduced to such lesser amount as the Administrative Agent determines will permit such renewal to be so made and each Multicurrency Lender shall fund the difference between such Lender's ratable portion of the original aggregate Face Amount of such renewal and the Face Amount of the Bankers' Acceptances to be created by such Lender after giving effect to such reduction in the form of a Canadian Prime Rate Advance, which shall be deemed for all purposes hereof to be a Multicurrency Advance made pursuant to Section 2.01(d). Each notice of renewal under this Section 2.11(a) shall be irrevocable and binding on the Canadian Borrower. Upon any renewal of Bankers' Acceptances comprising part of any Drawing in accordance with this Section 2.11(a), the Multicurrency Lenders holding the Bankers' Acceptances to be renewed shall exchange such maturing Bankers' Acceptances for new Bankers' Acceptances containing the terms set forth in the applicable notice of renewal, and the Drawing Purchase Price payable for each such renewal shall be applied, together with other funds, if necessary, available to the Canadian Borrower, to reimburse the Bankers' Acceptances otherwise maturing on such date in accordance with Section 2.05(e). The Canadian Borrower hereby irrevocably authorizes and directs each Multicurrency Lender to apply the proceeds of each renewed Bankers' Acceptance owing to it to the reimbursement, in accordance with this Section 2.11(a), of the Bankers' Acceptances owing to such Multicurrency Lender and maturing on such date. (b) Optional Conversion. The Canadian Borrower may on any Business Day, upon notice given to the Administrative Agent not later than 12:00 noon (Toronto time) on a Business Day at least two Canadian Business Days prior to the date of the proposed Conversion and subject to the provisions of Section 2.12, Convert all or any portion of the Bankers' 71 65 Acceptances comprising part of the same Drawing to a Multicurrency Borrowing comprised of Canadian Prime Rate Advances; provided, however, that: (i) any Conversion of Bankers' Acceptances shall be made only on the then existing Maturity Date for such Bankers' Acceptances; (ii) each Conversion of Bankers' Acceptances comprising part of the same Drawing shall be made ratably among the Multicurrency Lenders holding such Bankers' Acceptances in accordance with the respective amounts of such Bankers' Acceptances so held; and (iii) no Conversion may be made if (A) the amount of the Advance to be made by any Multicurrency Lender in connection with such Conversion would exceed such Multicurrency Lender's Unused Multicurrency Commitment in effect at the time of such Conversion, or (B) after giving effect to such Conversion, the sum of the aggregate principal amount of outstanding Multicurrency Advances plus the aggregate Face Amount of Bankers' Acceptances then outstanding would exceed the Multicurrency Facility. Each such notice of Conversion shall, within the restrictions set forth above, specify (A) the date of such Conversion (which shall be the then existing Maturity Date of such Bankers' Acceptances and shall be a Business Day), (B) the Bankers' Acceptances to be Converted and (C) if less than all of the Bankers' Acceptances comprising part of any Drawing are to be Converted, the aggregate Face Amount of such Conversion. Each notice of Conversion under this Section 2.11(b) shall be irrevocable and binding on the Canadian Borrower. Upon any Conversion of Bankers' Acceptances comprising part of the same Drawing in accordance with this Section 2.11(b), the obligation of the Canadian Borrower to reimburse the Lenders under Section 2.13 in respect of the Bankers' Acceptances otherwise maturing on such date shall, to the extent of such Conversion, be Converted to an obligation to reimburse the Lenders making the Multicurrency Advances made in respect of such maturing Bankers' Acceptances on such date ratably in accordance with the amount of the Advances held by such Lender at the time of reimbursement. The Canadian Borrower hereby irrevocably authorizes and directs each Multicurrency Lender to apply the net proceeds of each Canadian Prime Rate Advance made by such Lender pursuant to this Section 2.11(b) to the reimbursement of the Bankers' Acceptances owing to such Lender and maturing on such date. (c) Mandatory Conversion. If any Default shall have occurred and be continuing or if the Canadian Borrower shall fail (i) to deliver a properly completed notice of renewal under Section 2.11(a) or a properly completed notice of Conversion under Section 2.11(b) indicating its intention to renew or to Convert any maturing Bankers' Acceptances or (ii) to reimburse the Multicurrency Lenders for any Bankers' Acceptances comprising part of the same Drawing pursuant to Section 2.05, the Administrative Agent will forthwith so notify the 72 66 Canadian Borrower and the Multicurrency Lenders, whereupon each such Bankers' Acceptance will automatically, on the then existing Maturity Date of such Bankers' Acceptances, Convert into a Canadian Prime Rate Advance. SECTION 2.12. Increased Costs, Etc. (a) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be: (A) any increase in the cost to any Lender Party of agreeing to make or of making, funding or maintaining Eurocurrency Rate Advances or of agreeing to issue or of issuing or maintaining or participating in Letters of Credit; (B) any increase in the cost to any Lender Party of agreeing to perform or of performing its obligations under this Agreement under or in respect of Bankers' Acceptances; or (C) any reduction in any amount payable to, or any increase in any payment required to be made by, or any forgiveness or reduction of effective return to, any Lender Party under this Agreement under or in respect of any Bankers' Acceptances (excluding, for purposes of this Section 2.12, any such increased costs resulting from (x) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (y) changes in the basis of taxation of overall net income or overall gross income by the United States or by the foreign jurisdiction or state under the laws of which such Lender Party is organized or has its Applicable Lending Office or any political subdivision thereof), then each of the Borrowers shall from time to time, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party additional amounts sufficient to compensate such Lender Party for such increased cost attributable to such Borrower. A certificate as to the amount of such increased cost, submitted to the Borrowers by such Lender Party, shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request from any central bank or other governmental authority, including, without limitation, any agency of the European Union or similar monetary or multinational authority (whether or not having the force of law), there shall be any increase in the amount of capital required or expected to be maintained by any Lender Party or any corporation controlling such Lender Party as a result of or based upon the existence of such Lender Party's commitment to lend, to accept, purchase and discount Bankers' Acceptances or to issue or participate in Letters of Credit hereunder and other commitments of such type or the purchase or acceptance and maintenance of Bankers' 73 67 Acceptances or the issuance or maintenance of or participation in the Letters of Credit (or similar contingent obligations), then, upon demand by such Lender Party or such corporation (with a copy of such demand to the Administrative Agent), the Borrowers shall pay to the Administrative Agent for the account of such Lender Party, from time to time as specified by such Lender Party, additional amounts sufficient to compensate such Lender Party in the light of such circumstances, to the extent that such Lender Party reasonably determines such increase in capital to be allocable to the existence of such Lender Party's commitment to lend, to accept, purchase and discount Bankers' Acceptances or to issue or participate in Letters of Credit hereunder or the purchase or acceptance and maintenance of Bankers' Acceptances or to the issuance or maintenance of or participation in any Letters of Credit. A certificate as to such amounts submitted to the Borrowers by such Lender Party shall be conclusive and binding for all purposes, absent manifest error. (c) If, with respect to any Eurocurrency Rate Advances under any Facility, Lenders owed at least 51% of the then aggregate unpaid principal amount thereof notify the Administrative Agent that (i) they are unable to obtain matching deposits in the London inter-bank market at or about 11:00 A.M. (London time) on the second Business Day before the making or Conversion of a Borrowing in sufficient amounts to fund their respective Multicurrency Advances as a part of such Borrowing during its Interest Period or (ii) the Eurocurrency Rate for any Interest Period for such Advances will not adequately reflect the cost to such Lenders of making, funding or maintaining their respective Eurocurrency Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the applicable Borrower and the Appropriate Lenders, whereupon (A) such Borrower will, on the last day of the then existing Interest Period therefor, (1) if such Eurocurrency Rate Advances are denominated in Dollars, either (x) prepay such Advances or (y) Convert such Advances into Base Rate Advances and (2) if such Eurocurrency Rate Advances are denominated in any Foreign Currency, either (x) prepay such Advances or (y) Convert such Advances into Local Rate Advances of such Foreign Currency and (B) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify the applicable Borrower and the Appropriate Lenders that the circumstances causing such suspension no longer exist; provided that, if the circumstances set forth in clause (ii) above are applicable, the applicable Foreign Borrower may elect, by notice to the Administrative Agent and the Multicurrency Lenders, to continue such Multicurrency Advances in such Foreign Currency for Interest Periods of not longer than one month, which Multicurrency Advances shall thereafter bear interest at a rate per annum equal to the Applicable Margin plus, for each Multicurrency Lender, the cost to such Multicurrency Lender (expressed as a rate per annum) of funding its Eurocurrency Rate Advances by whatever means it reasonably determines to be appropriate. Each Multicurrency Lender shall certify its cost of funds for each Interest Period to the Administrative Agent and the applicable Foreign Borrower as soon as practicable (but in any event not later than ten Business Days after the first day of such Interest Period). 74 68 (d) Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Eurocurrency Lending Office to perform its obligations hereunder to make Eurocurrency Rate Advances in Dollars or any Foreign Currency or to continue to fund or maintain Eurocurrency Rate Advances in Dollars or any Foreign Currency hereunder, then, on notice thereof and demand therefor by such Lender to the Borrowers through the Administrative Agent, (i) each Eurocurrency Rate Advance under each Facility under which such Lender has a Commitment will automatically, upon such demand, (A) if such Eurocurrency Rate Advance is denominated in Dollars, be Converted into a Base Rate Advance, and (B) if such Eurocurrency Rate Advance is denominated in any Foreign Currency, be Converted into a Local Rate Advance of such Foreign Currency, and (ii) the obligation of the Appropriate Lenders to make, or to Convert Advances into, Eurocurrency Rate Advances shall be suspended until the Administrative Agent shall notify the Borrowers that such Lender has determined that the circumstances causing such suspension no longer exist. (e) Notwithstanding any other provision of this Agreement, if the introduction of or any change in the interpretation of any law or regulation (including, without limitation, any change in acceptance limits imposed on any Lender) shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Multicurrency Lender or any of their respective BA Lending Offices to perform its obligations hereunder to complete and accept Drafts, to purchase Bankers' Acceptances or to continue to fund or maintain Bankers' Acceptances hereunder, then, upon notice thereof and demand therefor by such Multicurrency Lender to the Canadian Borrower through the Administrative Agent (i) an amount equal to the aggregate Face Amount of all Bankers' Acceptances outstanding at such time held by such Multicurrency Lender shall, upon such demand (which shall only be made if deemed necessary by the applicable Lender to comply with applicable law), be deposited by the Canadian Borrower into the Canadian Cash Collateral Account until the Maturity Date of each such Bankers' Acceptance, (ii) upon the Maturity Date of any Bankers' Acceptance in respect of which any such deposit has been made, the Administrative Agent shall be, and hereby is, authorized (without notice to or any further action by the Canadian Borrower) to apply, or to direct the Administrative Agent to apply, such amount (or the applicable portion thereof) to the reimbursement of such Bankers' Acceptance and (iii) the obligation of the Multicurrency Lenders to complete and accept Drafts and/or to purchase Bankers' Acceptances shall be suspended until the Administrative Agent shall notify the Canadian Borrower that such Multicurrency Lender has determined that the circumstances causing such suspension no longer exist. SECTION 2.13. Payments and Computations. (a) Each Borrower shall make each payment hereunder and under the Notes, irrespective of any right of counterclaim or set-off (except as otherwise provided in Section 2.17), except with respect to principal of, interest on, and other amounts relating to, Advances denominated in a Foreign Currency, not later than 75 69 11:00 A.M. (New York City time) on the day when due in Dollars to the Administrative Agent at the applicable Administrative Agent's Account in same day funds, with payments received after such time being deemed to have been received on the next succeeding Business Day. The Foreign Borrowers shall make each payment hereunder with respect to principal of, interest on, and other amounts relating to, Advances denominated in a Foreign Currency and Bankers' Acceptances, not later than 11:00 A.M. (at the Payment Office for such Foreign Currency) on the day when due in such Foreign Currency to the applicable Administrative Agent in same day funds, by deposit of such funds to the applicable Administrative Agent's Account in same day funds, with payments received by the Administrative Agent or such Sub-Agent after such time being deemed to have been received on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause like funds to be distributed (i) if such payment is in respect of principal, interest, commitment fees or any other Obligation then payable hereunder and under the Notes to more than one Lender Party, to such Lender Parties for the account of their respective Applicable Lending Offices ratably in accordance with the amounts of such respective Obligations then payable to such Lender Parties and (ii) if such payment is in respect of any Obligation then payable hereunder to one Lender Party, to such Lender Party for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date of such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender Party assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) Each Borrower hereby authorizes each Lender Party, if and to the extent payment owed to such Lender Party is not made when due hereunder or, in the case of a Lender, under the Note held by such Lender, to charge from time to time against any or all of such Borrower's accounts with such Lender Party any amount so due. (c) All computations of interest, fees and Letter of Credit commissions shall be made by the Administrative Agent on the basis of a year of 360 days (or, in each case of Advances denominated in Foreign Currencies where market practice differs, in accordance with market practice) and all computations of interest based on the BA Rate shall be made by the Administrative Agent on the basis of a year of 365 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Each determination by the Administrative Agent of an interest rate, fee or commission hereunder shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under the Notes or in respect of Bankers' Acceptances shall be stated to be due on a day other than a Business Day, such payment 76 70 shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from the applicable Borrower prior to the date on which any payment is due to any Lender Party hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each such Lender Party on such due date an amount equal to the amount then due such Lender Party. If and to the extent such Borrower shall not have so made such payment in full to the Administrative Agent, each such Lender Party shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender Party together with interest thereon, for each day from the date such amount is distributed to such Lender Party until the date such Lender Party repays such amount to the Administrative Agent at, (i) the Federal Funds Rate in the case of Advances denominated in Dollars or (ii) the cost of funds incurred by the Administrative Agent in respect of such amount in the case of Advances denominated in Foreign Currencies. (f) If the Administrative Agent receives funds for application to the Obligations under the Loan Documents under circumstances for which the Loan Documents do not specify the Advances or the Facility to which, or the manner in which, such funds are to be applied, the Administrative Agent may, but shall not be obligated to, elect to distribute such funds to each Lender Party ratably in accordance with such Lender Party's proportionate share of the principal amount of all outstanding Advances, the Face Amount of all outstanding Bankers' Acceptances and the Available Amount of all Letters of Credit then outstanding, in repayment or prepayment of such of the outstanding Advances or other Obligations owed to such Lender Party, and for application to such principal installments, as the Administrative Agent shall direct. SECTION 2.14. Taxes. (a) Any and all payments by any Borrower hereunder or under the Notes or in respect of any Bankers' Acceptances shall be made, in accordance with Section 2.13, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender Party and each Agent, taxes that are imposed on its overall net income by the United States and taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction under the laws of which such Lender Party or such Agent, as the case may be, is organized or any political subdivision thereof and, in the case of each Lender Party, taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the state or foreign jurisdiction of such Lender Party's Applicable Lending Office or any political subdivision thereof (all such non-excluded 77 71 taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments hereunder or under the Notes or in respect of any Bankers' Acceptances being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note or in respect of any Bankers' Acceptances to any Lender Party or any Agent or, if the Administrative Agent shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or in respect of any Bankers' Acceptances to any Lender Party, (i) the sum payable by such Borrower shall be increased as may be necessary so that after such Borrower and the Administrative Agent have made all required deductions (including deductions applicable to additional sums payable under this Section 2.14) such Lender Party or such Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make all such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Borrower shall pay any present or future stamp, documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under the Notes or in respect of any Bankers' Acceptances or from the execution, delivery or registration of, performance under, or otherwise with respect to, this Agreement , the Notes, any Letters of Credit or any Bankers' Acceptances (hereinafter referred to as "Other Taxes"). (c) Each Borrower shall indemnify each Lender Party and each Agent for and hold them harmless against the full amount of Taxes and Other Taxes, and for the full amount of taxes of any kind imposed by any jurisdiction on amounts payable under this Section 2.14, imposed on or paid by such Lender Party or such Agent (as the case may be) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be made within 30 days from the date such Lender Party or such Agent (as the case may be) makes written demand therefor. (d) Within 30 days after the date of any payment of Taxes, each Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.02, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder, under the Notes, in respect of any Letters of Credit or in respect of any Bankers' Acceptances by or on behalf of such Borrower through an account or branch outside the United States, the United Kingdom and Canada or by or on behalf of such Borrower by a payor that is not a United States person or a corporation organized under the laws of the United Kingdom or Canada, if such Borrower determines that no Taxes are payable in respect thereof, such Borrower shall furnish, or shall cause such payor to furnish, to the Administrative Agent, at such address, an opinion of counsel reasonably acceptable to the Administrative Agent stating that such payment is exempt from Taxes. For purposes of subsections (d) and (e) of this Section 2.14, the terms "United 78 72 States" and "United States person" shall have the meanings specified in Section 7701 of the Internal Revenue Code. (e) Each Lender Party organized under the laws of a jurisdiction outside the United States shall, on or prior to the date of its execution and delivery of this Agreement in the case of each Initial Lender or Initial Issuing Bank, as the case may be, and on the date of the Assignment and Acceptance pursuant to which it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter as requested in writing by any Borrower (but only so long thereafter as such Lender Party remains lawfully able to do so), provide each of the Administrative Agent and the Company with any form or certificate that is required by any taxing authority, including, if applicable, two original Internal Revenue Service forms 1001 or 4224 or (in the case of a Lender Party that has certified in writing to the Administrative Agent that it is not a "bank" as defined in Section 881(c)(3)(A) of the Internal Revenue Code) form W-8 (and, if such Lender Party delivers a form W-8, a certificate representing that such Lender Party is not a "bank" for purposes of Section 881(c) of the Internal Revenue Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Company and is not a controlled foreign corporation related to the Company (within the meaning of Section 864(d)(4) of the Internal Revenue Code)), as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that such Lender Party is exempt from or entitled to a reduced rate of Home Jurisdiction Withholding Taxes (as defined below) on payments pursuant to this Agreement or the Notes or in respect of any Bankers' Acceptances or, in the case of a Lender Party providing a form W-8, certifying that such Lender Party is a foreign corporation, partnership, estate or trust. If the forms provided by a Lender Party at the time such Lender Party first becomes a party to this Agreement indicate a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from Taxes unless and until such Lender Party provides the appropriate forms certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided, however, that if, at the effective date of the Assignment and Acceptance pursuant to which a Lender Party becomes a party to this Agreement, the Lender Party assignor was entitled to payments under subsection (a) of this Section 2.14 in respect of United States withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) United States withholding tax, if any, applicable with respect to the Lender Party assignee on such date. If any form or document referred to in this subsection (e) requires the disclosure of information, other than information necessary to compute the tax payable and information required on the date hereof by Internal Revenue Service form 1001, 4224 or W-8 (or the related certificate described above), that the Lender Party reasonably considers to be confidential, the Lender Party shall give notice thereof to the Borrowers and shall not be obligated to include in such form or document such confidential information. 79 73 "Home Jurisdiction Withholding Taxes" means (a) in the case of the Company, withholding taxes imposed by the United States, (b) in the case of HHEL and Rigby, withholding taxes imposed by the United Kingdom, (c) in the case of the Canadian Borrower, withholding taxes imposed by Canada and (d) in the case of Danmark, withholding taxes imposed by Denmark. (f) For any period with respect to which a Lender Party has failed to provide the Borrowers with the appropriate form described in subsection (e) above (other than if such failure is due to a change in law occurring after the date on which a form originally was required to be provided or if such form otherwise is not required under subsection (e) above), such Lender Party shall not be entitled to indemnification under subsection (a) or (c) of this Section 2.14 with respect to Taxes imposed by the United States, the United Kingdom or Canada by reason of such failure; provided, however, that should a Lender Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrowers shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. (g) Each Lender Party shall promptly upon the request of the Administrative Agent take all action (including without limitation the completion of forms and the provision of information to the appropriate taxing authorities or to the Administrative Agent), of the kind prescribed in regulations promulgated under Section 118H of the U.K. Income and Corporation Taxes Act of 1988 (and any statements published by the Inland Revenue relating thereto and having general application) and consistent with such Lender Party's legal and regulatory restrictions, reasonably requested by the Administrative Agent, and the Administrative Agent shall upon reasonable request from any Foreign Borrower make such request of each Lender Party and shall itself (consistent with the Administrative Agent's legal and regulatory restrictions), to the extent appropriate and reasonable, take similar action, to secure the benefit of any exemption from, or relief with respect to, Taxes or Other Taxes imposed by the United Kingdom under Section 118H of the U.K. Income and Corporation Taxes Act of 1988 in relation to any amounts payable under this Agreement. (h) Any Lender Party claiming any additional amounts payable pursuant to this Section 2.14 agrees to use its reasonable best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender Party, be otherwise disadvantageous to such Lender Party. SECTION 2.15. Sharing of Payments, Etc. If any Lender Party shall obtain at any time any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise, other than as a result of an assignment pursuant to Section 9.07) (a) on account of Obligations due and payable to such Lender Party hereunder and under the Notes and Bankers' 80 74 Acceptances at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender Party at such time to (ii) the aggregate amount of the Obligations due and payable to all Lender Parties hereunder and under the Notes and Bankers' Acceptances at such time) of payments on account of the Obligations due and payable to all Lender Parties hereunder and under the Notes and Bankers' Acceptances at such time obtained by all the Lender Parties at such time or (b) on account of Obligations owing (but not due and payable) to such Lender Party hereunder and under the Notes and Bankers' Acceptances at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing to such Lender Party at such time to (ii) the aggregate amount of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes and Bankers' Acceptances at such time) of payments on account of the Obligations owing (but not due and payable) to all Lender Parties hereunder and under the Notes and Bankers' Acceptances at such time obtained by all of the Lender Parties at such time, such Lender Party shall forthwith purchase from the other Lender Parties such interests or participating interests in the Obligations due and payable or owing to them, as the case may be, as shall be necessary to cause such purchasing Lender Party to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender Party, such purchase from each other Lender Party shall be rescinded and such other Lender Party shall repay to the purchasing Lender Party the purchase price to the extent of such Lender Party's ratable share (according to the proportion of (i) the purchase price paid to such Lender Party to (ii) the aggregate purchase price paid to all Lender Parties) of such recovery together with an amount equal to such Lender Party's ratable share (according to the proportion of (i) the amount of such other Lender Party's required repayment to (ii) the total amount so recovered from the purchasing Lender Party) of any interest or other amount paid or payable by the purchasing Lender Party in respect of the total amount so recovered; provided further that, so long as the Obligations under the Loan Documents shall not have been accelerated, any excess payment received by any Appropriate Lender shall be shared on a pro rata basis only with other Appropriate Lenders. Each Borrower agrees that any Lender Party so purchasing an interest or participating interest from another Lender Party pursuant to this Section 2.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such an interest or participating interest, as the case may be, as fully as if such Lender Party were the direct creditor of such Borrower in the amount of such an interest or participating interest, as the case may be. SECTION 2.16. Use of Proceeds. The proceeds of the Advances, Bankers' Acceptances and issuances of Letters of Credit shall be available (and each Borrower agrees that it shall use such proceeds and Letters of Credit) solely to pay transaction fees and expenses, refinance certain Existing Debt of the Company, provide working capital for the Company and its Subsidiaries and for other general corporate purposes permitted by this Agreement. 81 75 SECTION 2.17. Defaulting Lenders. (a) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance to any Borrower and (iii) such Borrower shall be required to make any payment hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then such Borrower may, so long as no Default shall occur or be continuing at such time and to the fullest extent permitted by applicable law, set off and otherwise apply the Obligation of such Borrower to make such payment to or for the account of such Defaulting Lender against the obligation of such Defaulting Lender to make such Defaulted Advance. In the event that, on any date, any Borrower shall so set off and otherwise apply its obligation to make any such payment against the obligation of such Defaulting Lender to make any such Defaulted Advance on or prior to such date, the amount so set off and otherwise applied by such Borrower shall constitute for all purposes of this Agreement and the other Loan Documents an Advance by such Defaulting Lender made on the date of such setoff under the Facility pursuant to which such Defaulted Advance was originally required to have been made pursuant to Section 2.01. Such Advance shall be a Base Rate Advance or a Local Rate Advance, as the case may be, and shall be considered, for all purposes of this Agreement, to comprise part of the Borrowing in connection with which such Defaulted Advance was originally required to have been made pursuant to Section 2.01, even if the other Advances comprising such Borrowing shall be Eurocurrency Rate Advances or Bankers' Acceptances on the date such Advance is deemed to be made pursuant to this subsection (a). Each Borrower shall notify the Administrative Agent at any time such Borrower exercises its right of set-off pursuant to this subsection (a) and shall set forth in such notice (A) the name of the Defaulting Lender and the Defaulted Advance required to be made by such Defaulting Lender and (B) the amount set off and otherwise applied in respect of such Defaulted Advance pursuant to this subsection (a). Any portion of such payment otherwise required to be made by any Borrower to or for the account of such Defaulting Lender which is paid by such Borrower, after giving effect to the amount set off and otherwise applied by such Borrower pursuant to this subsection (a), shall be applied by the Administrative Agent as specified in subsection (b) or (c) of this Section 2.17. (b) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to any Agent or any of the other Lender Parties and (iii) any Borrower shall make any payment hereunder or under any other Loan Document to the Administrative Agent for the account of such Defaulting Lender, then the Administrative Agent may, on its behalf or on behalf of such other Agents or such other Lender Parties and to the fullest extent permitted by applicable law, apply at such time the amount so paid by such Borrower to or for the account of such Defaulting Lender to the payment of each such Defaulted Amount to the extent required to pay such Defaulted Amount. In the event that the Administrative Agent shall so apply any such amount to the payment of any such Defaulted Amount on any date, the amount so applied by the Administrative Agent shall constitute for all purposes of this Agreement and the other Loan Documents payment, to such extent, of such Defaulted Amount on such date. Any such amount so applied by the Administrative Agent shall 82 76 be retained by the Administrative Agent or distributed by the Administrative Agent to such other Agents or such other Lender Parties, ratably in accordance with the respective portions of such Defaulted Amounts payable at such time to the Administrative Agent, such other Agents and such other Lender Parties and, if the amount of such payment made by the applicable Borrower shall at such time be insufficient to pay all Defaulted Amounts owing at such time to the Administrative Agent, such other Agents and such other Lender Parties, in the following order of priority: (i) first, to the Agents for any Defaulted Amounts then owing to the Agents, ratably in accordance with such respective Defaulted Amounts then owing to the Agents; (ii) second, to the Issuing Banks and the Swing Line Bank for any Defaulted Amounts then owing to them, in their capacities as such, ratably in accordance with such respective Defaulted Amounts then owing to such Issuing Banks and such Swing Line Bank; and (iii) third, to any other Lender Parties for any Defaulted Amounts then owing to such other Lender Parties, ratably in accordance with such respective Defaulted Amounts then owing to such other Lender Parties. Any portion of such amount paid by the applicable Borrower for the account of such Defaulting Lender remaining, after giving effect to the amount applied by the Administrative Agent pursuant to this subsection (b), shall be applied by the Administrative Agent as specified in subsection (c) of this Section 2.17. (c) In the event that, at any one time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance or a Defaulted Amount and (iii) any Borrower, any Agent or any other Lender Party shall be required to pay or distribute any amount hereunder or under any other Loan Document to or for the account of such Defaulting Lender, then such Borrower or such Agent or such other Lender Party shall pay such amount to the Administrative Agent to be held by the Administrative Agent, to the fullest extent permitted by applicable law, in escrow or the Administrative Agent shall, to the fullest extent permitted by applicable law, hold in escrow such amount otherwise held by it. Any funds held by the Administrative Agent in escrow under this subsection (c) shall be deposited by the Administrative Agent in an account with Citibank, in the name and under the control of the Administrative Agent, but subject to the provisions of this subsection (c). The terms applicable to such account, including the rate of interest payable with respect to the credit balance of such account from time to time, shall be Citibank's standard terms applicable to escrow accounts maintained with it. Any interest credited to such account from time to time shall be held by the Administrative Agent in escrow under, and applied by the Administrative Agent from time to time in accordance with the provisions of, this subsection (c). The Administrative Agent shall, to the fullest extent permitted by applicable law, apply all funds so held in escrow from time to time to 83 77 the extent necessary to make any Advances required to be made by such Defaulting Lender and to pay any amount payable by such Defaulting Lender hereunder and under the other Loan Documents to the Administrative Agent or any other Lender Party, as and when such Advances or amounts are required to be made or paid and, if the amount so held in escrow shall at any time be insufficient to make and pay all such Advances and amounts required to be made or paid at such time, in the following order of priority: (i) first, to the Agents for any amounts then due and payable by such Defaulting Lender to the Agents hereunder, ratably in accordance with such amounts then due and payable to the Agents; (ii) second, to the Issuing Banks and the Swing Line Bank for any amounts then due and payable to them hereunder, in their capacities as such, by such Defaulting Lender, ratably in accordance with such amounts then due and payable to such Issuing Banks and such Swing Line Bank; (iii) third, to any other Lender Parties for any amount then due and payable by such Defaulting Lender to such other Lender Parties hereunder, ratably in accordance with such respective amounts then due and payable to such other Lender Parties; and (iv) fourth, to the applicable Borrower for any Advance then required to be made by such Defaulting Lender pursuant to a Commitment of such Defaulting Lender. In the event that any Lender Party that is a Defaulting Lender shall, at any time, cease to be a Defaulting Lender, any funds held by the Administrative Agent in escrow at such time with respect to such Lender Party shall be distributed by the Administrative Agent to such Lender Party and applied by such Lender Party to the Obligations owing to such Lender Party at such time under this Agreement and the other Loan Documents ratably in accordance with the respective amounts of such Obligations outstanding at such time. (d) The rights and remedies against a Defaulting Lender under this Section 2.17 are in addition to other rights and remedies that any Borrower may have against such Defaulting Lender with respect to any Defaulted Advance and that any Agent or any Lender Party may have against such Defaulting Lender with respect to any Defaulted Amount. 84 78 ARTICLE III CONDITIONS OF LENDING AND ISSUANCES OF LETTERS OF CREDIT SECTION 3.01. Conditions Precedent to Initial Extension of Credit. The obligation of each Lender to make an Advance to any Borrower (other than Danmark) or of any Issuing Bank to issue a Letter of Credit on the occasion of the Initial Extension of Credit hereunder is subject to the satisfaction of the following conditions precedent before or concurrently with the Initial Extension of Credit: (a) The Administrative Agent shall have received on or before the day of the Initial Extension of Credit the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and (except for the Notes) in sufficient copies for each Lender Party: (i) The Notes (other than the Notes made by Danmark) payable to the order of the Lenders. (ii) A security agreement in substantially the form of Exhibit D hereto (together with each other security agreement and security agreement supplement delivered pursuant to Section 5.01(j), in each case as amended, the "Security Agreement"), duly executed by each Loan Party, together with: (A) certificates representing the Pledged Shares referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank, (B) acknowledgment copies or stamped receipt copies of proper financing statements, duly filed on or before the day of the Initial Extension of Credit under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement, covering the Collateral described in the Security Agreement, (C) completed requests for information, dated on or before the date of the Initial Extension of Credit, listing the financing statements referred to in clause (B) above and all other effective financing statements filed in the jurisdictions referred to in clause (B) above that name any Loan Party as debtor, together with copies of such other financing statements, 85 79 (D) evidence of the completion of all other recordings and filings of or with respect to the Security Agreement that the Administrative Agent may deem necessary or desirable in order to perfect and protect the Liens created thereby, (E) evidence of the insurance required by the terms of the Security Agreement, (F) copies of the Assigned Agreements referred to in the Security Agreement, together with a consent to such assignment, in substantially the form of Exhibit B to the Security Agreement, duly executed by each party to such Assigned Agreements other than the Loan Parties, (G) the Pledged Account Letters referred to in the Security Agreement, duly executed by each Pledged Account Bank referred to in the Security Agreement, and (H) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement has been taken (including, without limitation, receipt of duly executed payoff letters, UCC-3 termination statements and landlords' and bailees' waiver and consent agreements). (iii) A guaranty in substantially the form of Exhibit E hereto (together with each other guaranty and guaranty supplement delivered by a Domestic Subsidiary pursuant to Section 5.01(j), in each case as amended, the "Domestic Subsidiary Guaranty"), duly executed by each Domestic Subsidiary Guarantor and a guaranty in substantially the form of Exhibit F hereto (together with each other guaranty and guaranty supplement delivered by a Foreign Subsidiary pursuant to Section 5.01(j), in each case as amended, the "Foreign Subsidiary Guaranty") duly executed by each Foreign Subsidiary Guarantor. (iv) Deeds of trust, trust deeds and mortgages in substantially the form of Exhibit G hereto and covering the properties designated by an asterisk (*) and listed on Schedule 4.01(w) hereto (together with the Assignments of Leases and Rents referred to therein and each other mortgage delivered pursuant to Section 5.01(j), in each case as amended, the "Mortgages"), duly executed by the appropriate Loan Party, together with: 86 80 (A) evidence that counterparts of the Mortgages have been duly recorded or delivered for recording to the Company's title company on or before the day of the Initial Extension of Credit in all filing or recording offices that the Administrative Agent may deem necessary or desirable in order to create a valid first and subsisting Lien on the property described therein in favor of the Collateral Agent for the benefit of the Secured Parties and that all filing and recording taxes and fees have been paid, (B) fully paid American Land Title Association Lender's Extended Coverage (or equivalent) title insurance policies (the "Mortgage Policies") in form and substance, with endorsements and in amount acceptable to the Administrative Agent (which amount shall not exceed the greater of the amount of the Lien or the fair market value of the property, issued, coinsured and reinsured by title insurers acceptable to the Administrative Agent, insuring the Mortgages to be valid first and subsisting Liens on the property described therein, free and clear of all material defects (including, but not limited to, mechanics' and materialmen's Liens) and encumbrances, excepting only Permitted Encumbrances, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents and for mechanics' and materialmen's Liens) and such coinsurance and direct access reinsurance as the Administrative Agent may deem necessary or desirable, (C) the Assignments of Leases and Rents referred to in the Mortgages, duly executed by the appropriate Loan Party, (D) evidence of the insurance required by the terms of the Mortgages, and (E) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to create valid first and subsisting Liens on the property described in the Mortgages has been taken. (v) A Canadian security agreement in substantially the form of Exhibit H hereto (together with each other Canadian security agreement and Canadian security agreement supplement delivered pursuant to Section 5.01(j), in each case as amended, the "Canadian Security Agreement"), duly executed by each Loan Party organized under the laws of Canada, together with evidence that all action that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Canadian Security Agreement has been taken. 87 81 (vi) A deed of charge, in substantially the form of Exhibit I-1 (as amended, supplemented or otherwise modified in accordance with its terms, the "Deed of Charge"), duly executed by each of Handy & Harman UK Holdings Limited, HHEL and Rigby, and a deed of charge over shares, in substantially the form of Exhibit I-2 (as amended, supplemented or otherwise modified in accordance with its terms, the "Deed of Charge over Shares"), duly executed by Handy & Harman International, Ltd. together with evidence that all actions that may be necessary or desirable in order to improve, maintain, perfect and protect the security intended to be created by or pursuant to the Deed of Charge and the Deed of Charge over Shares, respectively, have been taken. (vii) Certified copies of the resolutions of the Board of Directors of each Loan Party (other than Danmark) approving the transactions contemplated by the Transaction Documents and each Transaction Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the transactions contemplated by the Transaction Documents and each Transaction Document to which it is or is to be a party. (viii) A copy of a certificate of the applicable regulatory authority of the jurisdiction of incorporation of each Loan Party (other than Danmark), dated reasonably near the date of the Initial Extension of Credit, certifying (to the extent applicable) (A) as to a true and correct copy of the charter of such Loan Party and each amendment thereto on file in such office and (B) that (1) such amendments are the only amendments to such Loan Party's charter on file in such office, (2) such Loan Party has paid all franchise taxes to the date of such certificate and (C) such Loan Party is duly incorporated and in good standing or presently subsisting under the laws of the jurisdiction of its incorporation. (ix) A copy of a certificate of the applicable regulatory authority of each jurisdiction listed on Schedule 3.01(a)(ix), dated reasonably near the date of the Initial Extension of Credit, stating (to the extent applicable) that each Loan Party is duly qualified and in good standing as a foreign corporation in such jurisdiction and has filed all annual reports required to be filed to the date of such certificate. (x) A certificate of each Loan Party (other than Danmark), signed on behalf of such Loan Party by its President or a Vice President and its Secretary or any Assistant Secretary, dated the date of the Initial Extension of Credit (the statements made in which certificate shall be true on and as of the date of the Initial Extension of Credit), certifying as to (A) the absence of any amendments to 88 82 the charter of such Loan Party since the date of the certificate referred to in Section 3.01(a)(viii), (B) a true and correct copy of the bylaws of such Loan Party as in effect on the date on which the resolutions referred to in Section 3.01(a)(vii) were adopted and on the date of the Initial Extension of Credit, (C) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its incorporation, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the date of the Initial Extension of Credit and (E) the absence of any event occurring and continuing, or resulting from the Initial Extension of Credit, that constitutes a Default. (xi) A certificate of the Secretary or an Assistant Secretary of each Loan Party (other than Danmark) certifying the names and true signatures of the officers of such Loan Party authorized to sign each Transaction Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (xii) Certified copies of each of the Related Documents, duly executed by the parties thereto and in form and substance satisfactory to the Lender Parties, together with all agreements, instruments and other documents delivered in connection therewith as the Administrative Agent shall request. (xiii) Certificates, in substantially the form of Exhibit J hereto, attesting to the Solvency of each Loan Party before and after giving effect to and the transactions contemplated by the Transaction Documents, from a Designated Officer of such Loan Party. (xiv) Such financial, business and other information regarding each Loan Party and its Subsidiaries as the Lender Parties shall have requested, including, without limitation, information as to possible contingent liabilities, tax matters, environmental matters, obligations under Plans, Multiemployer Plans and Welfare Plans, collective bargaining agreements and other arrangements with employees, audited annual financial statements dated December 31, 1995, December 31, 1996 and December 31, 1997, interim financial statements dated as of March 31, 1998, pro forma financial statements as to the Company as at June 30, 1998 in the form of the forecasts delivered pursuant to this clause (xiv) and forecasts prepared by management of the Company, in form and substance satisfactory to the Lender Parties, giving effect to the transactions contemplated by the Transaction Documents, the acquisition of the Company by WHX Corporation and the precious metals dividend contemplated by Section 5.02(g)(i)(B), of balance sheets, 89 83 income statements and cash flow statements on a monthly basis for the first year following the day of the Initial Extension of Credit and on an annual basis for each year thereafter until the Final Maturity Date. (xv) A letter, in form and substance satisfactory to the Administrative Agent, from the Company to KPMG Peat Marwick LLP, its independent certified public accountants, advising such accountants that the Agents and the Lender Parties have been authorized to exercise all rights of the Company to require such accountants to disclose any and all financial statements and any other information of any kind that they may have with respect to the Company and its Subsidiaries and directing such accountants to comply with any reasonable request of any Agent or any Lender Party for such information. (xvi) Evidence of insurance naming the Collateral Agent as additional insured and loss payee with such responsible and reputable insurance companies or associations, and in such amounts and covering such risks, as is satisfactory to the Lender Parties. (xvii) A Borrowing Base Certificate. (xviii) A favorable opinion of Olshan Grundman Frome & Rosenzweig LLP, counsel for the Loan Parties, in substantially the form of Exhibit K hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xix) A favorable opinion of each of the counsel set forth on Schedule 3.01(a)(xix), local counsel to the Loan Parties in each of the jurisdictions set forth on such Schedule, in substantially the form of Exhibit L hereto and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (xx) A favorable opinion of Shearman & Sterling, counsel for the Administrative Agent, in form and substance satisfactory to the Administrative Agent. (b) The Lender Parties shall be satisfied with the corporate and legal structure and capitalization of the Company and each of its Subsidiaries the capital stock of which Subsidiaries is being pledged pursuant to the Loan Documents, including the terms and conditions of the charter, bylaws and each class of capital stock or other equity interest of the Company and each such Subsidiary and of each agreement or instrument relating to such structure or capitalization. 90 84 (c) The Lender Parties shall be satisfied that all Existing Debt, other than Surviving Debt, has been prepaid, redeemed or defeased in full or otherwise satisfied and extinguished and that all Surviving Debt shall be on terms and conditions satisfactory to the Lender Parties. (d) Before giving effect to and the transactions contemplated by the Transaction Documents, there shall have occurred no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company and its Subsidiaries taken as a whole since December 31, 1997. (e) There shall exist no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Transaction Document or the consummation of the transactions contemplated by the Transaction Documents. (f) All governmental and third party consents and approvals necessary in connection with the transactions contemplated by the Transaction Documents shall have been obtained (without the imposition of any conditions that are not acceptable to the Lender Parties) and shall remain in effect; all applicable waiting periods in connection with the transactions contemplated by the Transaction Documents shall have expired without any action being taken by any competent authority, and no law or regulation shall be applicable in the judgment of the Lender Parties, in each case that restrains, prevents or imposes materially adverse conditions upon the transactions contemplated by the Transaction Documents or the rights of the Loan Parties or their Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien on, any properties now owned or hereafter acquired by any of them. (g) The Lender Parties shall have completed a due diligence investigation of the Company and its Subsidiaries in scope, and with results, satisfactory to the Lender Parties, and nothing shall have come to the attention of the Lender Parties during the course of such due diligence investigation to lead them to believe that the Information Memorandum was or has become misleading, incorrect or incomplete in any material respect; without limiting the generality of the foregoing, the Lender Parties shall have been given such access to the management, records, books of account, contracts and properties of the Company and its Subsidiaries as they shall have requested. (h) The Company shall have paid all accrued fees of the Agents and the Lender Parties and all accrued expenses of the Agents (including the accrued fees and expenses of counsel to the Administrative Agent). 91 85 (i) The Total Leverage Ratio shall not exceed 4.50:1.00. SECTION 3.02. Conditions Precedent to Initial Borrowing by Danmark. The obligation of each Multicurrency Lender to make an Advance to Danmark shall be effective on and as of the date (the "Danmark Effective Date") on which the Administrative Agent shall have received on or before such date the following, each dated such day (unless otherwise specified), in form and substance satisfactory to the Administrative Agent (unless otherwise specified) and in sufficient copies for each Multicurrency Lender: (i) A Danish security agreement in form and substance reasonably satisfactory to the Administrative Agent (together with each other Danish security agreement and Danish security agreement supplement delivered pursuant to Section 5.01(j), in each case as amended, the "Danish Security Agreement"), duly executed by each Loan Party organized under the laws of Denmark, together with evidence that all action that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Danish Security Agreement has been taken. (ii) Certified copies of the resolutions of the Board of Directors of Danmark approving the transactions contemplated by the Transaction Documents and each Transaction Document to which it is or is to be a party, and of all documents evidencing other necessary corporate action and governmental and other third party approvals and consents, if any, with respect to the transactions contemplated by the Transaction Documents and each Transaction Document to which it is or is to be a party. (iii) A copy of a certificate of the applicable regulatory authority of the jurisdiction of incorporation of Danmark, dated reasonably near the Danmark Effective Date, certifying (to the extent applicable) (A) as to a true and correct copy of the charter of such Loan Party and each amendment thereto on file in such Secretary's office and (B) that (1) such amendments are the only amendments to such Loan Party's charter on file in such office, (2) such Loan Party has paid all franchise taxes to the date of such certificate and (C) such Loan Party is duly incorporated and in good standing or presently subsisting under the laws of the jurisdiction of its incorporation. (iv) A certificate of Danmark, signed on behalf of such Loan Party by its President, a Vice President or a director and its Secretary, any Assistant Secretary or any other director, dated the Danmark Effective Date (the statements made in which certificate shall be true on and as of the Danmark Effective Date), certifying as to (A) the absence of any amendments to the charter of such Loan 92 86 Party since the date of the certificate referred to in Section 3.02(iii), (B) a true and correct copy of the bylaws of such Loan Party as in effect on the date on which the resolutions referred to in Section 3.02(ii) were adopted and on the date of the initial Advance to Danmark, (C) the due incorporation and good standing or valid existence of such Loan Party as a corporation organized under the laws of the jurisdiction of its incorporation, and the absence of any proceeding for the dissolution or liquidation of such Loan Party, (D) the truth of the representations and warranties contained in the Loan Documents as though made on and as of the Danmark Effective and (E) the absence of any event occurring and continuing that constitutes a Default. (v) A certificate of the Secretary or an Assistant Secretary of Danmark certifying the names and true signatures of the officers of such Loan Party authorized to sign each Transaction Document to which it is or is to be a party and the other documents to be delivered hereunder and thereunder. (vi) A favorable opinion of Nielsen & Koch Law Office, counsel for the Loan Parties in Denmark, in form and substance reasonably satisfactory to the Administrative Agent and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. (vii) A favorable opinion of Olshan Grundman Frome & Rosenzweig LLP, counsel for the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent and as to such other matters as any Lender Party through the Administrative Agent may reasonably request. SECTION 3.03. Conditions Precedent to Each Borrowing, Drawing and Issuance and Renewal. The obligation of each Appropriate Lender to make an Advance or to purchase, accept or renew a Bankers' Acceptance (other than a Letter of Credit Advance made by an Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and a Swing Line Advance made by a Revolving Credit Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including the initial Borrowing), and the obligation of each Issuing Bank to issue a Letter of Credit (including the initial issuance) or renew a Letter of Credit and the right of the Company to request a Swing Line Borrowing, shall be subject to the further conditions precedent that on the date of such Borrowing, Drawing or issuance or renewal (a) the following statements shall be true (and each of the giving of the applicable Notice of Borrowing, Notice of Drawing, Notice of Swing Line Borrowing, Notice of Issuance or Notice of Renewal and the acceptance by the applicable Borrower of the proceeds of such Borrowing or of such Letter of Credit or the renewal of such Letter of Credit shall constitute a representation and warranty by such Borrower that both on the date of such notice and on the date of such Borrowing, Drawing or issuance or renewal such statements are true): 93 87 (i) the representations and warranties contained in each Loan Document are correct on and as of such date, before and after giving effect to such Borrowing, Drawing or issuance or renewal and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing, Drawing or issuance or renewal, in which case as of such specific date; (ii) no Default has occurred and is continuing, or would result from such Borrowing, Drawing or issuance or renewal or from the application of the proceeds therefrom; (iii) for each Multicurrency Advance, Revolving Credit Advance or Swing Line Advance made by the Swing Line Bank or issuance or renewal of any Letter of Credit, the sum of the Loan Values of the Eligible Collateral exceeds the aggregate principal amount of the Multicurrency Advances plus Revolving Credit Advances plus Swing Line Advances plus Letter of Credit Advances to be outstanding plus the aggregate Available Amount of all Letters of Credit to be outstanding after giving effect to such Advance or issuance or renewal, respectively; and (iv) for each Delayed Draw Advance, before and after giving effect to such Borrowing, the Total Leverage Ratio shall not exceed 4.00:1.00 and the amount of the aggregate principal amounts of Delayed Draw Borrowings shall not exceed the amount of Investments permitted under Section 5.02(f)(viii) immediately prior to such Delayed Draw Advance. and (b) the Administrative Agent shall have received such other approvals, opinions or documents as any Appropriate Lender through the Administrative Agent may reasonably request. SECTION 3.04. Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01, each Lender Party shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender Parties unless an officer of the Administrative Agent responsible for the transactions contemplated by the Loan Documents shall have received notice from such Lender Party prior to the Initial Extension of Credit specifying its objection thereto and, if the Initial Extension of Credit consists of a Borrowing or a Drawing, such Lender Party shall not have made available to the Administrative Agent such Lender Party's ratable portion of such Borrowing or Drawing. 94 88 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrowers. Each Borrower represents and warrants as follows: (a) Each Loan Party and each of its Subsidiaries (other than Inactive Subsidiaries) (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) is duly qualified and in good standing as a foreign corporation in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed except where the failure to so qualify or be licensed would not be reasonably likely to have a Material Adverse Effect and (iii) has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted. All of the outstanding capital stock of the Company has been validly issued, is fully paid and non-assessable and is owned by WHX Corporation free and clear of all Liens. (b) Set forth on Schedule 4.01(b) hereto is a complete and accurate list of all Subsidiaries of each Loan Party, showing as of the date hereof (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of capital stock authorized, and the number outstanding, on the date hereof and the percentage of the outstanding shares of each such class owned (directly or indirectly) by such Loan Party and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights at the date hereof. All of the outstanding capital stock of all of each Loan Party's Subsidiaries (other than Inactive Subsidiaries) has been validly issued, is fully paid and non-assessable and is owned by such Loan Party or one or more of its Subsidiaries free and clear of all Liens, except those created under the Collateral Documents. (c) The execution, delivery and performance by each Loan Party of each Transaction Document to which it is or is to be a party, and the consummation of the transactions contemplated by the Transaction Documents, are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not (i) contravene such Loan Party's charter or bylaws, (ii) violate any law, rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any loan agreement, indenture or mortgage or any material contract, deed of trust, lease or other 95 89 instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties or (iv) except for the Liens created under the Loan Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect. (d) Other than the filings contemplated to be made pursuant to Section 3.01, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of any Transaction Document to which it is or is to be a party, or for the consummation of the transactions contemplated by the Transaction Documents, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by any Agent or any Lender Party of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents. (e) This Agreement has been, and each other Transaction Document when delivered hereunder will have been, duly executed and delivered by each Loan Party party thereto. This Agreement is, and each other Transaction Document when delivered hereunder will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally. (f) There is no action, suit, investigation, litigation or proceeding affecting any Loan Party or any of its Subsidiaries, including any Environmental Action, pending or threatened before any court, governmental agency or arbitrator that (i) would be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Transaction Document or the consummation of the transactions contemplated by the Transaction Documents. (g) The Consolidated balance sheets of the Company and its Subsidiaries as at December 31, 1997, and the related Consolidated statements of income and Consolidated statement of cash flows of the Company and its Subsidiaries for the fiscal year then ended, accompanied by an unqualified opinion of KPMG Peat Marwick, independent public accountants, and the Consolidated balance sheets of the Company and its Subsidiaries as 96 90 at June 30, 1998, and the related Consolidated statements of income and Consolidated statement of cash flows of the Company and its Subsidiaries for the six months then ended, duly certified by a Designated Officer of the Company, copies of which have been furnished to each Lender Party, fairly present, subject, in the case of said balance sheet as at June 30, 1998, and said statements of income and cash flows for the six months then ended, to year-end audit adjustments, the Consolidated financial condition of the Company and its Subsidiaries as at such dates and the Consolidated results of operations of the Company and its Subsidiaries for the periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis, and since December 31, 1997, there has been no Material Adverse Change. (h) The Consolidated pro forma balance sheets of the Company and its Subsidiaries as at June 30, 1998, and the related Consolidated pro forma statements of income and cash flows of the Company and its Subsidiaries for the six months then ended, certified by a Designated Officer of the Company, copies of which have been furnished to each Lender Party, fairly present the Consolidated pro forma financial condition of the Company and its Subsidiaries as at such date and the Consolidated pro forma results of operations of the Company and its Subsidiaries for the period ended on such date, in each case giving effect to the transactions contemplated by the Transaction Documents, the acquisition of the Company by WHX Corporation and the precious metals dividend contemplated by Section 5.02(g)(i)(B), all in accordance with GAAP. (i) The Consolidated and, as to the five business segments of the Company, consolidating, forecasted balance sheets, statements of income and statements of cash flows of the Company and its Subsidiaries delivered to the Lender Parties pursuant to Section 3.01(a)(xiv) or 5.03 were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Company's best estimate of its future financial performance (it being understood that the Company can give no assurance that future performance will equal the forecasts or that the results of operations will not differ substantially therefrom). (j) Neither the Information Memorandum nor any other information, exhibit or report furnished by or on behalf of any Loan Party to any Agent or any Lender Party in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading. (k) No Borrower is engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance, any Drawing or 97 91 drawings under any Letter of Credit will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. (l) Neither any Loan Party nor any of its Subsidiaries is an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Advances, nor the issuance of any Letters of Credit, nor the application of the proceeds or repayment thereof by any Borrower, nor the consummation of the other transactions contemplated by the Transaction Documents, will violate any provision of such Act or any rule, regulation or order of the Securities and Exchange Commission thereunder. (m) Neither any Loan Party nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction that would be reasonably likely to have a Material Adverse Effect. (n) After giving effect to the filings contemplated to be made pursuant to Section 3.01, the Collateral Documents create a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations, and all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken. The Loan Parties are the legal and beneficial owners of the Collateral free and clear of any Lien, except for the liens and security interests created or permitted under the Loan Documents. (o) Each Loan Party is, individually and together with its Subsidiaries, Solvent. (p) (i) Set forth on Schedule 4.01(p) hereto is a complete and accurate list of all Plans, Multiemployer Plans and Welfare Plans. (ii) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan. (iii) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service and furnished to the Lender Parties, is complete and accurate and fairly presents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status. 98 92 (iv) Neither any Loan Party nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability exceeding $4,000,000 to any Multiemployer Plan. (v) Neither any Loan Party nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganization or to be terminated, within the meaning of Title IV of ERISA. (q) (i) Except as otherwise set forth on Part I of Schedule 4.01(q) hereto, the operations and properties of each Loan Party and each of its Subsidiaries comply in all material respects with all applicable Environmental Laws and Environmental Permits, all past non-compliance with such Environmental Laws and Environmental Permits has been resolved without ongoing obligations or costs, and no circumstances exist that would be reasonably likely to (A) form the basis of an Environmental Action against any Loan Party or any of its Subsidiaries or any of their properties that could have a Material Adverse Effect or (B) cause any such property to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (ii) Except as otherwise set forth on Part II of Schedule 4.01(q) hereto, none of the properties currently or formerly owned or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or, to the best of its knowledge, is adjacent to any such property; there are no and never have been any underground or aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by any Loan Party or any of its Subsidiaries or, to the best of its knowledge, on any property formerly owned or operated by any Loan Party or any of its Subsidiaries; there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any of its Subsidiaries; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries, except as would not be reasonably expected to result in a liability in excess of $250,000 in any Fiscal Year. (iii) Except as otherwise set forth on Part III of Schedule 4.01(q) hereto, neither any Loan Party nor any of its Subsidiaries is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any governmental or regulatory authority or the 99 93 requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result in liability to any Loan Party or any of its Subsidiaries that would be material to the Company and its Subsidiaries taken as a whole. (r) (i) Each Loan Party and each of its Subsidiaries and Affiliates has filed, has caused to be filed or has been included in all tax returns (Federal, state, local and foreign) required to be filed and has paid all taxes, together with applicable interest and penalties, shown thereon to be due. (ii) Set forth on Schedule 4.01(r) hereto is a complete and accurate list, as of the date hereof, of each taxable year of each Loan Party and each of its Subsidiaries and Affiliates for which Federal income tax returns have been filed and for which the expiration of the applicable statute of limitations for assessment or collection has not occurred by reason of extension or otherwise (an "Open Year"). (iii) The aggregate unpaid amount, as of the date hereof, of adjustments to the Federal income tax liability of each Loan Party and each of its Subsidiaries and Affiliates proposed by the Internal Revenue Service with respect to Open Years does not exceed $1,000,000. No issues have been raised by the Internal Revenue Service in respect of Open Years that, in the aggregate, would be reasonably likely to have a Material Adverse Effect. (iv) The aggregate unpaid amount, as of the date hereof, of adjustments to the state, local and foreign tax liability of each Loan Party and its Subsidiaries and Affiliates proposed by all state, local and foreign taxing authorities (other than amounts arising from adjustments to Federal income tax returns) does not exceed $1,000,000. No issues have been raised by such taxing authorities that, in the aggregate, would be reasonably likely to have a Material Adverse Effect. (s) Neither the business nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that would be reasonably likely to have a Material Adverse Effect. (t) Set forth on Schedule 4.01(t) hereto is a complete and accurate list of all Existing Debt (other than Surviving Debt), showing as of the date hereof the obligor and the principal amount outstanding thereunder other than Debt in the aggregate principal amount not exceeding $100,000. 100 94 (u) Set forth on Schedule 4.01(u) hereto is a complete and accurate list of all Surviving Debt, showing as of the date hereof the obligor and the principal amount outstanding thereunder, the maturity date thereof and the amortization schedule therefor other than Debt in the aggregate principal amount not exceeding $100,000. (v) Set forth on Schedule 4.01(v) hereto is a complete and accurate list of all Liens on the property or assets of any Loan Party or any of its Subsidiaries, showing as of the date hereof the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets subject thereto other than Liens covering property with a fair market value in the aggregate not exceeding $100,000. (w) Set forth on Schedule 4.01(w) hereto is a complete and accurate list of all real property owned by any Loan Party or any of its Subsidiaries (other than Inactive Subsidiaries), showing as of the date hereof the street address, county or other relevant jurisdiction, state and record owner thereof other than real property with a fair market value in the aggregate not exceeding $100,000. Each Loan Party or such Subsidiary has good, marketable and insurable fee simple title to such real property, free and clear of all Liens, other than Liens created or permitted by the Loan Documents. (x) Set forth on Schedule 4.01(x) hereto is a complete and accurate list of all leases of real property under which any Loan Party or any of its Subsidiaries (other than Inactive Subsidiaries) is the lessee, showing as of the date hereof the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof other than leases with annual rental payments in the aggregate not exceeding $100,000. Each such lease is the legal, valid and binding obligation of the lessor thereof, enforceable in accordance with its terms. (y) Set forth on Schedule 4.01(y) hereto is a complete and accurate list of all Investments held by any Loan Party or any of its Subsidiaries on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof other than Investments with a fair market value in the aggregate not exceeding $100,000. (z) Set forth on Schedule 4.01(z) hereto is a complete and accurate list of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of each Loan Party or any of its Subsidiaries required in the operation of its business, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date. (aa) The Company has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those materially affected by suppliers, vendors and customers) that could be materially adversely affected by the 101 95 "Year 2000 Problem" (that is, the risk that computer applications used by the Company or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) used its reasonable efforts to develop a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented in all material respects that plan in accordance with that timetable. Based on the foregoing, the Company believes that all computer applications that are material to its and its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to have Material Adverse Effect. ARTICLE V COVENANTS OF THE BORROWERS SECTION 5.01. Affirmative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, each Borrower will: (a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with ERISA and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect. (b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither such Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that (x) is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors or (y) to the extent that the aggregate of all such taxes, charges or claims do not exceed $100,000. (c) Compliance with Environmental Laws. (i) Comply, and cause each of its Subsidiaries and all lessees and other Persons operating or occupying its properties to comply with all applicable Environmental Laws and Environmental Permits; obtain and 102 96 renew and cause each of its Subsidiaries to obtain and renew all Environmental Permits necessary for its operations and properties; and (ii) conduct, and cause each of its Subsidiaries to conduct, any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws, except in the case of each of the foregoing clauses (i) and (ii) where the failure to do so could not reasonably be expected to have a Material Adverse Effect; provided, however, that neither such Borrower nor any of its Subsidiaries shall be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and appropriate reserves are being maintained with respect to such circumstances. (d) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which such Borrower or such Subsidiary operates. (e) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name, rights (charter and statutory), permits, licenses, approvals, privileges and franchises; provided, however, that such Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(d) and provided further that neither any Borrower nor any of its Subsidiaries shall be required to preserve any right, permit, license, approval, privilege or franchise if the Board of Directors of such Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof is not disadvantageous in any material respect to the Company and its Subsidiaries taken as a whole or the Lender Parties. (f) Visitation Rights. At any reasonable time and from time to time with prior notice to the Company (other than during the continuance of a Default), permit any of the Agents or any of the Lender Parties, or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, such Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of such Borrower and any of its Subsidiaries with any of their officers or directors and with their independent certified public accountants. (g) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Borrower and each such 103 97 Subsidiary in accordance with generally accepted accounting principles in effect from time to time. (h) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its material properties that are then used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted. (i) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of their Affiliates on terms that are fair and reasonable and no less favorable to such Borrower or such Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate except that, so long as no Default shall have occurred and be continuing at the time of any payment described below or would result therefrom: (i) the Company may pay management fees to WHX or its Affiliates not in excess of $1,000,000 in any Fiscal Year in accordance with the Management Agreement, (ii) the Company and its Subsidiaries may make payments in accordance with the Tax Agreement provided that both before and after giving effect to such payments the Senior Leverage Ratio shall not be greater than 4.50:1.00, (iii) the Company and its Subsidiaries may pay fees to their respective directors, (iv) the Company and its Subsidiaries may each make pension plan contribution payments in respect of their proportionate share of the cost of such contributions under the relevant plans, (v) the Company may pay dividends to WHX Corporation or its wholly-owned Subsidiaries permitted by Section 5.02(g), (vi) the Company and its Subsidiaries may prepay Subordinated Debt as permitted by section 5.02(k), and (vii) other transactions with Affiliates to the extent not included in (i) through (vi) above provided that the amounts payable by the Loan Parties in connection with such transactions shall not in the aggregate exceed $1,000,000 in any Fiscal Year. 104 98 (j) Covenant to Guarantee Obligations and Give Security. Upon (x) the request of the Collateral Agent following the occurrence and during the continuance of a Default, (y) the formation or acquisition of any new direct or indirect Subsidiaries by any Loan Party other than an Inactive Subsidiary or (z) the acquisition of any property (including, without limitation, any interest in joint ventures) by any Loan Party, other than property that, in the judgment of the Collateral Agent, shall not be material or shall not already be subject to a perfected first priority security interest in favor of the Collateral Agent for the benefit of the Secured Parties, then such Borrower shall, in each case at such Borrower's expense: (i) in connection with the formation or acquisition of a Subsidiary other than an Inactive Subsidiary, within 10 days after such formation or acquisition, cause each such Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Collateral Agent a guaranty or guaranty supplement, in form and substance satisfactory to the Collateral Agent, guaranteeing the other Loan Parties' (in the case of the formation or acquisition of a Domestic Subsidiary) or the Foreign (other than any such liabilities in respect of renewals or replacements of existing leases in amounts not in excess of those payable under existing leases) Borrowers' and Foreign Subsidiaries' (in the case of the formation or acquisition of a Foreign Subsidiary) obligations under the Loan Documents, (ii) within 10 days after such request, formation or acquisition, furnish to the Collateral Agent a description of the real and personal properties of the Loan Parties and their respective Subsidiaries in detail satisfactory to the Collateral Agent, (iii) within 15 days after such request, formation or acquisition, duly execute and deliver, and cause each such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to duly execute and deliver, to the Collateral Agent mortgages, pledges, assignments, security agreement supplements and other security agreements, as specified by and in form and substance satisfactory to the Collateral Agent, securing payment of all the Obligations of the applicable Loan Party, such Subsidiary or such parent, as the case may be, under the Loan Documents and constituting Liens on all such properties, (iv) within 30 days after such request, formation or acquisition, take, and cause such Subsidiary or such parent to take, whatever action (including, without limitation, the recording of mortgages, the filing of Uniform Commercial 105 99 Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary or advisable in the opinion of the Collateral Agent to vest in the Collateral Agent (or in any representative of the Collateral Agent designated by it) valid and subsisting Liens on the properties purported to be subject to the mortgages, pledges, assignments, security agreement supplements and security agreements delivered pursuant to this Section 5.01(j), enforceable against all third parties in accordance with their terms, (v) within 60 days after such request, formation or acquisition, deliver to the Collateral Agent, upon the request of the Collateral Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Collateral Agent and the other Secured Parties, of counsel for the Loan Parties acceptable to the Collateral Agent as to the matters contained in clauses (i), (iii) and (iv) above, as to such guaranties, guaranty supplements, mortgages, pledges, assignments, security agreement supplements and security agreements being legal, valid and binding obligations of each Loan Party party thereto enforceable in accordance with their terms, as to the matters contained in clause (iv) above, as to such recordings, filings, notices, endorsements and other actions being sufficient to create valid perfected Liens on such properties, and as to such other matters as the Collateral Agent may reasonably request, (vi) as promptly as practicable after such request, formation or acquisition, deliver, upon the request of the Collateral Agent in its sole discretion, to the Collateral Agent with respect to each parcel of real property owned or held by the entity that is the subject of such request, formation or acquisition, such title reports, as the Collateral Agent may request, in scope, form and substance satisfactory to the Collateral Agent, provided, however, that to the extent that any Loan Party or any of its Subsidiaries shall have otherwise received title reports, surveys and engineering, soils and other reports, and environmental assessment reports with respect to such real property, such items shall, promptly after the receipt thereof, be delivered to the Collateral Agent, (vii) upon the occurrence and during the continuance of a Default, promptly cause to be deposited any and all cash dividends paid or payable to it or any of its Subsidiaries from any of its Subsidiaries from time to time into the Cash Collateral Account, and with respect to all other dividends paid or payable to it or any of its Subsidiaries from time to time, promptly execute and deliver, or cause such Subsidiary to promptly execute and deliver, as the case may be, any and all further instruments and take or cause such Subsidiary to take, as the case may be, all such other action as the Collateral Agent may deem necessary or desirable in order to obtain and maintain from and after the time such dividend is paid or 106 100 payable a perfected, first priority lien on and security interest in such dividends, and (viii) at any time and from time to time, promptly execute and deliver any and all further instruments and documents and take all such other action as the Collateral Agent may reasonably deem necessary in obtaining the full benefits of, or in perfecting and preserving the Liens of, such guaranties, mortgages, pledges, assignments, security agreement supplements and security agreements. (k) Further Assurances. (i) Promptly upon request by any Agent, or any Lender Party through the Administrative Agent, correct, and cause each of its Subsidiaries promptly to correct, any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (ii) Promptly upon request by the Collateral Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust deeds, assignments, financing statements and continuations thereof, termination statements, notices of assignment, transfers, certificates, assurances and other instruments as the Collateral Agent may reasonably require from time to time in order to (A) carry out more effectively the purposes of the Loan Documents, (B) to the fullest extent permitted by applicable law, subject any Loan Party's or any of its Subsidiaries' properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (C) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (D) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of its Subsidiaries is or is to be a party, and cause each of its Subsidiaries to do so. (l) Performance of Related Documents. Perform and observe, and cause each of its Subsidiaries to perform and observe, all of the terms and provisions of each Related Document to be performed or observed by it, maintain each such Related Document in full force and effect, enforce such Related Document in accordance with its terms, take all such action to such end as may be from time to time requested by the Administrative Agent and, upon request of the Administrative Agent, make to each other party to each such Related Document such demands and requests for information and reports or for action as any Loan Party or any of its Subsidiaries is entitled to make under such Related Document. 107 101 (m) Preparation of Environmental Reports. At the request of the Administrative Agent or the Collateral Agent from time to time after the occurrence and during the continuance of a Default, provide to the Lender Parties within 60 days after such request, at the expense of the Company, an environmental site assessment report for any of its or its Subsidiaries' properties described in such request, prepared by an environmental consulting firm acceptable to the Administrative Agent or the Collateral Agent, indicating the presence or absence of Hazardous Materials and the estimated cost of any compliance, removal or remedial action in connection with any Hazardous Materials on such properties; without limiting the generality of the foregoing, if the Administrative Agent or the Collateral Agent determine at any time that a material risk exists that any such report will not be provided within the time referred to above, the Administrative Agent or the Collateral Agent may retain an environmental consulting firm to prepare such report at the expense of the Company, and the Company hereby grants and agrees to cause any Subsidiary that owns any property described in such request to grant at the time of such request to the Agents, the Lender Parties, such firm and any agents or representatives thereof an irrevocable non-exclusive license, subject to the rights of tenants, to enter onto their respective properties to undertake such an assessment. (n) Compliance with Terms of Leaseholds. Make all payments and otherwise perform all obligations in respect of all leases of real property to which such Borrower or any of its Subsidiaries is a party, keep such leases in full force and effect and not allow such leases to lapse or be terminated or any rights to renew such leases to be forfeited or canceled, notify the Administrative Agent of any default by any party with respect to such leases and cooperate with the Administrative Agent in all respects to cure any such default, and cause each of its Subsidiaries to do so, except, in any case, where the failure to do so, either individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect. (o) Cash Concentration Accounts. Maintain, and cause each of its Subsidiaries to maintain, main cash concentration accounts with The Bank of New York or one or more banks acceptable to the Collateral Agent that have accepted the assignment of such accounts to the Collateral Agent for the benefit of the Secured Parties pursuant to the Security Agreement. (p) Interest Rate Hedging. Enter into prior to September 30, 1998, and maintain at all times thereafter, interest rate Hedge Agreements with Persons acceptable to the Administrative Agent, covering a notional amount of not less than $125,000,000 and providing for such Persons to make payments thereunder for a period of no less than three years to the extent of increases in interest rates based on greater than 1.5% above the weighted average Eurocurrency Rate for $1,000,000 for an Interest Period of three months on the date thereof. 108 102 (q) Conditions Subsequent. (i) Deliver to the Administrative Agent on or before September 30, 1998 American Land Title Association form surveys, dated no more than 30 days before the day of the Initial Extension of Credit, certified to the Administrative Agent and the issuer of the Mortgage Policies described in Section 3.01(a)(iv) in a manner satisfactory to the Administrative Agent by a land surveyor duly registered and licensed in the States in which the property described in such surveys is located and acceptable to the Administrative Agent, showing all buildings and other improvements, any off-site improvements, the location of any easements, parking spaces, rights of way, building set-back lines and other dimensional regulations and the absence of encroachments, either by such improvements or on to such property, and other defects, other than encroachments and other defects acceptable to the Administrative Agent. (ii) Deliver to the Administrative Agent on or before August 31, 1998 the Pledged Account Letters referred to in the Security Agreement, duly executed by the Pledged Account Bank referred to in the Security Agreement or, if the Company is unable to deliver such Pledged Account Letter on or before August 31, 1998, on or before November 30, 1998, transfer the Pledged Account to another financial institution and deliver to the Administrative Agent a Pledged Account Letter from such other financial institution. (iii) Deliver to the Administrative Agent on or before August 31, 1998 evidence that the Articles of Association of HHEL, Rigby and Handy & Harman UK Holdings Limited have been amended in a manner satisfactory to the Administrative Agent and that such amendments have been filed with the Registrar of Companies in England and Wales. (iv) Deliver to the Administrative Agent on or before September 30, 1998 a Schedule setting forth the book and estimated fair value of each parcel of real property listed on Schedule 4.01(w). (v) Deliver to the Administrative Agent (A) on or before August 31, 1998 (1) evidence that the precious metals and the commodity contracts have been deposited into separate accounts at one or more securities intermediary and (2) a copy of a securities account notification and control agreement and a copy of a commodity account notification and control agreement, each in form and substance reasonably satisfactory to the Administrative Agent and executed by Merrill Lynch or (B) if the Company is unable to deliver such agreements on or before August 31, 1998, deliver to the Administrative Agent on or before October 31, 1998 evidence that the precious metals and the commodities contracts have been transferred to another securities intermediary and a securities account notification and control agreement and a commodity account 109 103 notification and control agreement in form and substance reasonably satisfactory to the Administrative Agent and executed by such other securities intermediary. SECTION 5.02. Negative Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, no Borrower will, at any time: (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, or sign or file or suffer to exist, or permit any of its Subsidiaries to sign or file or suffer to exist, under the Uniform Commercial Code or similar legislation of any jurisdiction, a financing statement that names such Borrower or any of its Subsidiaries as debtor, or sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to exist, any security agreement authorizing any secured party thereunder to file such financing statement, or assign, or permit any of its Subsidiaries to assign, any accounts or other right to receive income, except: (i) Liens created under the Loan Documents; (ii) Permitted Liens; (iii) Liens existing on the date hereof and described on Schedule 4.01(v) hereto; (iv) purchase money Liens upon or in real property or equipment acquired or held by such Borrower or any of its Subsidiaries in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition, construction or improvement of any such property or equipment to be subject to such Liens, or Liens existing on any such property or equipment at the time of acquisition or at the time the Person owning such property or equipment became a Subsidiary (other than any such Liens created in contemplation of such acquisition that do not secure the purchase price), or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; provided, however, that no such Lien shall extend to or cover any property other than the property or equipment being acquired, constructed or improved, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Lien being extended, renewed or replaced; and provided further that the aggregate principal amount of the Debt secured by Liens permitted by this 110 104 clause (iv) shall not exceed the amount permitted under Section 5.02(b)(iii)(B) at any time outstanding; (v) Liens arising in connection with Capitalized Leases permitted under Section 5.02(b)(iii)(C); provided that no such Lien shall extend to or cover any Collateral or assets other than the assets subject to such Capitalized Leases; (vi) Liens arising in connection with a Precious Metals Leasing as contemplated by the Intercreditor Agreement; (vii) other Liens securing Debt outstanding in an aggregate principal amount not to exceed $10,000,000, provided that no such Lien shall extend to or cover any Collateral; (viii) the replacement, extension or renewal of any Lien permitted by clauses (iii) and (v) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby; (ix) Liens securing the performance of bids, tenders, leases, contracts (other than for the repayment of borrowed currency), statutory obligations, surety and appeal bonds and other obligation of like nature, incurred in the ordinary course of business, and judgment liens not constituting a Default under Section 6.01; (x) Zoning restrictions, easements, waiver, reservations, restrictions on the use of real property or minor irregularities incident thereto which do not in the aggregate detract from the value or use of any material property or from the property of the Company and its Subsidiaries taken as a whole; and (xi) Liens incurred in connection with transactions of the type described in clause (d) of the definition of Cash Equivalents in an aggregate amount not to exceed $5,000,000. (b) Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except: (i) in the case of the Company: (A) Debt in respect of Hedge Agreements designed to hedge against fluctuations in interest rates incurred in the ordinary course of 111 105 business and consistent with prudent business practice with the aggregate notional amount thereof not to exceed $175,000,000 at any time outstanding; (B) Subordinated Debt maturing at least 12 months later than the Final Maturity Date that is issued: (1) to WHX Corporation or its Subsidiaries on terms substantially as set forth in Exhibit N hereto for the purposes of permitting the Company to comply with the financial covenants set forth in Section 5.04; provided that such Subordinated Debt is incurred prior to the date of delivery of financial statements pursuant to Section 5.03(b) or (c) evidencing any Default under Section 5.04 and provided further, that before incurring any such Debt, a Designated Officer of the Company shall deliver to the Administrative Agent a certificate demonstrating compliance, on a pro forma basis after giving effect to the incurrence of any such Debt, with all such covenants as at the end of the immediately preceding fiscal quarter of the Company; or (2) to any Person on terms, including as to interest and subordination, at the time of issuance, comparable to that offered in the capital markets generally to companies of comparable size and creditworthiness; provided, that before incurring any such Debt, a Designated Officer of the Company shall deliver to the Administrative Agent a certificate demonstrating compliance, on a pro forma basis after giving effect to the incurrence of any such Debt, with the Senior Leverage Ratio and the Total Leverage Ratio as at the end of the immediately preceding fiscal quarter of the Company; (ii) in the case of any Subsidiary of the Company, Debt owed to the Company or to a wholly owned Subsidiary of the Company, provided that, in each case, such Debt (x) shall, in the case of Debt owed to a Loan Party, constitute Pledged Debt and (y) shall be evidenced by promissory notes in form and substance satisfactory to the Administrative Agent and such promissory notes shall, in the case of Debt owed to a Loan Party, be pledged as security for the Obligations of the holder thereof under the Loan Documents to which such holder is a party and delivered to the Collateral Agent pursuant to the terms of the Security Agreement; and 112 106 (iii) in the case of the Company and its Subsidiaries: (A) Debt under the Loan Documents; (B) Debt secured by Liens permitted by Section 5.02(a)(iv) not to exceed in the aggregate $10,000,000 at any time outstanding; (C) Capitalized Leases not to exceed in the aggregate $10,000,000 at any time outstanding; (D) the Surviving Debt, and any Debt extending the maturity of, or refunding or refinancing, in whole or in part, any Surviving Debt included in Part I of Schedule 4.01(u), provided that the terms of any such extending, refunding or refinancing Debt, and of any agreement entered into and of any instrument issued in connection therewith, are not otherwise prohibited by the Loan Documents, provided further that the principal amount of such Surviving Debt shall not be increased above the principal amount thereof outstanding immediately prior to such extension, refunding or refinancing, and the direct and contingent obligors therefor shall not be changed, as a result of or in connection with such extension, refunding or refinancing; (E) Debt of any Person that becomes a Subsidiary of the Company after the date hereof in accordance with the terms of Section 5.02(f) that is existing at the time such Person becomes a Subsidiary of the Company (other than Debt incurred solely in contemplation of such Person becoming a Subsidiary of the Company); (F) Letters of Credit issued for the account of any Foreign Subsidiary of the Company to support obligations in respect of value added taxes, in an aggregate available amount of such letters of credit plus reimbursement obligations thereunder not to exceed $7,500,000 at any time outstanding; (G) Debt in respect of Hedge Agreements designed to hedge against fluctuations in foreign exchange rates or commodity prices incurred in the ordinary course of business and consistent with prudent business practice; (H) Debt owing to any Lender in respect of any overdraft facility, cash management service or in connection with any automated 113 107 clearing house transfers of funds of the Company or any of its Subsidiaries in an aggregate amount outstanding at any time not to exceed $6,500,000; (I) Contingent Obligations incurred in connection with transactions permitted under Sections 5.02(d) and 5.02(f)(viii) (other than any such Contingent Obligations created in contemplation of any such transaction); (J) current liabilities in respect of taxes, assessments and governmental charges or levies incurred, or claims for labor, materials, inventory, services, supplies and rentals incurred, or for goods or services purchased, in the ordinary course of business; (K) Debt arising under surety, payment or performance bond reimbursement obligation entered into in the ordinary course of business; (L) Debt arising under any appeal reimbursement bond obligation entered into with respect to any judgment not constituting a Default under Section 6.01; (M) Debt incurred in connection with transactions described in clause (d) of the definition of Cash Equivalents; and (N) Debt not otherwise permitted under this Section 5.02(b) in an aggregate principal amount not to exceed $15,000,000 at any time outstanding. (c) Change in Nature of Business. Make, with respect to the Company and its Subsidiaries taken as a whole, any material change in the nature of its business as a diversified manufacturing company. (d) Mergers, Etc. Merge into or consolidate with any Person or permit any Person to merge into it, or permit any of its Subsidiaries to do so, except that: (i) any Subsidiary of the Company may merge into or consolidate with the Company or any other Subsidiary of the Company, provided that (A) in the case of any such merger or consolidation, the Person formed by such merger or consolidation shall be the Company or a wholly owned Subsidiary of the Company (or, if the merger or consolidation shall relate to two less than wholly owned Subsidiaries of the Company, the surviving Subsidiary shall be owned by the Company to the same or greater extent immediately following such transaction as 114 108 was owned by the Company immediately prior to such transaction), (B) in the case of any such merger or consolidation to which a Domestic Subsidiary Guarantor is a party, the Person formed by such merger or consolidation shall be a Domestic Subsidiary Guarantor, (C) in the case of any merger or consolidation to which one Foreign Subsidiary Guarantor is a party, the Person formed by such merger or consolidation shall be such Foreign Subsidiary Guarantor (unless the other party is a Domestic Subsidiary Guarantor in which case clause (B) above shall apply and (D) in the case of any such merger or consolidation to which two or more Foreign Subsidiary Guarantors are a party, each such Foreign Subsidiary shall be organized under the laws of one country and the Person formed by such merger or consolidation shall be a Foreign Subsidiary Guarantor organized under the laws of such country; (ii) in connection with any acquisition permitted under Section 5.02(f), any Subsidiary of the Company may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided that the Person surviving such merger shall be a wholly owned Subsidiary of the Company (or, if the merger or consolidation shall relate to two less than wholly owned Subsidiaries of the Company, the surviving Subsidiary shall be owned by the Company to the same or greater extent immediately following such transaction as was owned by the Company immediately prior to such transaction); and (iii) in connection with any sale or other disposition permitted under Section 5.02(e) (other than clause (ii) thereof), any Subsidiary of the Company may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided, however, that in each case, immediately after giving effect thereto, no event shall occur and be continuing that constitutes a Default. (e) Sales, Etc., of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets other than Inventory to be sold in the ordinary course of its business, except: (i) sales or dispositions of Inventory in the ordinary course of its business, assets which have become obsolete or assets of Inactive Subsidiaries; (ii) in a transaction authorized by Section 5.02(d); 115 109 (iii) sales of assets for fair value in an aggregate amount not to exceed $90,000,000 from the date hereof, provided that in the case of sales of assets pursuant to this clause (iii), the Company shall prepay the Advances pursuant to, and in the amount, on the date and in the order of priority set forth in Section 2.07(b)(ii)(A), as specified therein; (iv) sales, leases, transfers or other dispositions of assets not constituting a sale and leaseback by the Company or any wholly-owned Domestic Subsidiary of the Company to any Foreign Subsidiary of the Company, in an aggregate amount not to exceed $2,500,000, or to the Company or any other wholly-owned Domestic Subsidiary of the Company; (v) sales, leases, transfers or other dispositions of assets not constituting a sale and leaseback by any Foreign Borrower or any wholly-owned Subsidiary of a Foreign Borrower to the Company or any wholly owned Subsidiary of the Company or to any other Foreign Borrower or wholly-owned Subsidiary of a Foreign Borrower; (vi) so long as no Default is existing or would result therefrom, (x) sale of assets for fair value in connection with trade-in for replacements of existing assets and (y) sale and leaseback transactions involving property having a fair market value at the time of such sale and leaseback aggregating not more than $5,000,000 in any Fiscal Year; (vii) sales of assets incurred in connection with transaction of the type described in clause (d) of the definition of Cash Equivalents; and (viii) sales, leases, transfers or other dispositions of assets for cash and for fair value not otherwise permitted by clauses (i)-(vii) above, provided that in the case of sales of assets pursuant to this clause (viii), the Company shall, on the date of receipt by any Loan Party or any of its Subsidiaries of the Net Cash Proceeds from such sale, lease, transfer or disposition, prepay the Advances pursuant to, and in the amount and order of priority set forth in, Section 2.07(b)(ii)(B), as specified therein; provided that sales and other dispositions of assets made in accordance with clauses (iii) and (viii) above shall be made for not less than 75% cash consideration with the remainder of the consideration to consist of promissory notes or marketable securities for which all actions contemplated by Section 5.01(j) shall be taken. 116 110 (f) Investments in Other Persons. Make or hold, or permit any of its Subsidiaries to make or hold, any Investment in any Person, except: (i) Investments by the Company and its Domestic Subsidiaries in their Domestic Subsidiaries existing on the date hereof and additional Investments in Domestic Subsidiaries; (ii) Investments by the Company and its Subsidiaries in their Foreign Subsidiaries outstanding on the date hereof and additional investments in (except for directors' qualifying shares) wholly owned Foreign Subsidiaries in an aggregate amount invested from the date hereof not to exceed $10,000,000; (iii) loans and advances to employees in the ordinary course of the business of the Company and its Subsidiaries as presently conducted in an aggregate principal amount not to exceed $2,000,000 at any time outstanding; (iv) Investments by the Company and its Subsidiaries in Cash Equivalents provided that amounts in excess of $5,000,000 shall be held by the Collateral Agent or be subject to a first priority perfected lien in favor or the Collateral Agent; (v) Investments existing on the date hereof and described on Schedule 4.01(y) hereto; (vi) Investments by the Company and its Subsidiaries in Hedge Agreements permitted under Section 5.02(b)(i) or 5.02(b)(iii)(H); (vii) Investments consisting of intercompany Debt permitted under Section 5.02(b)(ii); and (viii) other Investments in an aggregate amount invested in connection with joint ventures and newly acquired Subsidiaries; provided that with respect to Investments made under this clause (viii): (1) any newly acquired or organized Subsidiary of the Company or any of its Subsidiaries shall be not less than 80% owned (directly or indirectly) by the Company in the case of any Domestic Subsidiary and not less than 90% owned (directly or indirectly) by the Company in the case of any Foreign Subsidiary; (2) immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom; 117 111 (3) any company or business acquired or invested in pursuant to this clause (viii) shall be, directly or indirectly, in a basic manufacturing business; (4) immediately after giving effect to the acquisition of a company or business pursuant to this clause (viii), the Company shall be in pro forma compliance with the covenants contained in Section 5.04, calculated based on the financial statements most recently delivered to the Lender Parties pursuant to Section 5.03 and as though such acquisition had occurred at the beginning of the four-quarter period covered thereby, as evidenced by a certificate of a Designated Officer of the Company delivered to the Lender Parties demonstrating such compliance; provided however, that, notwithstanding the foregoing, the Company and its Subsidiaries may make additional Investments to the extent that such pro forma calculation indicates a Senior Leverage Ratio of not more than 4.00:1.00 and a Total Leverage Ratio of not more than 4.75:1.00; and (5) the Company and its Subsidiaries shall comply with the requirements of Section 5.01(j); and (ix) Investments in accounts, contract rights, chattel paper (each as defined in the Uniform Commercial Code), notes receivable and similar items arising or acquired in the ordinary course of business. (g) Restricted Payments. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock or accept any capital contributions, or permit any of its Subsidiaries to do any of the foregoing, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of the Company or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock, except that, so long as no Default shall have occurred and be continuing at the time of any action described in clause (i), (ii) or (iii) below or would result therefrom: (i) the Company may (A) declare and pay dividends and distributions payable only in common stock of the Company, (B) on or before July 30, 1999, declare and pay dividends payable in and make distributions of Precious Metal Inventory reflected on Schedule 5.02(g), (C) declare and pay dividends or make other payments required to be made under the Tax Agreement, provided that with 118 112 respect to any dividends declared and paid under this clause (C), both before and after such declaration and payment the Total Leverage Ratio shall not be greater than 4.50:1.00, (D) declare and pay cash dividends in an amount in any Fiscal Year in an amount, together with any payments made pursuant to Section 5.02(k)(iii), that is equal to a percentage of the Excess Cash Flow for the immediately preceding Fiscal Year as follows: (1) if the Total Leverage Ratio as at the time of such declaration is equal to or greater than 4.00:1.00, 12.5% and (2) if the Total Leverage Ratio as at the time of such declaration is less than 4.00:1.00 but equal to or greater than 3.50:1.00, 25%, provided that for the Fiscal Year ending December 31, 1998, such Excess Cash Flow shall be determined for the period from April 13, 1998 through December 31, 1998, and (E) declare and pay cash dividends if the Total Leverage Ratio as at the time of such declaration and after giving effect to such payment under this clause (E) and any payment made pursuant to Section 5.02(k)(iv) is less than 3.50:1.00; (ii) any Subsidiary of the Company may (A) declare and pay cash dividends to the Company, (B) declare and pay cash dividends to any other wholly owned Subsidiary of the Company of which it is a Subsidiary and (C) accept capital contributions from its parent to the extent permitted under Section 5.01(f)(i); and (iii) the Company and any Subsidiary may issue or sell capital stock and/or warrants, rights or options to acquire capital stock (A) to the Company or any other Subsidiary or (B) in connection with transaction permitted by Section 5.02(d) hereof. provided, however, the Company may issue or sell capital stock to WHX Corporation or any of its Subsidiaries to permit the Company to comply with the Senior Leverage Ratio or the Total Leverage Ratio, subject to the provisions of Section 6.01(c). (h) Lease Obligations. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any obligations as lessee (i) for the rental or hire of real or personal property in connection with any sale and leaseback transaction, or (ii) for the rental or hire of other real or personal property of any kind under leases or agreements to lease (other than Capitalized Leases) having an original term of one year or more that would cause the direct and contingent liabilities of the Company and its Subsidiaries, on a Consolidated basis, in respect of all such obligations to exceed $10,000,000 payable in any period of 12 consecutive months in respect of the Precious Metals Leasing and $13,000,000 payable in any period of 12 consecutive months in respect of all other leases. 119 113 (i) Amendments of Constitutive Documents. Amend, or permit any of its Subsidiaries to amend, its certificate of incorporation or bylaws or other constitutive documents other than changes which could not reasonably be expected to have a Material Adverse Effect. (j) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in (i) accounting policies or reporting practices, except as required by generally accepted accounting principles, or (ii) its Fiscal Year. (k) Prepayments, Etc., of Debt. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Surviving Debt or Subordinated Debt, except (i) refinancings of any Surviving Debt in accordance with Section 5.02(b)(iii)(D), (ii) regularly scheduled or required repayments or redemptions of Surviving Debt, (iii) prepayments of Subordinated Debt in any Fiscal Year in an amount, together with any dividends made pursuant to Section 5.02(g)(i)(D), that is equal to a percentage of the Excess Cash Flow for the immediately preceding Fiscal Year as follows: (1) if the Total Leverage Ratio as at the time of such declaration is equal to or greater than 4.00:1.00, 12.5% and (2) if the Total Leverage Ratio as at the time of such declaration is less than 4.00:1.00 but equal to or greater than 3.50:1.00, 25%, provided that for the Fiscal Year ending December 31, 1998, such Excess Cash Flow shall be determined for the period from April 13, 1998 through December 31, 1998 and (iv) prepayments of Subordinated Debt if the Total Leverage Ratio as at the time of such prepayment and after giving effect to such payment under this clause (iv) and any dividends made pursuant to Section 5.02(g)(i)(E) is less than 3.50:1.00, or amend, modify or change in any manner any term or condition of any Surviving Debt or Subordinated Debt, or permit any of its Subsidiaries to do any of the foregoing. (l) Amendment, Etc., of Related Documents. Cancel or terminate any Related Document or consent to or accept any cancellation or termination thereof, amend, modify or change in any manner any term or condition of any Related Document or give any consent, waiver or approval thereunder, waive any default under or any breach of any term or condition of any Related Document, agree in any manner to any other amendment, modification or change of any term or condition of any Related Document or take any other action in connection with any Related Document that would impair the value of the interest or rights of any Loan Party thereunder in any material respect or that would impair the rights or interests of any Agent or any Lender Party in any material respect, or permit any of its Subsidiaries to do any of the foregoing. (m) Negative Pledge. Enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting or conditioning the 120 114 creation or assumption of any Lien upon any of its property or assets except for any such agreement (i) in favor of the Secured Parties or (ii) in connection with (A) any Surviving Debt, (B) any purchase money Debt permitted by Section 5.02(b)(iii)(B) solely to the extent that the agreement or instrument governing such Debt prohibits a Lien on the property acquired with the proceeds of such Debt or (C) any Capitalized Lease permitted by Section 5.02(b)(iii)(C) solely to the extent that such Capitalized Lease prohibits a Lien on the property subject thereto or (D) Precious Metals Leasing. (n) Partnerships, Etc. Become a general partner in any general or limited partnership or joint venture, or permit any of its Subsidiaries to do so, other than any Subsidiary the sole assets of which consist of its interest in such partnership or joint venture. (o) Speculative Transactions. Engage, or permit any of its Subsidiaries to engage, in any transaction involving commodity options or futures contracts or any similar speculative transactions other than those incurred in the ordinary course of business and consistent with past practice. (p) Capital Expenditures. Make, or permit any of its Subsidiaries to make, any Capital Expenditures that would cause the aggregate of all such Capital Expenditures made by the Company and its Subsidiaries in any period set forth below to exceed the amount set forth below for such period. Year Ending In Amount ======================== ============= 1998 $25,000,000 ------------------------ ------------- 1999 $26,500,000 ------------------------ ------------- 2000 $28,000,000 ------------------------ ------------- 2001 $29,500,000 ------------------------ ------------- 2002 $30,000,000 ------------------------ ------------- 2003 $30,000,000 ------------------------ ------------- 2004 $30,000,000 ------------------------ ------------- 2005 $30,000,000 ------------------------ ------------- 2006 $30,000,000 ------------------------ ------------- 121 115 plus, for each Fiscal Year set forth above, an amount equal to 25% of the excess of the amount of Capital Expenditures permitted to be made by the Company and its Subsidiaries in such prior year over the aggregate amount of Capital Expenditures made by the Company and its Subsidiaries during such prior year. (q) Formation of Subsidiaries. Organize or invest, or permit any Subsidiary to organize or invest, in any new Subsidiary except as permitted under Section 5.02(f)(viii). (r) Payment Restrictions Affecting Subsidiaries. Directly or indirectly, enter into or suffer to exist, or permit any of its Subsidiaries to enter into or suffer to exist, any agreement or arrangement limiting the ability of any of its Subsidiaries to declare or pay dividends or other distributions in respect of its capital stock or repay or prepay any Debt owed to, make loans or advances to, or otherwise transfer assets to or invest in, the Company or any Subsidiary of the Company (whether through a covenant restricting dividends, loans, asset transfers or investments, a financial covenant or otherwise), except (i) the Loan Documents, (ii) any agreement or instrument evidencing Surviving Debt and (iii) any agreement in effect at the time such Subsidiary becomes a Subsidiary of the Company, so long as such agreement was not entered into solely in contemplation of such Person becoming a Subsidiary of the Company. SECTION 5.03. Reporting Requirements. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Company will furnish to the Agents and (except in the case of subsection (o) below) the Lender Parties: (a) Default Notices. As soon as possible and in any event within two Business Days after the occurrence of each Default or any event, development or occurrence reasonably likely to have a Material Adverse Effect continuing on the date of such statement, a statement of a Designated Officer of the Company setting forth details of such Default and the action that the Company has taken and proposes to take with respect thereto. (b) Annual Financials. (i) As soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Company and its Subsidiaries, including therein Consolidated balance sheets of the Company and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and a Consolidated statement of cash flows of the Company and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion acceptable to the Required Lenders of independent public accountants of nationally recognized standing 122 116 in the United States acceptable to the Required Lenders, together with (A) a certificate of such accounting firm to the Lender Parties stating that in the course of the regular audit of the business of the Company and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (B) a schedule in form satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Company shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (C) a certificate of a Designated Officer of the Company stating that no Default has occurred and is continuing or, if a default has occurred and is continuing, a statement as to the nature thereof and the action that the Company has taken and proposes to take with respect thereto. . (ii) As soon as available and in any event within 90 days after the end of each Fiscal Year, a copy of the annual audit report for such year for WHX Corporation and its Subsidiaries, including therein Consolidated balance sheets of the WHX Corporation and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and a Consolidated statement of cash flows of the WHX Corporation and its Subsidiaries for such Fiscal Year, in each case accompanied by an opinion acceptable to the Required Lenders of PriceWaterhouseCoopers or other independent public accountants of recognized standing acceptable to the Required Lenders, together with a certificate of such accounting firm to the Lender Parties stating that such audit was conducted by such accounting firm in accordance with generally accepted auditing standards. (c) Quarterly Financials. (i) As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated balance sheets of the Company and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Company and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Company and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by a Designated Officer of the Company as having been prepared in accordance with GAAP, together with (A) a certificate of said officer stating that no Default has occurred and is continuing or, if a 123 116 Default has occurred and is continuing, a statement as to the nature thereof and the action that the Company has taken and proposes to take with respect thereto and (B) a schedule in form satisfactory to the Administrative Agent of the computations used by the Company in determining compliance with the covenants contained in Section 5.04, provided that in the event of any change in GAAP used in the preparation of such financial statements, the Company shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP. (ii) As soon as available and in any event within 45 days after the end of each of the first three quarters of each Fiscal Year, Consolidated balance sheets of WHX Corporation and its Subsidiaries as of the end of such quarter and Consolidated statements of income and a Consolidated statement of cash flows of WHX Corporation and its Subsidiaries for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and Consolidated statements of income and a Consolidated statement of cash flows of WHX Corporation and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding Fiscal Year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments) by a Designated Officer of the Company as having been prepared in accordance with GAAP. (d) Annual Forecasts. As soon as available and in any event no later than 15 days before the end of each Fiscal Year, Consolidated and, as to the five business segments of the Company, consolidating, forecasted balance sheets, statements of income and statements of cash flows of the Company and its Subsidiaries prepared by management of the Company, in form satisfactory to the Administrative Agent, on a monthly basis for the Fiscal Year following such Fiscal Year and on an annual basis for each Fiscal Year thereafter until one year after the Final Maturity Date. (e) Litigation. Promptly after the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Loan Party or any of its Subsidiaries of the type described in Section 4.01(f). (f) Securities Reports. Promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that any Loan Party or any of its Subsidiaries sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements, that any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or with any provincial or national securities exchange. 124 118 (g) Creditor Reports. Promptly after the furnishing thereof, copies of any statement or report furnished to any holder of Debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of any indenture, loan or credit or similar agreement and not otherwise required to be furnished to the Lender Parties pursuant to any other clause of this Section 5.03. (h) Agreement Notices. Promptly upon receipt thereof, copies of all notices, requests and other documents received by any Loan Party or any of its Subsidiaries under or pursuant to any Related Document or instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that could materially impair the value of the interests or the rights of any Loan Party or otherwise have a Material Adverse Effect and copies of any amendment, modification or waiver of any provision of any Related Document or instrument, indenture, loan or credit or similar agreement and, from time to time upon request by the Administrative Agent, such information and reports regarding the Related Documents and such instruments, indentures and loan and credit and similar agreements as the Administrative Agent may reasonably request. (i) Revenue Agent Reports. Within 10 days after receipt, copies of all Revenue Agent Reports (Internal Revenue Service Form 886), or other written proposals of the Internal Revenue Service, that propose, determine or otherwise set forth positive adjustments to the Federal income tax liability of the affiliated group (within the meaning of Section 1504(a)(1) of the Internal Revenue Code) of which the Company is a member aggregating $1,000,000 or more. (j) Tax Certificates. Promptly, and in any event within ten Business Days after the due date (with extensions) for filing the final Federal income tax return in respect of each taxable year, a certificate (a "Tax Certificate"), signed by the President or a Designated Officer of the Company, stating that the common parent of the affiliated group (within the meaning of Section 1504(a)(1) of the Internal Revenue Code) of which the Company is a member has paid to the Internal Revenue Service or other taxing authority, the full amount that such affiliated group is required to pay in respect of Federal income tax for such year and that the Company and its Subsidiaries have received any amounts payable to them, and have not paid amounts in respect of taxes (Federal, state, local or foreign) in excess of the amount they are required to pay, under the Tax Agreement in respect of such taxable year. (k) ERISA. (i) ERISA Events and ERISA Reports. (A) Promptly and in any event within 10 days after any Loan Party or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a statement of a Designated Officer of the Company describing such ERISA Event and the action, if any, that such Loan Party or 125 119 such ERISA Affiliate has taken and proposes to take with respect thereto and (B) on the date any records, documents or other information must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA, a copy of such records, documents and information. (ii) Plan Terminations. Promptly and in any event within two Business Days after receipt thereof by any Loan Party or any ERISA Affiliate, copies of each notice from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan. (iii) Multiemployer Plan Notices. Promptly and in any event within five Business Days after receipt thereof by any Loan Party or any ERISA Affiliate from the sponsor of a Multiemployer Plan, copies of each notice concerning (A) the imposition of Withdrawal Liability by any such Multiemployer Plan, (B) the reorganization or termination, within the meaning of Title IV of ERISA, of any such Multiemployer Plan or (C) the amount of liability incurred, or that may be incurred, by such Loan Party or any ERISA Affiliate in connection with any event described in clause (A) or (B). (l) Environmental Conditions. Promptly after the assertion or occurrence thereof, notice of any Environmental Action against or of any noncompliance by any Loan Party or any of its Subsidiaries with any Environmental Law or Environmental Permit that could (i) reasonably be expected to have a Material Adverse Effect or (ii) cause any property described in the Mortgages to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law. (m) Real Property. As soon as available and in any event within 30 days after the end of each Fiscal Year, a report supplementing Schedules 4.01(w) and 4.01(x) hereto, including an identification of all owned and leased real property disposed of by the Company or any of its Subsidiaries during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all real property acquired or leased during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete, other than owned or leased property in each case with an aggregate fair market value not exceeding $100,000. (n) Insurance. As soon as available and in any event within 30 days after the end of each Fiscal Year, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for the Company and its Subsidiaries and containing such additional information as any Agent, or any Lender Party through the Administrative Agent, may reasonably specify. 126 120 (o) Borrowing Base Certificate. As soon as available and in any event within 20 days after the end of each month, a Borrowing Base Certificate, as at the end of the previous month, certified by a Designated Officer of the Company. (p) Year 2000 Compliance. Promptly after the Company discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its and its Subsidiaries' business and operations will not be Year 2000 compliant, except to the extent that such failure could not be reasonably expected to have a Material Adverse Effect, notice of such failure. (q) Other Information. Such other information respecting the business, condition (financial or otherwise), operations, performance, properties or prospects of any Loan Party or any of its Subsidiaries as any Agent, or any Lender Party through the Administrative Agent, may from time to time reasonably request. SECTION 5.04. Financial Covenants. So long as any Advance or any other Obligation of any Loan Party under any Loan Document shall remain unpaid, any Letter of Credit or Bankers' Acceptance shall be outstanding or any Lender Party shall have any Commitment hereunder, the Company will: (a) Fixed Charge Coverage Ratio. Maintain at the end of each fiscal quarter of the Company a Fixed Charge Coverage Ratio of not less than the ratio set forth below for each period set forth below: 127 121 Quarter Ending Ratio ====================================== ======================= September 30, 1998 1.15:1.00 December 31, 1998 1.15:1.00 - -------------------------------------- ----------------------- March 31, 1999 1.15:1.00 June 30, 1999 1.15:1.00 September 30, 1999 1.15:1.00 December 31, 1999 1.15:1.00 - -------------------------------------- ----------------------- March 31, 2000 1.25:1.00 June 30, 2000 1.25:1.00 September 30, 2000 1.25:1.00 December 31, 2000 1.25:1.00 - -------------------------------------- ----------------------- March 31, 2001 1.35:1.00 June 30, 2001 1.35:1.00 September 30, 2001 1.35:1.00 December 31, 2001 1.35:1.00 - -------------------------------------- ----------------------- March 31, 2002 1.35:1.00 June 30, 2002 1.35:1.00 September 30, 2002 1.35:1.00 December 31, 2002 1.35:1.00 - -------------------------------------- ----------------------- March 31, 2003 1.40:1.00 June 30, 2003 1.40:1.00 September 30, 2003 1.40:1.00 December 31, 2003 1.40:1.00 - -------------------------------------- ----------------------- March 31, 2004 1.40:1.00 June 30, 2004 1.40:1.00 September 30, 2004 1.40:1.00 December 31, 2004 1.40:1.00 - -------------------------------------- ----------------------- March 31, 2005 1.40:1.00 June 30, 2005 1.40:1.00 September 30, 2005 1.40:1.00 December 31, 2005 1.40:1.00 - -------------------------------------- ----------------------- March 31, 2006 1.40:1.00 June 30, 2006 1.40:1.00 September 30, 2006 1.40:1.00 December 31, 2006 1.40:1.00 - -------------------------------------- ----------------------- 128 122 (b) Senior Leverage Ratio. Maintain at the end of each fiscal quarter of the Company a Senior Leverage Ratio of not more than the ratio set forth below for each period set forth below: Quarter Ending Ratio ===================================== ======================= September 30, 1998 4.70:1.00 December 31, 1998 4.70:1.00 - ------------------------------------- ----------------------- March 31, 1999 4.55:1.00 June 30, 1999 4.55:1.00 September 30, 1999 4.55:1.00 December 31, 1999 4.55:1.00 - ------------------------------------- ----------------------- March 31, 2000 4.25:1.00 June 30, 2000 4.25:1.00 September 30, 2000 4.25:1.00 December 31, 2000 4.25:1.00 - ------------------------------------- ----------------------- March 31, 2001 3.95:1.00 June 30, 2001 3.95:1.00 September 30, 2001 3.95:1.00 December 31, 2001 3.95:1.00 - ------------------------------------- ----------------------- March 31, 2002 3.75:1.00 June 30, 2002 3.75:1.00 September 30, 2002 3.75:1.00 December 31, 2002 3.75:1.00 - ------------------------------------- ----------------------- March 31, 2003 3.50:1.00 June 30, 2003 3.50:1.00 September 30, 2003 3.50:1.00 December 31, 2003 3.50:1.00 - ------------------------------------- ----------------------- March 31, 2004 3.25:1.00 June 30, 2004 3.25:1.00 September 30, 2004 3.25:1.00 December 31, 2004 3.25:1.00 - ------------------------------------- ----------------------- March 31, 2005 3.25:1.00 June 30, 2005 3.25:1.00 September 30, 2005 3.25:1.00 December 31, 2005 3.25:1.00 - ------------------------------------- ----------------------- March 31, 2006 3.25:1.00 June 30, 2006 3.25:1.00 September 30, 2006 3.25:1.00 December 31, 2006 3.25:1.00 - ------------------------------------- ----------------------- 129 123 (c) Total Leverage Ratio. Maintain at the end of each fiscal quarter of the Company a Total Leverage Ratio of not more than the ratio set forth below for each period set forth below: Quarter Ending Ratio ===================================== ======================= September 30, 1998 5.00:1.00 December 31, 1998 5.00:1.00 - ------------------------------------- ----------------------- March 31, 1999 5.00:1.00 June 30, 1999 5.00:1.00 September 30, 1999 5.00:1.00 December 31, 1999 5.00:1.00 - ------------------------------------- ----------------------- March 31, 2000 5.00:1.00 June 30, 2000 5.00:1.00 September 30, 2000 5.00:1.00 December 31, 2000 5.00:1.00 - ------------------------------------- ----------------------- March 31, 2001 5.00:1.00 June 30, 2001 5.00:1.00 September 30, 2001 5.00:1.00 December 31, 2001 5.00:1.00 - ------------------------------------- ----------------------- March 31, 2002 4.75:1.00 June 30, 2002 4.75:1.00 September 30, 2002 4.75:1.00 December 31, 2002 4.75:1.00 - ------------------------------------- ----------------------- March 31, 2003 4.75:1.00 June 30, 2003 4.75:1.00 September 30, 2003 4.75:1.00 December 31, 2003 4.75:1.00 - ------------------------------------- ----------------------- March 31, 2004 4.50:1.00 June 30, 2004 4.50:1.00 September 30, 2004 4.50:1.00 December 31, 2004 4.50:1.00 - ------------------------------------- ----------------------- March 31, 2005 4.00:1.00 June 30, 2005 4.00:1.00 September 30, 2005 4.00:1.00 December 31, 2005 4.00:1.00 - ------------------------------------- ----------------------- March 31, 2006 4.00:1.00 June 30, 2006 4.00:1.00 September 30, 2006 4.00:1.00 December 31, 2006 4.00:1.00 ===================================== ======================= 130 124 (d) Interest Coverage Ratio. Maintain at the end of each fiscal quarter of the Company an Interest Coverage Ratio of not less than the ratio set forth below for each period set forth below: Quarter Ending Ratio September 30, 1998 2.25:1.00 December 31, 1998 2.25:1.00 - ---------------------------------- ------------------------- March 31, 1999 2.30:1.00 June 30, 1999 2.30:1.00 September 30, 1999 2.30:1.00 December 31, 1999 2.30:1.00 - ---------------------------------- ------------------------- March 31, 2000 2.55:1.00 June 30, 2000 2.55:1.00 September 30, 2000 2.55:1.00 December 31, 2000 2.55:1.00 - ---------------------------------- ------------------------- March 31, 2001 2.85:1.00 June 30, 2001 2.85:1.00 September 30, 2001 2.85:1.00 December 31, 2001 2.85:1.00 - ---------------------------------- ------------------------- March 31, 2002 3.15:1.00 June 30, 2002 3.15:1.00 September 30, 2002 3.15:1.00 December 31, 2002 3.15:1.00 - ---------------------------------- ------------------------- March 31, 2003 3.35:1.00 June 30, 2003 3.35:1.00 September 30, 2003 3.35:1.00 December 31, 2003 3.35:1.00 - ---------------------------------- ------------------------- March 31, 2004 3.50:1.00 June 30, 2004 3.50:1.00 September 30, 2004 3.50:1.00 December 31, 2004 3.50:1.00 - ---------------------------------- ------------------------- March 31, 2005 3.50:1.00 June 30, 2005 3.50:1.00 September 30, 2005 3.50:1.00 December 31, 2005 3.50:1.00 - ---------------------------------- ------------------------- March 31, 2006 3.50:1.00 June 30, 2006 3.50:1.00 September 30, 2006 3.50:1.00 December 31, 2006 3.50:1.00 - ---------------------------------- ------------------------- 131 125 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing: (a) (i) any Borrower shall fail to pay any principal of any Advance or any portion of any Bankers' Acceptance when the same shall become due and payable or (ii) any Borrower shall fail to pay any interest on any Advance, or any Loan Party shall fail to make any other payment under any Loan Document, in each case under this clause (ii) within five days after the same becomes due and payable; or (b) any representation or warranty made by any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or (c) any Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.16, 5.01(e), (f), (i), (j), (m) or (p), 5.02, 5.03 or 5.04; provided, however, that no Default shall be deemed to have occurred with respect to Section 5.04(b) or (c) as at the end of any fiscal quarter if, prior to the delivery of the financial statements required by Section 5.03(b)(i) or 5.03(c)(i) in respect of such fiscal quarter, the Company shall have received additional equity and shall have made the prepayment required by Section 2.07(b)(iii)(y) and, as a result thereof, assuming such additional equity contribution had been made on the last day of such fiscal quarter, the Company shall have complied with such Section 5.04(b) or (c) on a pro forma basis; or (d) any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 15 days after the earlier of the date on which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Company by any Agent or any Lender Party; or (e) any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt that is outstanding in a principal amount (or, in the case of any Hedge Agreement, an Agreement Value) of at least $1,000,000 either individually or in the aggregate (but excluding Debt outstanding hereunder) of such Loan Party or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or 132 126 otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or (f) any Loan Party or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Loan Party or any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party or any of its Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or (g) one or more judgments or orders for the payment of money in excess of $1,500,000 in the aggregate shall be rendered against any Loan Party or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgments or orders or (ii) there shall be any period of 15 consecutive days during which a stay of enforcement of such judgments or orders, by reason of a pending appeal or otherwise, shall not be in effect unless such judgments or orders are covered by a valid and binding policy of insurance covering payment thereof and the insurer, which shall be rated at least "A" by A. M. Best Company has acknowledged in writing responsibility for the full payment of such judgments or orders; or (h) one or more non-monetary judgments or orders shall be rendered against any Loan Party or any of its Subsidiaries that are, in the aggregate, reasonably likely to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgments or orders, by reason of a pending appeal or otherwise, shall not be in effect; or (i) any provision of any Loan Document after delivery thereof pursuant to Section 3.01 or 5.01(j) shall for any reason cease to be valid and binding on or enforceable 133 127 in any material respect against any Loan Party party to it, or any such Loan Party shall so state in writing; or (j) any Collateral Document after delivery thereof pursuant to Section 3.01 or 5.01(j) shall for any reason (other than pursuant to the terms thereof) cease to create a valid and perfected first priority lien on and security interest in the Collateral purported to be covered thereby in any material respect; or (k) a Change of Control shall occur; or (l) (i) Immediately after Wheeling-Pittsburgh Steel Corporation ceases to be an ERISA Affiliate (the "WP Spinoff"), as to any Plan as to which immediately after the WP Spinoff any Loan Party or any ERISA Affiliate is deemed to be an "employer" under ERISA, the funded current liability percentage (as defined in ERISA) of such Plan is less than 90% or the unfunded current liability (as defined in ERISA) exceeds $20,000,000 or (ii) any Loan Party shall incur liability in excess of $20,000,000 with respect to any pension plan as a result of the WP Spinoff; or (m) any ERISA Event shall have occurred with respect to a Plan and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Loan Parties and the ERISA Affiliates related to such ERISA Event) exceeds $4,000,000 and any Loan Party or any ERISA Affiliate could reasonably be expected to incur liability in such amount; provided, however, that a WP Spinoff or any transaction occurring in connection therewith shall not be an ERISA Event under clause (a), (d) or (e) of the definition of ERISA Event for purposes of this subsection (m); or (n) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds $4,000,000 or requires payments exceeding $1,000,000 per annum; or (o) any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, and as a result of such reorganization or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such 134 128 Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganization or termination occurs by an amount exceeding $4,000,000; or (p) an "Event of Default" (as defined in any Mortgage) shall have occurred and be continuing; then, and in any such event, the Administrative Agent (i) shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrowers, declare the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)), of each Multicurrency Lender to accept or purchase Bankers' Acceptances and of each Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Required Lenders, (A) by notice to the Borrowers, declare the Notes, all interest thereon and all other amounts payable under this Agreement and the other Loan Documents to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by each Borrower, (B) by notice to each party required under the terms of any agreement in support of which a Letter of Credit is issued, request that all Obligations under such agreement be declared to be due and payable and (C) by notice to each Issuing Bank, direct such Issuing Bank to deliver a Default Termination Notice to the beneficiary of each Letter of Credit issued by it, and each Issuing Bank shall deliver such Default Termination Notices; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any Borrower under the Federal Bankruptcy Code, (x) the Commitments of each Lender Party and the obligation of each Lender Party to make Advances (other than Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)), of each Multicurrency Lender to accept or purchase Bankers' Acceptances and of each Issuing Bank to issue Letters of Credit shall automatically be terminated and (y) the Notes, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by each Borrower. SECTION 6.02. Actions in Respect of the Letters of Credit and Bankers' Acceptances upon Default. If any Event of Default shall have occurred and be continuing, the Administrative Agent may, or shall at the request of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, (a) make demand upon the Company to, and forthwith upon such demand the Company will, pay to the Collateral Agent on behalf of the Lender Parties in same day funds at the Collateral Agent's office designated in such demand, for deposit in the L/C Cash Collateral Account, an amount equal to the aggregate 135 129 Available Amount of all Letters of Credit then outstanding and (b) make demand upon the Canadian Borrower to, and forthwith upon such demand, such Borrower will, pay to the Administrative Agent on behalf of the Multicurrency Lenders in same day funds at the Administrative Agent's office designated in such demand, for deposit in the Canadian Cash Collateral Account, an amount equal to the aggregate Face Amount of all Bankers' Acceptances then outstanding. If at any time the Administrative Agent or the Collateral Agent determines that any funds held in the L/C Cash Collateral Account or the Canadian Cash Collateral Account, as the case may be, are subject to any right or claim of any Person other than the Agents and the Lender Parties or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit or the aggregate Face Amount of all outstanding Bankers' Acceptances, as the case may be, the Company will, forthwith upon demand by the Administrative Agent or the Collateral Agent, (x) pay to the Collateral Agent, as additional funds to be deposited and held in the L/C Cash Collateral Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Collateral Account that the Administrative Agent or the Collateral Agent, as the case may be, determines to be free and clear of any such right and claim and (y) pay to the Administrative Agent, as additional funds to be deposited and held in the Canadian Cash Collateral Account, an amount equal to the excess of (i) such aggregate Face Amount of all outstanding Bankers' Acceptances over (ii) the total amount of funds, if any, then held in the Canadian Cash Collateral Account that the Administrative Agent or the Collateral Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit or the maturity of any Banker's Acceptance for which funds are on deposit in the L/C Cash Collateral Account or the Canadian Cash Collateral Account, such funds shall be applied to reimburse the relevant Issuing Bank, Revolving Credit Lenders or Multicurrency Lenders, as applicable, to the extent permitted by applicable law. ARTICLE VII COMPANY GUARANTY SECTION 7.01. Guaranty. The Company hereby unconditionally and irrevocably guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of each Foreign Borrower now or hereafter existing under this Agreement or any other Loan Document, whether for principal, interest, fees, expenses or otherwise (such obligations, to the extent not paid by such Foreign Borrower or specifically waived in accordance with Section 9.01, being the "Guaranteed Obligations"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Administrative Agent or the Lenders in enforcing any rights under this Article VII ("this Guaranty"). Without limiting the generality of the foregoing, the Company's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by any Foreign Borrower to the Administrative Agent or any Lender under this Agreement or any other 136 130 Loan Agreement but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Foreign Borrower. SECTION 7.02. Guaranty Absolute. The Company guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement and the other Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or the Lenders with respect thereto. The obligations of the Company under this Guaranty are independent of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted against the Company to enforce this Guaranty, irrespective of whether any action is brought against any Foreign Borrower or whether any Foreign Borrower is joined in any such action or actions. The liability of the Company under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Company hereby irrevocably waives any defenses it may now or hereafter have in any way relating to, any or all of the following: (a) any lack of validity or enforceability of this Agreement, any other Loan Document or any agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure from this Agreement or any other Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Foreign Borrower or otherwise; (c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) any change, restructuring or termination of the corporate structure or existence of any Foreign Borrower; or (e) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Administrative Agent or any Lender that might otherwise constitute a defense available to, or a discharge of, the Company, any Foreign Borrower or any other guarantor or surety. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Foreign Borrower or otherwise, all as though such payment had not been made. 137 131 SECTION 7.03. Waiver. The Company hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Administrative Agent or any Lender exhaust any right or take any action against any Foreign Borrower or any other Person or any collateral. The Company acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated herein and that the waiver set forth in this Section 7.03 is knowingly made in contemplation of such benefits. The Company hereby waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future. SECTION 7.04. Continuing Guaranty; Assignments. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of the cash payment in full of the Guaranteed Obligations and all other amounts payable under this Guaranty and the Termination Date, (b) be binding upon the Company, its successors and assigns and (c) inure to the benefit of and be enforceable by the Lenders, the Administrative Agent and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer all or any portion of its rights and obligations hereunder (including, without limitation, all or any portion of its Commitments, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as provided in Section 9.07. SECTION 7.05. Subrogation. The Company will not exercise any rights that it may now or hereafter acquire against any Foreign Borrower or any other insider guarantor that arise from the existence, payment, performance or enforcement of the Company's obligations under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against a Foreign Borrower or any other insider guarantor or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from a Foreign Borrower or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security solely on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash and the Termination Date shall have occurred. If any amount shall be paid to the Company in violation of the preceding sentence at any time prior to the later of the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty and the Termination Date, such amount shall be held in trust for the benefit of the Administrative Agent and the Lenders and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as collateral for any Guaranteed Obligations or other 138 132 amounts payable under this Guaranty thereafter arising. If (i) the Company shall make payment to the Administrative Agent or any Lender of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall be paid in full in cash and (iii) the Termination Date shall have occurred, the Administrative Agent and the Lenders will, at the Company's request and expense, execute and deliver to the Company appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Company of an interest in the Guaranteed Obligations resulting from such payment by the Company. ARTICLE VIII THE AGENTS SECTION 8.01. Authorization and Action. Each Lender Party (in its capacities as a Lender, the Swing Line Bank (if applicable), an Issuing Bank (if applicable) and on behalf of itself and its Affiliates as potential Hedge Banks) hereby appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lender Parties and all holders of Notes; provided, however, that no Agent shall be required to take any action that exposes such Agent to personal liability or that is contrary to this Agreement or applicable law. Each Agent agrees to give to each Lender Party prompt notice of each notice given to it by any Borrower pursuant to the terms of this Agreement. SECTION 8.02. Agents' Reliance, Etc. Neither any Agent nor any of their respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with the Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent: (a) may treat the payee of any Note as the holder thereof until, in the case of the Administrative Agent, the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender that is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, or, in the case of any other Agent, such Agent has received notice from the Administrative Agent that it has received and accepted such Assignment and Acceptance, in each case as provided in Section 9.07; (b) may consult with legal counsel (including counsel for any Loan Party), independent public accountants and other experts selected by it and shall not be 139 133 liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender Party and shall not be responsible to any Lender Party for any statements, warranties or representations (whether written or oral) made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions (other than, in the case of the Administrative Agent, reasonable care in respect of the delivery of items required by Section 3.01 or 3.02) of any Loan Document on the part of any Loan Party or to inspect the property (including the books and records) of any Loan Party; (e) shall not be responsible to any Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; and (f) shall incur no liability under or in respect of any Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex) reasonably believed by it to be genuine and signed or sent by the proper party or parties. SECTION 8.03. Citicorp and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Citicorp shall have the same rights and powers under the Loan Documents as any other Lender Party and may exercise the same as though it were not an Agent; and the term "Lender Party" or "Lender Parties" shall, unless otherwise expressly indicated, include Citicorp in its individual capacity. Citicorp and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, accept investment banking engagements from and generally engage in any kind of business with, any Loan Party, any of its Subsidiaries and any Person that may do business with or own securities of any Loan Party or any such Subsidiary, all as if Citicorp were not an Agent and without any duty to account therefor to the Lender Parties. SECTION 8.04. Lender Party Credit Decision. Each Lender Party acknowledges that it has, independently and without reliance upon any Agent or any other Lender Party and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges that it will, independently and without reliance upon any Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 8.05. Indemnification. (a) Each Lender Party severally agrees to indemnify each Agent (to the extent not promptly reimbursed by the Borrowers) from and against such Lender Party's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such 140 134 Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Agent under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse each Agent promptly upon demand for its ratable share of any costs and expenses (including, without limitation, reasonable fees and expenses of counsel) payable by the Borrowers under Section 9.04(a), to the extent that such Agent is not promptly reimbursed for such costs and expenses by the Borrowers. (b) Each Lender Party severally agrees to indemnify each Issuing Bank (to the extent not promptly reimbursed by the Borrowers) from and against such Lender Party's ratable share (determined as provided below) of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against such Issuing Bank in any way relating to or arising out of the Loan Documents or any action taken or omitted by such Issuing Bank under the Loan Documents; provided, however, that no Lender Party shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Issuing Bank's gross negligence or willful misconduct as found in a final, non-appealable judgment by a court of competent jurisdiction. Without limitation of the foregoing, each Lender Party agrees to reimburse such Issuing Bank promptly upon demand for its ratable share of any costs and expenses (including, without limitation, fees and expenses of counsel) payable by the Borrowers under Section 9.04(b), to the extent that such Issuing Bank is not promptly reimbursed for such costs and expenses by the Borrowers. (c) For purposes of this Section 8.05, the Lender Parties' respective ratable shares of any amount shall be determined, at any time, according to the sum of (i) the aggregate principal amount of the Advances outstanding at such time and owing to the respective Lender Parties, (ii) their respective Pro Rata Shares of the aggregate Available Amount of all Letters of Credit outstanding at such time, (iii) the aggregate unused portions of their respective Term A Commitments, Term B Commitments, Delayed Draw Commitments and Multicurrency Commitments at such time and (iv) their respective Unused Revolving Credit Commitments at such time; provided that the aggregate principal amount of Swing Line Advances owing to the Swing Line Bank and of Letter of Credit Advances owing to any Issuing Bank shall be considered to be owed to the Revolving Credit Lenders ratably in accordance with their respective Revolving Credit Commitments. The failure of any Lender Party to reimburse any Agent or any Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lender Parties to such Agent or such Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender Party of its obligation hereunder to reimburse such Agent or such Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender 141 135 Party shall be responsible for the failure of any other Lender Party to reimburse such Agent or such Issuing Bank, as the case may be, for such other Lender Party's ratable share of such amount. Without prejudice to the survival of any other agreement of any Lender Party hereunder, the agreement and obligations of each Lender Party contained in this Section 8.05 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the other Loan Documents. SECTION 8.06. Successor Agents. Any Agent may resign as to any or all of the Facilities at any time by giving written notice thereof to the Lender Parties and the Borrowers and may be removed as to all of the Facilities at any time with or without cause by the Required Lenders; provided that each of the Required Lenders so acting to remove such Agent shall offer to assume such Lender's Pro Rata Share of the Revolving Credit Commitments of such Agent. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent as to such of the Facilities as to which such Agent has resigned or been removed. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lender Parties, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent as to all of the Facilities and, in the case of a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. Upon the acceptance of any appointment as Agent hereunder by a successor Agent as to less than all of the Facilities and, in the case of a successor Collateral Agent, upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to continue the perfection of the Liens granted or purported to be granted by the Collateral Documents, such successor Agent shall succeed to and become vested with all the rights, powers, discretion, privileges and duties of the retiring Agent as to such Facilities, other than with respect to funds transfers and other similar aspects of the administration of Borrowings under such Facilities, issuances of Letters of Credit (notwithstanding any resignation as Agent with respect to the Letter of Credit Facility) and payments by the Borrowers in respect of such Facilities, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement as to such Facilities, other than as aforesaid. If within 45 days after written notice is given of the retiring Agent's 142 136 resignation or removal under this Section 8.06 no successor Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Agent's resignation or removal shall become effective, (ii) the retiring Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Agent under the Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided above. After any retiring Agent's resignation or removal hereunder as Agent as to any of the Facilities shall have become effective, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent as to such Facilities under this Agreement. SECTION 8.07. Sub-Agents. Each Sub-Agent has been designated under this Agreement to carry out duties of the Administrative Agent. Each Sub-Agent shall be subject to each of the obligations in this Agreement to be performed by the applicable Sub-Agent, and each of the Borrowers and the Lender Parties agrees that each Sub-Agent shall be entitled to exercise each of the rights and shall be entitled to each of the benefits of the Administrative Agent under this Agreement as relate to the performance of its obligations hereunder. ARTICLE IX MISCELLANEOUS SECTION 9.01. Amendments, Etc. (a) No amendment or waiver of any provision of this Agreement or the Notes or any other Loan Document, nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed (or, in the case of the Collateral Documents, consented to) by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (i) no amendment, waiver or consent shall, unless in writing and signed by all of the Lenders (other than any Lender Party that is, at such time, a Defaulting Lender), do any of the following at any time: (A) waive any of the conditions specified in Section 3.01 or, in the case of the Initial Extension of Credit, Section 3.03, (B) change the number of Lenders or the percentage of (1) the Commitments, (2) the aggregate unpaid principal amount of the Advances or (3) the aggregate Available Amount of outstanding Letters of Credit that, in each case, shall be required for the Lenders or any of them to take any action hereunder, (C) release all or substantially all of the Guarantors or otherwise limit liability of all or substantially all of the Guarantors with respect to the Obligations owing to the Agents and the Lender Parties, (D) release all or substantially all of the Collateral in any transaction or series of related transactions or permit the creation, incurrence, assumption or existence of any Lien on all or substantially all of the Collateral in any transaction or series of related transactions to secure any Obligations other than Obligations owing to the Secured Parties under the Loan Documents or (E) amend this Section 9.01 and (ii) no amendment, waiver or consent shall, unless 143 137 in writing and signed by the Required Lenders and each Lender (other than any Lender that is, at such time, a Defaulting Lender) that has a Commitment under the Term A Facility, Term B Facility, Delayed Draw Facility, Multicurrency Facility or Revolving Credit Facility if such Lender is directly affected by such amendment, waiver or consent, (A) increase the Commitments of such Lender or subject such Lender to any additional obligations, (B) reduce the principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender, (C) postpone any date fixed for any payment of principal of, or interest on, the Notes held by such Lender or any fees or other amounts payable hereunder to such Lender or (D) change the order of application of any prepayment set forth in Section 2.07 in any manner that materially affects such Lender; provided further that the Collateral Agent and the Administrative Agent may, without the consent of the Required Lenders, release up to 10% of the book value of the Collateral or consent to the creation, incurrence, assumption or existence of any Lien on up to 10% of the book value of the Collateral; provided further that no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Bank or each Issuing Bank, as the case may be, in addition to the Lenders required above to take such action, affect the rights or obligations of the Swing Line Bank or of the Issuing Banks, as the case may be, under this Agreement; and provided further that no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Lenders required above to take such action, affect the rights or duties of such Agent under this Agreement or the other Loan Documents. (b) Each Lender grants (x) to the Administrative Agent the right to purchase all (but not less than all) of such Lender's Commitments and Advances owing to it and the Notes held by it and all of its rights and obligations hereunder and under the other Loan Documents at a price equal to the aggregate amount of outstanding Advances owed to such Lender (together with all accrued and unpaid interest and fees owed to such Lender), and (y) to the Company the right to cause an assignment of all (but not less than all) of such Lender's Commitments and Advances owing to it and the Notes held by it and all of its rights and obligations hereunder and under the other Loan Documents to Eligible Assignees, which right may be exercised by the Administrative Agent or the Company, as the case may be, if such Lender refuses to execute any amendment, waiver or consent which requires the written consent of all the Lenders and to which Lenders owed at least 80% of the aggregate unpaid principal amount of Advances or, if no such principal amount is then outstanding, Lenders having at least 80% of the Commitments, the Administrative Agent and the Company have agreed. Each Lender agrees that if the Administrative Agent or the Company, as the case may be, exercises its option hereunder, it shall promptly execute and deliver all agreements and documentation necessary to effectuate such assignment as set forth in Section 9.07. SECTION 9.02. Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telecopy or telex communication) and mailed, telegraphed, telecopied, telexed or delivered, if to any Borrower, at 555 Theodore Fremd Avenue, 144 138 Rye, New York 10580, Attention: Paul Dixon, with a copy to WHX Corporation at its address at 110 East 59th Street, New York, New York 10022, Attention: Stewart E. Tabin; if to any Initial Lender or any Initial Issuing Bank, at its Domestic Lending Office specified opposite its name on Schedule I hereto; if to any other Lender Party, at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender Party; if to the Collateral Agent, at its address at 399 Park Avenue, New York, New York 10043, Attention: Keith Karako; and if to the Administrative Agent, at its address at 399 Park Avenue, New York, New York 10043, Attention: Keith Karako; or, as to any Borrower or the Administrative Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Company and the Administrative Agent. All such notices and communications shall, when mailed, telegraphed, telecopied or telexed, be effective when deposited in the mails, delivered to the telegraph company, transmitted by telecopier or confirmed by telex answerback, respectively, except that notices and communications to any Agent pursuant to Article II, III or VII shall not be effective until received by such Agent. Manual delivery by telecopier of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of an original executed counterpart thereof. SECTION 9.03. No Waiver; Remedies. No failure on the part of any Lender Party or any Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.04. Costs and Expenses. (a) The Borrowers (other than the Canadian Borrower) agree jointly and severally, and the Canadian Borrower agrees, as to the portion thereof attributable to it, its property and to its Borrowing hereunder, to pay on demand (i) all costs and expenses of each Agent in connection with the preparation, execution, delivery, administration, modification and amendment of the Loan Documents (including, without limitation, (A) all due diligence, collateral review, syndication, transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and expenses and (B) the reasonable fees and expenses of counsel for the Administrative Agent with respect thereto, with respect to advising such Agent as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under the Loan Documents, with respect to negotiations with any Loan Party or with other creditors of any Loan Party or any of its Subsidiaries arising out of any Default or any events or circumstances that may give rise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto) and (ii) all costs and expenses of the Administrative Agent in connection with the enforcement of the Loan Documents, whether in any action, suit or litigation, 145 139 or any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for the Administrative Agent and each Lender Party with respect thereto). (b) The Borrowers (other than the Canadian Borrower) agree jointly and severally and the Canadian Borrower agrees, as to the portion thereof attributable to it, its property or its Borrowings hereunder, to indemnify and hold harmless each Agent, each Lender Party and each of their Affiliates and their respective officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Transaction Documents or any of the transactions contemplated thereby or (ii) the actual or alleged presence of Hazardous Materials on any property of any Loan Party or any of its Subsidiaries or any Environmental Action relating in any way to any Loan Party or any of its Subsidiaries, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 9.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors or an Indemnified Party or any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated by the Transaction Documents are consummated. Each Borrower also agrees not to assert any claim against any Agent, any Lender Party or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Facilities, the actual or proposed use of the proceeds of the Advances or the Letters of Credit, the Transaction Documents or any of the transactions contemplated by the Transaction Documents. (c) If any payment of principal of, or Conversion of, any Eurocurrency Rate Advance is made by any Borrower to or for the account of a Lender Party other than on the last day of the Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.07, 2.10(b)(i) or 2.12(d), acceleration of the maturity of the Notes pursuant to Section 6.01 or for any other reason, or if such Borrower fails to make any payment or prepayment or Conversion of an Advance for which a notice of prepayment or Conversion has been given or that is otherwise required to be made, whether pursuant to Section 2.05, 2.07 or 6.01 or otherwise, such Borrower shall, upon demand by such Lender Party (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender Party any amounts required to compensate such Lender Party for any additional losses, 146 140 costs or expenses that it may reasonably incur as a result of such payment or Conversion or such failure to pay or prepay or Convert, as the case may be, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender Party to fund or maintain such Advance. (d) If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it under any Loan Document, including, without limitation, fees and expenses of counsel and indemnities, such amount may be paid on behalf of such Loan Party by the Administrative Agent or any Lender Party, in its sole discretion. (e) Without prejudice to the survival of any other agreement of any Loan Party hereunder or under any other Loan Document, the agreements and obligations of the Borrowers contained in Sections 2.12 and 2.14 and this Section 9.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under any of the other Loan Documents. SECTION 9.05. Right of Set-off. Upon (a) the occurrence and during the continuance of any Event of Default and (b) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Administrative Agent to declare the Notes due and payable pursuant to the provisions of Section 6.01, each Agent and each Lender Party and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and otherwise apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Agent, such Lender Party or such Affiliate to or for the credit or the account of any Borrower against any and all of the Obligations of such Borrower now or hereafter existing under the Loan Documents, irrespective of whether such Agent or such Lender Party shall have made any demand under this Agreement or such Note or Notes and although such obligations may be unmatured. Each Agent and each Lender Party agrees promptly to notify such Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender Party and their respective Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Agent, such Lender Party and their respective Affiliates may have. SECTION 9.06. Binding Effect. This Agreement shall become effective when it shall have been executed by each Borrower and each Agent and the Administrative Agent shall have been notified by each Initial Lender and each Initial Issuing Bank that such Initial Lender and such Initial Issuing Bank has executed it and thereafter shall be binding upon and inure to the benefit of each Borrower, each Agent and each Lender Party and their respective successors and 147 141 assigns, except that no Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender Parties. SECTION 9.07. Assignments and Participations. (a) Each Lender may, and, if demanded by the Company and the Administrative Agent pursuant to Section 9.01(b) with respect to any amendment requiring consent of all of the Lenders as to which such Lender shall not have consented, will, assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment or Commitments, the Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a uniform, and not a varying, percentage of all rights and obligations under and in respect of one or more Facilities, (ii) except in the case of an assignment to a Person that, immediately prior to such assignment, was a Lender or in the case of any Multicurrency Lender, an Affiliate of such Multicurrency Lender or an assignment of all of a Lender's rights and obligations under this Agreement or in the case of an assignment of Term Loan B, all of a Lender's rights and obligations under the Term Loan B Facility, the aggregate amount of the Commitments being assigned to such Eligible Assignee pursuant to such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each such assignment shall be to an Eligible Assignee, (iv) no such assignment shall be permitted without the consent of the Administrative Agent until the Administrative Agent shall have notified the Lender Parties that syndication of the Commitments hereunder has been completed, (v) no such assignments shall be permitted without the consent of the Company and the Administrative Agent to any Lender that would be entitled to demand additional payments pursuant to Section 2.12 or 2.14 if such payments were not required to be made to the assigning Lender immediately prior to such assignment, (vi) each such assignment made as a result of a demand by the Company shall be arranged by the Company after consultation with the Administrative Agent and shall be either an assignment of all of the rights and obligations of the assigning Lender under this Agreement or an assignment of a portion of such rights and obligations made concurrently with another such assignment or other such assignments that together cover all of the rights and obligations of the assigning Lender under this Agreement, (vii) no Lender shall be obligated to make any such assignment as a result of a demand by the Company unless and until such Lender shall have received one or more payments from either the Company or one or more Eligible Assignees in an aggregate amount at least equal to the aggregate outstanding principal amount of the Advances owing to such Lender, together with accrued interest thereon to the date of payment of such principal and all other amounts payable to such Lender under this Agreement and (viii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,500. 148 142 (b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in such Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender or Issuing Bank, as the case may be, hereunder and (ii) the Lender or Issuing Bank assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (other than its rights under Sections 2.12, 2.14 and 9.04 to the extent any claim thereunder relates to an event arising prior to such assignment) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender's or Issuing Bank's rights and obligations under this Agreement, such Lender or Issuing Bank shall cease to be a party hereto). (c) By executing and delivering an Assignment and Acceptance, each Lender Party assignor thereunder and each assignee thereunder confirm to and agree with each other and the other parties thereto and hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender Party makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon any Agent, such assigning Lender Party or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers and discretion as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Issuing Bank, as the case may be. (d) The Administrative Agent, acting for this purpose (but only for this purpose) as the agent of the Company shall maintain at its address referred to in Section 9.02 a 149 143 copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lender Parties and the Commitment under each Facility of, and principal amount of the Advances owing under each Facility to, each Lender Party from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrowers, the Agents and the Lender Parties shall treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender Party and an assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the applicable Borrowers and each other Agent. In the case of any assignment by a Lender, within five Business Days after its receipt of such notice, the applicable Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it under each Facility pursuant to such Assignment and Acceptance and, if any assigning Lender has retained a Commitment hereunder under such Facility, a new Note to the order of such assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A-1, A-2, A-3, A-4 or A-5 hereto, as the case may be. (f) Each Issuing Bank may assign to one or more Eligible Assignees all or a portion of its rights and obligations under the undrawn portion of its Letter of Credit Commitment at any time; provided, however, that (i) except in the case of an assignment to a Person that immediately prior to such assignment was an Issuing Bank or an assignment of all of an Issuing Bank's rights and obligations under this Agreement, the amount of the Letter of Credit Commitment of the assigning Issuing Bank being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) shall in no event be less than $5,000,000 and shall be in an integral multiple of $1,000,000 in excess thereof, (ii) each such assignment shall be to an Eligible Assignee and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with a processing and recordation fee of $3,500. (g) Each Lender Party may sell participations to one or more Persons (other than any Loan Party or any of its Affiliates) in or to all or a portion of its rights and obligations 150 144 under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Note or Notes (if any) held by it); provided, however, that (i) such Lender Party's obligations under this Agreement (including, without limitation, its Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender Party shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrowers, the Agents and the other Lender Parties shall continue to deal solely and directly with such Lender Party in connection with such Lender Party's rights and obligations under this Agreement, (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, postpone any date fixed for any payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or release all or substantially all of the Collateral and (vi) such Lender Party shall give prompt notice to the Administrative Agent of the amount and Persons party to each such participation. (h) Notwithstanding any other provision set forth in this Agreement, any Lender Party may at any time create a security interest in all or any portion of its rights under this Agreement (including, without limitation, the Advances owing to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System. SECTION 9.08. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Manual delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement. SECTION 9.09. No Liability of the Issuing Banks. The Company assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment 151 145 under any Letter of Credit, except that the Company shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Company, to the extent of any direct, but not consequential, damages suffered by the Company that the Company proves were caused by (i) such Issuing Bank's willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft and certificates strictly complying with the terms and conditions of the Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. SECTION 9.10. Release of Collateral. Upon the sale, lease, transfer or other disposition of any item of Collateral of any Loan Party in accordance with the terms of the Loan Documents, the Collateral Agent will, at the Company's expense, execute and deliver to such Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents in accordance with the terms of the Loan Documents. SECTION 9.11. Jurisdiction, Etc. (a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of any New York State court or Federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party, or for recognition or enforcement of any judgment in respect thereof, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by law, in such Federal court. Each Foreign Borrower hereby agrees that service of process in any such action or proceeding brought in any such New York State court or in such Federal court may be made upon the Company, and each Foreign Subsidiary hereby irrevocably appoints the Company its authorized agent to accept such service of process, and agrees that the failure of the Company to give any notice of any such service shall not impair or affect the validity of such service or any judgment rendered in any action or proceeding based thereon. Each Borrower hereby further irrevocably consents to the service of process in any action or proceeding in such courts by the mailing thereof by any party hereto by registered or certified mail, postage prepaid, to such Borrower at its address specified in Section 9.02. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction. 152 146 (b) Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is a party in any New York State or Federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. SECTION 9.13. Judgment. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase Dollars with such other currency at Citibank's principal office in London at 11:00 A.M. (London time) on the Business Day preceding that on which final judgment is given. (b) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in a Foreign Currency into Dollars, the parties agree to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase such Foreign Currency with Dollars at Citibank's principal office in London at 11:00 A.M. (London time) on the Business Day preceding that on which final judgment is given. (c) The obligation of each Borrower in respect of any sum due from it in any currency (the "Primary Currency") to any Lender Party or the Administrative Agent hereunder shall, notwithstanding any judgment in any other currency, be discharged only to the extent that on the Business Day following receipt by such Lender Party or the Administrative Agent (as the case may be), of any sum adjudged to be so due in such other currency, such Lender Party or the Administrative Agent (as the case may be) may in accordance with normal banking procedures purchase the applicable Primary Currency with such other currency; if the amount of the applicable Primary Currency so purchased is less than such sum due to such Lender Party or the Administrative Agent (as the case may be) in the applicable Primary Currency, each Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender Party or the Administrative Agent (as the case may be) against such loss, and if the amount of the applicable Primary Currency so purchased exceeds such sum due to any Lender Party or the Administrative Agent (as the case may be) in the applicable Primary Currency, such Lender Party or the Administrative Agent (as the case may be) agrees to remit to such Borrower such excess. SECTION 9.14. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. 153 147 SECTION 9.15. Substitution of Currency. If a change in any Foreign Currency occurs pursuant to any applicable law, rule or regulation of any governmental, monetary or multi-national authority, this Agreement (including, without limitation, the definition of Eurocurrency Rate) will be amended to the extent determined by the Administrative Agent (acting reasonably and in consultation with the Borrowers and the Multicurrency Lenders) to be necessary to reflect the change in currency and to put the Lenders and the Borrowers in the same position, so far as possible, that they would have been in if no change in such Foreign Currency had occurred. SECTION 9.16. Waiver of Jury Trial. Each of the Borrowers, the Agents and the Lender Parties irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to any of the Loan Documents, the Advances or the actions of any Agent or any Lender Party in the negotiation, administration, performance or enforcement thereof. SECTION 9.17. Power of Attorney. Each Subsidiary of the Company may from time to time authorize and appoint the Company as its attorney-in-fact to execute and deliver (a) any amendment, waiver or consent in accordance with Section 9.01 on behalf of and in the name of such Subsidiary and (b) any notice or other communication hereunder, on behalf of and in the name of such Subsidiary. Such authorization shall become effective as of the date on which such Subsidiary delivers to the Administrative Agent a power of attorney enforceable under applicable law and any additional information to the Administrative Agent as necessary to make such power of attorney the legal, valid and binding obligation of such Subsidiary. 154 148 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. HANDY & HARMAN By ------------------------------------- Title: HANDY & HARMAN OF CANADA, LIMITED By ------------------------------------- Title: HANDY & HARMAN EUROPE LIMITED By ------------------------------------- Title: RIGBY-MARYLAND (STAINLESS) LIMITED By ------------------------------------- Title: INDIANA TUBE DANMARK A/S By ------------------------------------- Title: 155 149 Agents CITICORP USA, INC., as Administrative Agent and as Collateral Agent By ------------------------------------------ Title: Initial Lenders CITIBANK, N.A., as the Initial Issuing Bank and as Initial Lender By ------------------------------------------ Title: NATIONSBANK, N.A. By ------------------------------------------ Title: 156 150 PNC BANK, N.A. By ------------------------------------------ Title: THE ROYAL BANK OF SCOTLAND PLC. By ------------------------------------------ Title: BHF-BANK AKTIENGESELLSCHAFT By ------------------------------------------ Title: By ------------------------------------------ Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By ------------------------------------------ Title: By ------------------------------------------ Title: 157 151 COMERICA BANK By ------------------------------------------ Title: DEN DANSKE BANK AKTIESELSKAB, CAYMAN ISLANDS BRANCH By ------------------------------------------ Title: By ------------------------------------------ Title: FLEET PRECIOUS METALS INC. By ------------------------------------------ Title: GENERAL ELECTRIC CAPITAL CORPORATION By ------------------------------------------ Title: KZH-ING-3 CORPORATION By ------------------------------------------ Title: 158 152 KEYBANK, N.A. By ------------------------------------------ Title: KZH-SOLEIL-2 CORPORATION By ------------------------------------------ Title: MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By ------------------------------------------ Title: MASSMUTUAL HIGH YIELD PARTNERS II, LLC By: HYP MANAGEMENT, INC., as managing member By ------------------------------------------ Title: ROYAL BANK OF CANADA By ------------------------------------------ Title: 159 1 EXHIBIT A-1 FORM OF TERM A NOTE $_______________ Dated: _________ __, ____ FOR VALUE RECEIVED, the undersigned, Handy & Harman, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________ _______________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the principal amount of the Term A Advance (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein, unless otherwise defined herein, being used herein as therein defined) among the Borrower, certain other borrowers parties thereto, the Lender and certain other lender parties party thereto, Citicorp USA, Inc. ("Citicorp"), as Collateral Agent, and Citicorp, as Administrative Agent for the Lender and such other lender parties, on the dates and in the amounts specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of the Term A Advance from the date of such Term A Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citicorp, as Administrative Agent, at its account with Citibank at its office at Two Penn's Way, Suite 200, New Castle, Delaware 19720, in same day funds. The Term A Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto, which is part of this Promissory Note; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the Obligations of the Borrower under this Promissory Note. 160 2 This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of a single advance (the "Term A Advance") by the Lender to the Borrower in an amount not to exceed the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from such Term A Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of the Borrower under this Promissory Note and the other Loan Documents, and the obligations of the other Loan Parties under the Loan Documents, are guaranteed and are secured by the Collateral, in each case as provided in the Loan Documents. HANDY & HARMAN By ------------------------------------------ Title: 161 ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of Unpaid Amount of Principal Paid Principal Notation Date Advance or Prepaid Balance Made By - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ ================== ======================== ======================== ========================= ========================
162 EXHIBIT A-2 FORM OF TERM B NOTE $_______________ Dated: _________ __, ____ FOR VALUE RECEIVED, the undersigned, Handy & Harman, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY _________________________ or its registered assigns (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the principal amount of the Term B Advance (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein, unless otherwise defined herein, being used herein as therein defined) among the Borrower, certain other borrowers parties thereto, the Lender and certain other lender parties party thereto, Citicorp USA, Inc. ("Citicorp"), as Collateral Agent, and Citicorp, as Administrative Agent for the Lender and such other lender parties, on the dates and in the amounts specified in the Credit Agreement. The Borrower promises to pay to ______ or its registered assigns interest on the unpaid principal amount of the Term B Advance from the date of such Term B Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citicorp, as Administrative Agent, at its account with Citibank at its office at Two Penn's Way, Suite 200, New Castle, Delaware 19720, in same day funds. The Term B Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto, which is part of this Promissory Note; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the Obligations of the Borrower under this Promissory Note. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of a single advance (the "Term B Advance") by the Lender to the Borrower in an amount not to exceed the Dollar amount first above mentioned, the indebtedness of the Borrower 163 2 resulting from such Term B Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of the Borrower under this Promissory Note and the other Loan Documents, and the obligations of the other Loan Parties under the Loan Documents, are guaranteed and are secured by the Collateral, in each case as provided in the Loan Documents. HANDY & HARMAN By ---------------------------------------- Title: 164 ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of Unpaid Amount of Principal Paid Principal Notation Date Advance or Prepaid Balance Made By - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ ================== ======================== ======================== ========================= ========================
165 EXHIBIT A-3 FORM OF DELAYED DRAW NOTE $_______________ Dated: _________ __, ____ FOR VALUE RECEIVED, the undersigned, Handy & Harman, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the aggregate principal amount of the Delayed Draw Advances (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein, unless otherwise defined herein, being used herein as therein defined) among the Borrower, certain other borrowers parties thereto, the Lender and certain other lender parties party thereto, Citicorp USA, Inc. ("Citicorp"), as Collateral Agent, and Citicorp, as Administrative Agent for the Lender and such other lender parties, on the Termination Date. The Borrower promises to pay interest on the unpaid principal amount of each Delayed Draw Advance from the date of such Delayed Draw Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citicorp, as Administrative Agent, at its account with Citibank at its office at Two Penn's Way, Suite 200, New Castle, Delaware 19720 in same day funds. Each Delayed Draw Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto, which is part of this Promissory Note; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the Obligations of the Borrower under this Promissory Note. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of advances (the "Delayed Draw Advances") by the Lender to the Borrower from time to time in an aggregate amount not to exceed the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Delayed Draw Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of 166 2 the Borrower under this Promissory Note and the other Loan Documents, and the obligations of the other Loan Parties under the Loan Documents, are guaranteed and are secured by the Collateral, in each case as provided in the Loan Documents. HANDY & HARMAN By ---------------------------------------- Title: 167 3 ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of Unpaid Amount of Principal Paid Principal Notation Date Advance or Prepaid Balance Made By - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ ================== ======================== ======================== ========================= ========================
168 EXHIBIT A-4 FORM OF MULTICURRENCY NOTE Dated: _________ __, ____ FOR VALUE RECEIVED, the undersigned, _________________________, a __________ corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the aggregate principal amount of the Multicurrency Advances (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein, unless otherwise defined herein, being used herein as therein defined) among the Borrower, certain other borrowers parties thereto, the Lender and certain other lender parties party thereto, Citicorp USA, Inc. ("Citicorp"), as Collateral Agent, and Citicorp, as Administrative Agent for the Lender and such other lender parties, on the Termination Date. The Borrower promises to pay interest on the unpaid principal amount of each Multicurrency Advance from the date of such Multicurrency Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in the currency of the applicable Multicurrency Advance at the applicable Payment Office in same day funds. Each Multicurrency Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto, which is part of this Promissory Note; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the Obligations of the Borrower under this Promissory Note. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of advances (the "Multicurrency Advances") by the Lender to the Borrower from time to time, the indebtedness of the Borrower resulting from each such Multicurrency Advance being evidenced by this Promissory Note, (ii) contains provisions for determining the Dollar Equivalent of Multicurrency Advances denominated in Foreign Currencies, and (iii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The obligations of the Borrower under this Promissory Note and 169 2 the other Loan Documents, and the obligations of the other Loan Parties under the Loan Documents, are guaranteed and are secured by the Collateral, in each case as provided in the Loan Documents. [NAME OF BORROWER] By ------------------------------------- Title: 170 ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of Unpaid Amount of Principal Paid Principal Notation Date Advance or Prepaid Balance Made By - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ ================== ======================== ======================== ========================= ========================
171 EXHIBIT A-5 FORM OF REVOLVING CREDIT NOTE $_______________ Dated: _________ __, ____ FOR VALUE RECEIVED, the undersigned, Handy & Harman, a New York corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the aggregate principal amount of the Revolving Credit Advances (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein, unless otherwise defined herein, being used herein as therein defined) among the Borrower, certain other borrowers parties thereto, the Lender and certain other lender parties party thereto, Citicorp USA, Inc. ("Citicorp"), as Collateral Agent, and Citicorp, as Administrative Agent for the Lender and such other lender parties, on the Termination Date. The Borrower promises to pay interest on the unpaid principal amount of each Revolving Credit Advance from the date of such Revolving Credit Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citicorp, as Administrative Agent, at its office at Citibank at its office at Two Penn's Way, Suite 200, New Castle, Delaware 19720 in same day funds. Each Revolving Credit Advance owing to the Lender by the Borrower and the maturity thereof, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto, which is part of this Promissory Note; provided, however, that the failure of the Lender to make any such recordation or endorsement shall not affect the Obligations of the Borrower under this Promissory Note. This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of advances (the "Revolving Credit Advances") by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Credit Advance being evidenced by this Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein 172 2 specified. The obligations of the Borrower under this Promissory Note and the other Loan Documents, and the obligations of the other Loan Parties under the Loan Documents, are guaranteed and are secured by the Collateral, in each case as provided in the Loan Documents. HANDY & HARMAN By ---------------------------------------- Title: 173 ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of Unpaid Amount of Principal Paid Principal Notation Date Advance or Prepaid Balance Made By - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ - ------------------ ------------------------ ------------------------ ------------------------- ------------------------ ================== ======================== ======================== ========================= ========================
174 EXHIBIT A-6 FORM OF DRAFT DUE___________________ No. BA___ Toronto, Canada ------------, ---- ON ______________________________, (WITHOUT GRACE), FOR VALUE RECEIVED PAY TO THE ORDER OF THE UNDERSIGNED DRAWER THE SUM OF $_______________________________________________________ CANADIAN DOLLARS TO: [NAME OF BANK] [NAME OF CANADIAN BORROWER] PER:_____________________________ Authorized Signatory 175 EXHIBIT B-1 FORM OF NOTICE OF BORROWING Citicorp USA, Inc., as Administrative Agent under the Credit Agreement referred to below Two Penn's Way New Castle, Delaware 19720 [Date] Attention: _______________ Ladies and Gentlemen: The undersigned, [Name of Borrower], refers to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; the terms defined therein being used herein as therein defined), among the undersigned, certain other borrowers parties thereto, the Lender Parties party thereto, Citicorp USA, Inc. ("Citicorp"), as Collateral Agent, and Citicorp, as Administrative Agent for the Lender Parties, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is _________ __, ____. (ii) The Facility under which the Proposed Borrowing is requested is the _______________ Facility. (iii) The Type of Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurocurrency Rate Advances][Local Rate Advances]. (iv) The aggregate amount of the Proposed Borrowing is [$__________] [for a Multicurrency Borrowing, list currency and amount of such Multicurrency Borrowing]. [(v) The initial Interest Period for each Eurocurrency Rate Advance made as part of the Proposed Borrowing is __________ month[s].] 176 2 The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in each Loan Document are correct on and as of the date of the Proposed Borrowing, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, other than any such representations or warranties that, by their terms, refer to a specific date other than the date of the Proposed Borrowing, in which case, as of such specific date. (B) no Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom. (C) if the Proposed Borrowing consists of a Revolving Credit Borrowing or a Multicurrency Borrowing, the sum of the Loan Values of the Eligible Collateral exceeds the aggregate principal amount of the Revolving Credit Advances plus Swing Line Advances plus Letter of Credit Advances to be outstanding plus Multicurrency Advances plus the Available Amount of all Letters of Credit then outstanding plus the Face Amount of all Bankers' Acceptances then outstanding after giving effect to the Proposed Borrowing. Manual delivery of an executed counterpart of this Notice of Borrowing by telecopier shall be effective as delivery of an original executed counterpart of this Notice of Borrowing. Very truly yours, [NAME OF BORROWER] By ------------------------------------- Title: 177 EXHIBIT B-2 TO THE CREDIT AGREEMENT FORM OF NOTICE OF DRAWING Citicorp USA, Inc., as Collateral and Administrative Agent under the Credit Agreement referred to below Attention: --------------------------- Ladies and Gentlemen: The undersigned, Handy & Harman of Canada, Limited, a corporation organized under the laws of Ontario, Canada, refers to the Credit Agreement dated as of July 30, 1997 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"; terms defined therein, unless otherwise defined herein, being used herein as therein defined) among the undersigned, certain other borrowers parties thereto, the Initial Lenders named therein, the Initial Issuing Banks named therein, and Citicorp USA, Inc., as Collateral Agent and Administrative Agent, and hereby gives you notice, irrevocably, pursuant to Section 2.04 of the Credit Agreement that the undersigned hereby requests a Drawing under the Credit Agreement and, in that connection, sets forth below the information relating to such Drawing (the "Proposed Drawing") as required by Section 2.04(a) of the Credit Agreement: (i) The Business Day of the Proposed Drawing is , . (ii) The aggregate Face Amount of the Proposed Drawing is CN$______. (iii) The initial Maturity Date for each Banker's Acceptance comprising part of the Proposed Drawing is [one][two][three][six] months. The undersigned hereby certifies that the following statements are true on the date hereof and will be true on the date of the Proposed Drawing: (A) the representations and warranties contained in each Loan Document are complete and correct on and as of the date of the Proposed Drawing, before and after giving effect to such Proposed Drawing and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations and warranties that, by their terms, refer to a specific date other than the date of the Proposed Drawing, in which case, as of such specific date; (B) no event has occurred and is continuing, or would result from the Proposed 178 2 Drawing or from the application of the proceeds therefrom, that constitutes a Default, and (C) the sum of the Loan Values of the Eligible Collateral exceeds the aggregate principal amount of the Revolving Credit Advances plus Swing Line Advances plus Letter of Credit Advances plus Multicurrency Advances to be outstanding plus the Available Amount of all Letters of Credit then outstanding plus the Face Amount of all Bankers' Acceptances to be outstanding after giving effect to the Proposed Drawing. Very truly yours, HANDY & HARMAN OF CANADA LIMITED By: ---------------------------- Name: Title: 179 EXHIBIT C FORM OF ASSIGNMENT AND ACCEPTANCE Reference is made to the Credit Agreement dated as of July 30, 1998 (as amended, amended and restated, supplemented or otherwise modified from time to time, the "Credit Agreement"; the terms defined therein, unless otherwise defined herein, being used herein as therein defined) among Handy & Harman, a New York corporation, certain other borrowers parties thereto, the Lender Parties party thereto, Citicorp USA, Inc., as Collateral Agent, and Citicorp USA, Inc., as Administrative Agent for the Lender Parties. Each "Assignor" referred to on Schedule 1 hereto (each, an "Assignor") and each "Assignee" referred to on Schedule 1 hereto (each, an "Assignee") agrees severally with respect to all information relating to it and its assignment hereunder and on Schedule 1 hereto as follows: 1. Such Assignor hereby sells and assigns, without recourse except as to the representations and warranties made by it herein, to such Assignee, and such Assignee hereby purchases and assumes from such Assignor, an interest in and to such Assignor's rights and obligations under the Credit Agreement as of the date hereof equal to the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement Facility or Facilities specified on Schedule 1 hereto. After giving effect to such sale and assignment, such Assignee's Commitments and the amount of the Advances owing to such Assignee will be as set forth on Schedule 1 hereto. 2. Such Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest or interests being assigned by it hereunder and that such interest or interests are free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, any Loan Document or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note or Notes held by such Assignor and requests that the Administrative Agent exchange such Note or Notes for a new Note or Notes payable to the order of such Assignee in an amount equal to the Commitments assumed by such Assignee pursuant hereto or new Notes payable to the order of such Assignee in an amount equal to the Commitments assumed by such Assignee pursuant hereto and such Assignor in an amount equal to the Commitments retained by such Assignor under the 180 2 Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. Such Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon any Agent, any Assignor or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes each Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Loan Documents as are delegated to such Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender Party; and (vi) attaches any U.S. Internal Revenue Service forms required under Section 2.14 of the Credit Agreement. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Administrative Agent, unless otherwise specified on Schedule 1 hereto. 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) such Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender Party thereunder and (ii) such Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement (other than its rights and obligations under the Loan Documents that are specified under the terms of such Loan Documents to survive the payment in full of the Obligations of the Loan Parties under the Loan Documents to the extent any claim thereunder relates to an event arising prior to the Effective Date of this Assignment and Acceptance) and, if this Assignment and Acceptance covers all of the remaining portion of the rights and obligations of such Assignor under the Credit Agreement, such Assignor shall cease to be a party thereto. 6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to such Assignee. Such Assignor and such Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 181 3 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Manual delivery of an executed counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall be effective as delivery of an original executed counterpart of this Assignment and Acceptance. IN WITNESS WHEREOF, each Assignor and each Assignee have caused Schedule 1 to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon. 182 SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE
ASSIGNOR Revolving Credit Facility 1Percentage interest assigned % % % % % - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Revolving Credit Commitment assigned $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Aggregate outstanding principal amount of Revolving Credit Advances assigned $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Principal amount of Revolving Credit Note payable to Assignor $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Term Facility - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- 2Percentage interest assigned % % % % % - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Term Commitment assigned $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Outstanding principal amount of Term Advance assigned $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Principal amount of Term Note payable to Assignor $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Letter of Credit Facility - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Letter of Credit Commitment assigned $ $ $ $ $ - --------------------------------------------------------- ----------- ---------- ------------ ----------- ------------- Letter of Credit Commitment retained $ $ $ $ $ ========================================================= =========== =========== ============= =========== ============
- -------- 1 If Nonratable Assignments are not permitted, the percentage interest assigned by an Assignor must be the same for all Facilities (other than the Letter of Credit Facility). 2 See footnote 1. 183 2
ASSIGNEE - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Revolving Credit Facility - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- 3Percentage interest assumed % % % % % - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Revolving Credit Commitment assumed $ $ $ $ $ - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Aggregate outstanding principal amount of Revolving Credit Advances assumed $ $ $ $ $ - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Principal amount of Revolving Credit Note payable to Assignee $ $ $ $ $ - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Term Facility - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- 4Percentage interest assumed % % % % % - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Term Commitment assumed $ $ $ $ $ - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Outstanding principal amount of Term Advance assumed $ $ $ $ $ - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Principal amount of Term Note payable to Assignee $ $ $ $ $ - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Letter of Credit Facility - -------------------------------------------------------- ----------- ----------- ------------- ---------- ------------- Letter of Credit Commitment assumed $ $ $ $ $ ========================================================= =========== =========== ============= =========== ============
- -------- 3 If Nonratable Assignments are not permitted, the percentage interest assumed by an Assignee must be the same for all Facilities (other than the Letter of Credit Facility). 4 See footnote 4. Handy & Harman Credit Agreement 184 3 Effective Date (if other than date of acceptance by Administrative Agent): 5_________ __, ____ Assignors ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ - -------- 5 This date should be no earlier than five Business Days after the delivery of this Assignment and Acceptance to the Administrative Agent. 185 4 ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ Domestic Lending Office: Eurocurrency Lending Office: 186 5 ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ Domestic Lending Office: Eurocurrency Lending Office: ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ Domestic Lending Office: Eurocurrency Lending Office: ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ Domestic Lending Office: Eurocurrency Lending Office: 187 6 ______________________, as Assignor By________________________________________ Title: Dated: _________ __, ____ Domestic Lending Office: Eurocurrency Lending Office: Accepted 6[and Approved] this ____ day of ___________, ____ CITICORP USA, INC., as Administrative Agent By_________________________________ Title: 7[Approved this ____ day of _____________, ____ HANDY & HARMAN By_________________________________ Title: ] - -------- 6 Required if the Assignee is an Eligible Assignee solely by reason of clause (a)(viii) or (b) of the definition of "Eligible Assignee". 7 See footnote 6. EX-10.9 4 AMENDMENT #4 TO MANAGEMENT AGREEMENT 1 AMENDMENT NO. 4 TO MANAGEMENT AGREEMENT AMENDMENT NO. 4 dated as of April 13, 1998 to the Management Agreement dated as of January 3, 1991, as amended by Amendment No. 1 dated as of January 1, 1993, by Amendment No. 2 dated as of April 11, 1994, and as further amended by Amendment No. 3 dated as of April 1, 1996 (as amended, the "Management Agreement"), each by and between WPN Corp. ("WPN"), a New York corporation having an office at 342 Madison Avenue, Suite 1510, New York, New York 10173-1510 and WHX Corporation (the "Company"), a Delaware corporation having an office at 110 East 59th Street, New York, New York 10022, pursuant to its assumption of the Management Agreement from Wheeling-Pittsburgh Corporation ("WPC") under the terms of the Contribution and Assumption Agreement dated as of July 26, 1994 between WPC and the Company. W I T N E S S E T H : WHEREAS, Handy & Harman ("H&H") is a wholly-owned subsidiary of the Company; and WHEREAS, H&H and the Company have entered into a Management Agreement dated as of April 13, 1998 (the "H&H Management Agreement"), pursuant to which the Company has caused and will continue to cause WPN to provide certain management, advisory and consulting services to H&H and its subsidiaries and 2 H&H has agreed to pay to the Company $62,500 per month for an aggregate annual payment of $750,000; and WHEREAS, in consideration for WPN's increased duties under the H&H Management Agreement, the parties wish to increase the compensation paid to WPN under the terms of the Management Agreement as provided herein. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 3.01 of the Management Agreement is hereby amended in its entirety effective as of April 13, 1998 to read as follows: 3.01 The Company shall pay WPN a fixed monthly fee of $520,833.33 in advance on the first day of each month. 2. Except as modified above, the terms and conditions of the Management Agreement are hereby confirmed and shall remain in full force and effect. IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 4 as of the date first above written. WPN CORP. By: /s/ Ronald LaBow -------------------------------- Ronald LaBow, President WHX CORPORATION By:/s/ Howard Mileaf -------------------------------- Howard Mileaf Vice President - General Counsel -2- EX-10.13 5 WPN CORP. STOCK OPTION GRANT LETTER 1 WHEELING-PITTSBURGH CORPORATION 110 East 59th Street New York, New York 10022 July 29, 1993 To: WPN Corp. 217 Stonehill Road Pound Ridge, NY 10576 We are pleased to inform you that on July 29, 1993 the Board of Directors of Wheeling-Pittsburgh Corporation (the "Company") granted you, subject to stockholder approval of the grant within one (1) year of July 29, 1993, non-qualified stock options, to purchase 600,000 shares (the "Shares") of Common Stock, par value $.01 per share, of the Company, at a price of $10.875 per Share. No part of the option is currently exercisable. The option may first be exercised with respect to 33.33% of the Shares at any time on or after the date of shareholder approval of this option grant which is expected to be no later than the next annual meeting of stockholders to be held in 1994 (the "Approval Date"). The option may be exercised with respect to an additional 33.33% of the Shares at any time on or after the 1995 anniversary of the Approval Date. The option may be exercised with respect to the remaining 33.34% of the Shares at any time on or after the 1996 anniversary of the Approval Date. You must purchase a minimum of 50 Shares or more (but not fractional shares) each time you choose to purchase Shares, except to purchase the remaining Shares available to you. This option, to the extent not previously exercised, will expire on April 29, 2003. Unless at the time of the exercise of this option a registration statement under the Securities Act of 1933, as amended (the "Act"), is in effect as to such Shares, any Shares purchased by you upon the exercise of this option shall be acquired for investment and not for sale or distribution, and if the Company so requests, upon any exercise of this option, in whole or in part, you will execute and deliver to the Company a certificate to such effect. The Company shall not be obligated to issue any Shares pursuant to this option if, in the opinion of counsel to the Company, the Shares to be so issued are required to be registered or otherwise qualified under the Act or under any other applicable statute, regulation or ordinance affecting 2 the sale of securities, unless and until such Shares have been so registered or otherwise qualified. You understand and acknowledge that, under existing law, unless at the time of the exercise of this option a registration statement under the Act is in effect as to such Shares (i) any Shares purchased by you upon exercise of this option may be required to be held indefinitely unless such Shares are subsequently registered under the Act or an exemption from such registration is available; (ii) any sales of such Shares made in reliance upon Rule 144 promulgated under the Act may be made only in accordance with the terms and conditions of that Rule (which, under certain circumstances, restrict the number of shares which may be sold and the manner in which shares may be sold); (iii) in the case of securities to which Rule 144 is not applicable, compliance with Regulation A promulgated under the Act or some other disclosure exemption will be required; (iv) certificates for Shares to be issued to you hereunder shall bear a legend to the effect that the Shares have not been registered under the Act and that the Shares may not be sold, hypothecated or otherwise transferred in the absence of an effective registration statement under the Act relating thereto or an opinion of counsel satisfactory to the Company that such registration is not required; (v) the Company will place an appropriate "stop transfer" order with its transfer agent with respect to such Shares; and (vi) the Company has undertaken no obligation to register the Shares or to include the Shares in any registration statement which may be filed by it subsequent to the issuance of the shares to you. In addition, you understand and acknowledge that the Company has no obligation to you to furnish information necessary to enable you to make sales under Rule 144. This option (or installment thereof) is to be exercised by delivering to the Company a written notice of exercise in the form attached hereto as Exhibit A, specifying the number of Shares to be purchased, together with payment of the purchase price of the Shares to be purchased. The purchase price is to be paid in cash or, at the discretion of the Stock Option Committee, by delivering shares of the Company's stock already owned by you and having a fair market value on the date of exercise equal to the exercise price of the option, or a combination of such shares and cash, or otherwise in accordance with the Plan. Would you kindly evidence your acceptance of this option and your agreement to comply with the provisions hereof -2- 3 and of the Plan by executing this letter under the words "Agreed To and Accepted." Very truly yours, WHEELING-PITTSBURGH CORPORATION By: /s/ Francis P. Massco --------------------------------- Francis P. Massco, Vice President AGREED TO AND ACCEPTED: WPN CORP. /s/ Ronald LaBow - ---------------- Ronald LaBow -3- 4 EXHIBIT A --------- Wheeling-Pittsburgh Corporation 110 East 59th Street New York, New York 10022 Gentlemen: Notice is hereby given of my election to purchase ______ shares of Common Stock, $.01 par value (the "Shares"), of Wheeling-Pittsburgh Corporation at a price of $10.875 per Share, pursuant to the provisions of the option granted to me on July 29, 1993. Enclosed in payment for the Shares is: / / my check in the amount of $________. */ / __________________ Shares having a total value $______________, such value being based on the closing price(s) of the Shares on the date hereof. The following information is supplied for use in issuing and registering the Shares purchased hereby: Number of Certificates and Denominations ___________________ Name ___________________ Address ___________________ ------------------- ------------------- Social Security Number ___________________ Dated: _______________, 19__ Very truly yours, -------------------------- *Subject to the approval of the Stock Option Committee -4- EX-10.16 6 EMPLOYMENT AGREEMENT: A. NANCE 1 EMPLOYMENT AGREEMENT This Agreement (the "Agreement"), dated as of May 1, 1998, will confirm that Handy & Harman, a New York corporation (the "Company") has offered, and you have accepted, the position of Vice President, Planning and Development of the Company. 1. The term of your employment shall be from May 1, 1998 through May 1, 1999, subject to earlier termination pursuant to the provisions set forth below. After expiration of the term, unless the Agreement is extended or a new employment agreement is entered into with the Company, you shall be an employee at-will and entitled to all of the benefits including severance under the Company's then applicable policies. 2. You agree to use your best efforts to promote the interest of the Company and devote your full business time and energies to the business and affairs of the Company. You agree to perform such services as are customary to your position and as shall from time to time be assigned to you by the Board of Directors of the Company. 3. Your annual base salary shall be no less than $210,000, less applicable federal, state and local tax deductions, payable in accordance with the Company's customary payroll practices. Any increases in your annual salary shall be in the sole discretion of the Company's Board of Directors. 4. (a) You shall be eligible to participate in the following compensation plans that may be offered from time to time by the Company, in accordance with the terms and provisions of such plans and their successors and assigns and subject to the discretion of the Company's Board of Directors: the Handy & Harman Management Incentive Plan (the "Bonus 2 Plan"), the Handy & Harman Long-Term Incentive Plan (the "Incentive Plan"), and WHX Corporation's (the "Parent Company") 1991 Incentive and Non-Qualified Stock Option Plan (the "Option Plan") in each case as described below. (b) You shall be eligible to participate in the Bonus Plan beginning in respect of the 1998 plan year; provided, however, that any bonus amounts payable thereunder are contingent upon the Company's attainment of performance goals established by the Company's Board of Directors in its sole discretion. (c) You shall be eligible to participate in the Incentive Plan in respect of the future cycles from the date hereof; provided, however, that any awards granted and any amounts payable thereunder are contingent upon the Company's attainment of performance goals established by the Company's Board of Directors. (d) You shall be granted, effective as of April 23, 1998, options (the "Options") to purchase 100,000 shares of common stock of the Parent Company pursuant to the Option Plan. The Options shall (i) be granted under, and subject to the terms of, the Option Plan, (ii) have a ten (10) year term (subject to earlier termination as provided in the Option Plan and the form of grant agreement thereunder), (iii) vest and become exercisable with respect to one-third of the shares of common stock subject thereto on each of the first three (3) anniversaries of the date of grant and (iv) have an exercise price per share of common stock equal to the fair market value of the common stock as of April 23, 1998. 5. (a) You shall be eligible to participate in all Company employee benefit plans and programs which are made generally available to salaried employees of the Company, in accordance with the terms and provisions of such plans. -2- 3 (b) You shall be eligible to participate in the Handy & Harman Supplemental Executive Retirement Plan and the Handy & Harman Executive Life Insurance and Post-Retirement Life Insurance Program, in each case in accordance with the terms and provisions of such plans. (c) The Company shall reimburse you for annual financial, estate and tax planning and tax preparation expenses up to a maximum of 3% of your annual base salary in effect on January 1 of the tax year. (d) You shall be provided with a Company-owned automobile in accordance with the Company's existing policies and procedures in place for other executive officers of the Company. 6. (a) The Company shall reimburse you for all reasonable business expenses incurred by you in accordance with the Company's policies on reimbursement for business expenses as then in effect. (b) The Company shall reimburse you for annual membership fees and expenses with respect to your membership in one country club selected by you. (c) You and your spouse shall be entitled to receive post-retirement health insurance benefits from the Company under the Company's Post-Retirement Medical Plan in effect for employees of the Company prior to 1992 on such terms and conditions in place for other employees covered by the Plan. 7. (a) The Company may terminate your employment at any time, without prior notice, for any of the following reasons: (i) your engaging in conduct which is materially injurious to the Company or the Parent Company, their subsidiaries or affiliates, or any of their -3- 4 respective customer or supplier relationships, monetarily or otherwise; (ii) your engaging in any act of fraud, misappropriation or embezzlement or any act which would constitute a felony (other than minor traffic violations); or (iii) your material breach of this Agreement. (b) If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties hereunder for at least 120 days within any twelve (12) consecutive months, excluding vacation time actually used in accordance with the Company's policies thereon, your employment may be terminated by the Company, upon written notice in accordance with paragraph 8 hereof without further notice. (c) The Company, in its sole discretion, may terminate your employment at any time for any reason other than those stated in paragraphs 7(a) or 7(b) upon thirty (30) days prior written notice. 8. (a) If your employment is terminated by the Company pursuant to paragraph 7(a), you shall receive your base salary through the date of termination and the Company shall have no further obligations to you under this Agreement. (b) If your employment is terminated by the Company pursuant to paragraph 7(b) or 7(c) or by your death, you or your personal representative, guardian, or the representative of your estate shall be entitled to the following severance and benefits: (i) The Company shall pay you a severance payment (the "Severance Payment") equal to one (1) year's full base salary at your highest rate in effect during the twelve (12) months preceding the date on which the Notice of Termination is given plus any Bonus Plan compensation you have accrued; -4- 5 (ii) The Company shall pay you the Severance Payment starting no later than the thirtieth (30th) day following the date of termination. The Company shall pay the Severance Payment in equal installments over the course of the twelve (12) months following the date of termination. (iii) The Company or the Parent Company shall continue to provide you or your family with life insurance (other than in the event of termination of employment as a result of your death) medical and dental insurance benefits, financial planning and a company-owned automobile, substantially similar to those benefits which you are receiving or entitled to receive prior to your termination of employment, for twelve (12) months following the date of termination. (iv) During the period you are receiving any payments or benefits under paragraph 8(b), you agree to promptly notify the Company and the Parent Company upon your acceptance of any other employment and upon your eligibility for any medical benefits, insurance, financial planning or use of a company-owned vehicle by your new employer, you shall no longer be eligible to participate in the corresponding aspects of the Company's and the Parent Company's benefit plans and arrangements. 9. You shall be entitled to terminate your employment for "Good Reason", which shall mean the occurrence of one of the following circumstances: (i) a reduction in your annual base salary as in effect on the date of such change; (ii) the Company causes the relocation of the office in which you are located prior to the change to a location more than fifty (50) miles from Rye, New York, except for -5- 6 required travel on the business of the Company to an extent substantially consistent with your present business travel obligations; (iii) pursuant to an action taken by the Company, you are selectively excluded from a compensation, bonus, stock option or stock ownership plan otherwise in existence at the time of the change or thereafter put into effect for the benefit of others in a similar situation unless substantially equivalent benefits are provided to you; (iv) except as a required by law, the failure to continue to provide you with benefits at least as favorable as those enjoyed by you under the employee benefit and welfare plans of the Company or the Parent Company in which you were participating at the time of the change or the taking of any action by the Company which would materially reduce any of the benefits enjoyed by you at the time of the change; or (v) the failure of the Company or the Parent Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement. 10. Upon the occurrence of any of the aforestated set forth in Section 9, you shall for Good Reason upon notice pursuant to Section 16 hereof to the Company, if such occurrence is not cured within 30 days of receipt of such notice, be entitled to the following benefits: (a) The Company shall pay you a severance payment (the "Severance Payment") equal to one (1) year's full base salary at your highest rate in effect during the twelve (12) months preceding the date on which the Notice of Termination is given plus any Bonus Plan compensation you have accrued; (b) For a twelve (12) month period after termination of your employment, the Company shall arrange to provide you with life, medical and dental insurance benefits, financial -6- 7 planning and a company-owned automobile substantially similar to those which you are receiving or entitled to receive immediately prior to the Notice of Termination, unless you are eligible to receive such benefits from a subsequent employer; (c) The Company shall pay you the Severance Payment starting no later than the thirtieth (30th) day following the date of termination. The Company shall pay the Severance Payment in equal installments over the course of the twelve (12) months following the date of termination. 11. Your continued employment shall not constitute consent to, or as a waiver of rights with respect to, any circumstance constituting Good Reason hereunder for a period of sixty (60) days following the occurrence of such event, and thereafter such circumstance shall be deemed waived as an event giving rise to a termination pursuant to Section 9. 12. Any termination of your employment by the Company, or by you shall be communicated by written "Notice of Termination" to the other party hereto in accordance with Section 16 hereof. For purposes of this Agreement, a Notice of Termination shall mean a notice indicating the specific termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. Further, you agree that upon termination that you will resign effective as of the date of termination from any and all directorships you may hold in the Company or the Parent Company and their subsidiaries. 13. "Date of Termination" shall mean (30) days after the date specified in the Notice of Termination. -7- 8 14. Arbitration; Certain Costs. Any dispute or controversy between the Company or Parent Company and you, whether arising out of or relating to the Agreement, the breach of the Agreement, or otherwise, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Rules then in effect and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Such arbitration shall take place in the New York City metropolitan area. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and you. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. In the event that it shall be necessary or desirable for you to retain legal counsel and/or incur other costs and expenses in connection with this arbitration provision, and provided that you substantially prevail in the enforcement of such rights, the Company shall pay (or you shall be entitled to recover from the Company, as the case may be) your reasonable attorneys' fees and costs and expenses in connection with any application under this arbitration provision, including the enforcement of any arbitration award, up to $25,000 in the aggregate. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company. -8- 9 15. You have previously executed the Non-Competition Agreement annexed hereto. 16. Any notices required by this Agreement shall be in writing and shall be deemed to have been given when delivered by hand, sent by facsimile (so long as an original is mailed within 24 hours of such facsimile transmission), mailed by United States certified mail, return receipt requested, postage prepaid, or sent by nationally-recognized overnight mail service, as follows: if to you: Mr. Arnold Nance 10 Keeler Court Ridgefield, CT. 06877 if to the Company: 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Paul Dixon Senior Vice President and General Counsel and or to such other address as the parties may furnish to the other in writing in accordance with this paragraph. Notices of change of address shall only be effective upon receipt. 17. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflict of laws principles. 18. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, arrangements and understandings among the Company and you with respect to such subject matter. -9- 10 This Agreement can be modified only by a writing signed by you and the Company. If any provision of this Agreement shall be held to be void or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. This Agreement shall inure to the benefit of and be binding upon the Company's successors and assigns. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. HANDY & HARMAN By: /s/ Paul Dixon ---------------------------------------- Name: Paul Dixon Title: Senior Vice President and General Counsel Agreed to this 1st day of May, 1998 /s/ Arnold Nance - ----------------------------- Arnold Nance -10- 11 Exhibit 10.16 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT AMENDMENT NO. 1 dated as of December __, 1998 to the Employment Agreement dated as of May 1, 1998 (the "Employment Agreement"), by and between Handy & Harman (the "Company"), a New York corporation, and Arnold Nance ("Employee"). W I T N E S S E T H : WHEREAS, Employee is an employee of the Company; and WHEREAS, Employee and the Company have entered into the Employment Agreement, pursuant to which the Company has employed and will continue to employ Employee as Vice President, Planning and Development of the Company; and WHEREAS, in consideration for Employee's performance under the Employment Agreement, the parties wish to amend certain terms of the Employment Agreement to provide for a one-year evergreen renewal, as provided herein. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Section 1 of the Employment Agreement is hereby amended in its entirety effective as of the date hereof to read as follows: 1. The initial term of your employment shall be from May 1, 1998 through May 1, 1999, subject to earlier termination pursuant to the provisions set forth below, and shall automatically be extended for successive one-year terms unless either you or the Company shall advise the other upon not more than 60 days nor less than 30 days notice that such term shall not be renewed; provided that if the Agreement shall not be renewed by the Company, you -1- 12 shall be entitled to the benefits set forth in Section 8(b) hereof as if your employment had been terminated pursuant to Section 7(c) hereof; 2. Except as modified above, the terms and conditions of the Employment Agreement are hereby confirmed and shall remain in full force and effect. IN WITNESS WHEREOF, the parties have duly executed this Amendment No. 1 as of the date first above written. HANDY & HARMAN By: /s/ Robert LeBlanc ---------------------------- Name: Robert LeBlanc Title: President and Chief Executive Officer Agreed to this 21st day of December, 1998 /s/ Arnold Nance - ----------------------- Arnold Nance -2- EX-10.17 7 EMPLOYMENT AGREEMENT: J.G. BRADLEY 1 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT effective as of the 23rd day of April, 1998, by and among WHEELING-PITTSBURGH STEEL CORPORATION ("WPSC"), a Delaware corporation with a principal place of business at 1134 Market Street, Wheeling, West Virginia, 26003, WHX CORPORATION ("WHX"), a Delaware corporation with a principal place of business at 110 East 59th Street, New York, New York, 10022 and WHEELING-PITTSBURGH CORPORATION ("WPC"), a Delaware corporation with a principal place of business at 1134 Market Street, Wheeling, West Virginia, 26003 (WPSC, WHX and WPC are collectively referred to as the "Company") and JAMES G. BRADLEY (the "Executive"). WHEREAS, the Company desires to employ the Executive as the President and Chief Executive Officer of WPSC and the Executive Vice President of WHX and the Executive desires to be employed by the Company upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. EMPLOYMENT. (a) The Company hereby employs the Executive, and the Executive hereby accepts such employment, as President and Chief Executive Officer of WPSC and as Executive Vice President of WHX upon the terms and subject to the conditions contained herein. 2 Immediately following the execution of this Agreement and at all other appropriate times thereafter, WHX, WPC and WPSC shall take all action to elect the Executive as President and Chief Executive Officer of WPSC and Executive Vice President of WHX. (b) Executive agrees that subsequent to the consummation of an underwritten initial public offering under the Securities Act of 1933, as amended (an "Initial Public Offering") of WPC or a "spin-off" or sale of any portion of the shares of Common Stock, or a sale of all or substantially all of the assets, of WPC, Executive will resign as an officer of WHX or in the case of an Initial Public Offering by WPSC or a "spin-off" or sale of any portion of the shares of Common Stock, or a sale of all or substantially all of the assets, of WPSC, as an officer of WPC also. (c) WPSC, WPC and WHX represent and warrant to Executive that this Agreement has been duly and validly authorized and executed by and on behalf of each of them in accordance with their respective Certificate of Incorporation and By-Laws and that this Agreement constitutes the lawful and valid obligation of WPSC, WPC and WHX enforceable against each of WPSC, WPC and WHX in accordance with its terms. 2. DUTIES. (a) The Executive shall perform all duties of the positions referenced in paragraph 1 of this Agreement consistent with the powers and duties of such offices set forth in WPSC's, WPC's or WHX's, as appropriate, By-Laws, as well as any other -2- 3 duties, commensurate with the Executive's positions that are assigned by the Board of Directors of WPSC, WPC or WHX. (b) Throughout his employment hereunder, Executive shall devote his full time, attention, knowledge and skills during reasonable business hours in furtherance of the business of the Company and will faithfully, diligently and to the best of his ability perform the duties described above and further the best interests of the Company. During his employment, the Executive shall not engage, and shall not solicit any employees of the Company or their respective subsidiaries to engage, in any commercial activities which are in any way in competition with the activities of the Company or their respective subsidiaries, or which may in any way interfere with the performance of his duties or responsibilities to the Company. (c) The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions and restrictions as the Company, consistent with Executive's rights and duties under this Agreement, may from time to time establish and those imposed by law. 3. EXECUTIVE COVENANTS. In order to induce the Company to enter into this Employment Agreement, the Executive hereby agrees as follows: (a) Except when disclosure is in the interest of the Company or is compelled by law, or disclosure is consented to or directed by the Chairman or the Board of Directors (the "Board) of WPC, WHX or WPSC, the Executive shall keep confidential and -3- 4 shall not divulge to any other person or entity, during the term of the Executive's employment or thereafter, any of the business secrets or other confidential information regarding the Company or the Company's other subsidiaries which have not otherwise become public knowledge. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, whether or not prepared by the Executive, shall be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company at any time upon request by the Chairman or the Board of WPC, WHX or WPSC. (c) During the term of Executive's employment hereunder, and for a period of one (1) year thereafter, the Executive shall not, without the prior written consent of the Board of WHX (i) participate as a director, stockholder or partner, or have any direct or indirect financial interest as creditor, in any business which directly or indirectly competes, within the United States of America, with the Company or the Company's other subsidiaries which exist as of the date of the termination of this Agreement (the "Existing Subsidiaries"); provided, however, that nothing in this Agreement shall restrict the Executive from holding up to two (2%) percent of the outstanding capital stock or other securities of any publicly traded entity; (ii) solicit any customers of the Company or its Existing Subsidiaries on behalf of himself, or any other person, firm or company; or (iii) directly or indirectly, act in the -4- 5 capacity of an executive officer, employee or in any other capacity for any company or other entity which competes with WPSC in the carbon steel manufacturing industry and which has at least 5% of its annual dollar sales comprised of products which directly compete with the Company's or its Existing Subsidiaries' products; provided, however, that nothing in this paragraph 3(c) shall prevent the Executive from holding or maintaining any positions or interests presently held by him and disclosed to the Board of WHX, or, held by him subsequent hereto with the consent of the Board of WHX. (d) The parties agree that the Executive's services are unique and that any breach or threatened breach of the provisions of this Section 3 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy. Accordingly, the Company shall, in addition to other remedies provided by law, be entitled to such equitable and injunctive relief as may be necessary to enforce the provisions of this Section 3 against the Executive or any other person or entity participating in such breach or threatened breach. Nothing contained herein shall be construed as prohibiting the Company from pursuing any other and additional remedies available to it, at law or in equity, for such breach or threatened breach including any recovery of damages from the Executive or termination of his employment as provided in Paragraph 9(b). 4. BASE SALARY AND BONUSES. As full compensation for Executive's services hereunder and in exchange for his promises -5- 6 contained herein, the Company shall compensate the Executive in the following manner (subject to Paragraph 4(c)): (a) BASE SALARY. The Company shall compensate Executive at the base salary rate of Four Hundred Thousand United States Dollars ($400,000 U.S.) per annum, payable in equal installments on the same basis as other senior salaried officers of the Company. Such annual salary may be increased in the future by such amounts and at such times as the Board of WHX or the Compensation Committee thereof shall deem appropriate in its sole discretion. (b) ANNUAL BONUSES. Beginning with the calendar year 1998 and in each year or portion thereof thereafter during the term of this Agreement, the Board of WHX or the Compensation Committee of WHX shall consider the Executive for a cash performance bonus in accordance with the following terms: The actual amount and timing of such bonus, if any, shall be determined in good faith based on criteria reasonably deemed to be relevant to such determination including, without limitation, the performance of the Executive, bonuses paid to other senior executives of the Company, the overall performance of the Company as measured by guidelines used to determine the bonuses of other senior executives of the Company and transactions effected for the benefit of the Company that are outside of the ordinary course of business and directly or indirectly accomplished through the efforts of the Executive (e.g., business -6- 7 combinations, corporate partnering and other similar transactions). (c) WITHHOLDINGS. The amounts set forth in subparagraphs (a) and (b) above shall be subject to appropriate payroll withholding and any similar deductions required by law. (d) OPTIONS. In connection with the execution of this Agreement, the Executive has been granted stock options ("Options") to purchase 260,000 shares of the common stock, $.01 par value, of WHX pursuant to the WHX 1991 Incentive and Nonqualified Stock Option Plan (the "1991 Option Plan") pursuant to the terms of WHX's standard option agreement, subject to approval by the stockholders of WHX of an increase in the number of shares of common stock with respect to which options may be granted under the 1991 Option Plan. To the maximum extent allowable under the Internal Revenue Code of 1986, as amended, a portion of such options shall be "incentive stock options." (e) INITIAL PUBLIC OFFERING. Upon the consummation of an underwritten initial public offering under the Securities Act of 1933, as amended (an "Initial Public Offering," including for this purpose a "spin-off" that creates publicly traded securities) by WPC or WPSC (or any successor or assign of either entity) during the term of this Agreement, the Executive shall be granted such options and/or awarded such bonus or other payment as shall be determined by the Board of Directors of the Company in its sole discretion. It is the intention of the Company and the Executive to seek to negotiate in good faith the basis for -7- 8 determining such payment by August 31, 1998, however, if the basis is not determined by August 31, 1998, the determination shall remain at the sole discretion of the Board of Directors of the Company. Subject to payment of any obligations required by this Section 4(e), from and after the consummation of the Initial Public Offering or a "spin-off" of any portion of the shares of Common Stock of WPC or WPSC, WHX, and in the case of a "spin-off" of any portion of the Shares of Common Stock of WPSC, WPC and WHX shall be relieved of all obligations under this Agreement, with no further action required by WHX and WPC, as appropriate, to terminate its obligations hereunder. 5. LONG-TERM INCENTIVE PLAN. The Executive shall be entitled to participate, to the extent he is eligible under the terms and conditions thereof, in any stock option plan, stock award plan, omnibus stock plan, or similar incentive plan currently in existence or hereafter established by the Company, in the manner and to the same extent as the Company's other senior executive officers, such participation to include 40,000 options under the 1991 WPC Incentive and Nonqualified Stock Option Plan ("1991 Plan"), which options were granted upon the effectiveness of the Initial Employment Agreement, in accordance with the provisions of the 1991 Plan. Awards to the Executive under any such plan shall be made as provided in such plan and at such times and in such amounts as shall be determined in the sole discretion reasonably exercised of the Board of WHX subject to confirmation by the Board of WHX or the Compensation Committee of -8- 9 WHX (or the Board or Compensation Committee of WPC from and after the consummation of the Initial Public Offering or a "spin-off" of any portion of the shares of Common Stock of WPC or WPSC). Except as provided above, the Executive shall not be entitled to participate in any bonus incentive or similar plan for salaried employees of the Company and Executive's right to receive a bonus shall be exclusively determined by the provisions of Paragraph 4(b) hereof. 6. BENEFIT PLANS. During the term of his employment, the Executive shall be entitled to participate in the Company's management employee benefits and retirement plans, as they are in existence on the date of this Agreement, or as they may be amended or added hereafter, to the same extent as the Company's other senior executive officers. The Company shall be under no obligation solely as a result of this Agreement to institute or continue the existence of any employee benefit plan. 7. OTHER BENEFITS. The Executive shall be provided the following additional benefits: (a) LEASED AUTOMOBILE. A leased Buick, Cadillac, Continental or comparable automobile of United States manufacture for his business and personal use. The Company shall keep such automobile adequately insured and will pay or reimburse the Executive for the cost of maintenance, repair and gasoline for such automobile. (b) CLUB MEMBERSHIPS. Reimbursement of the Executive for the cost of his and his immediate family's membership in one -9- 10 country club and his membership in one business club, and for his business-related use thereof. (c) LEGAL AND TAX ADVICE. In recognition of the Executive's need to carefully consider the terms herein, the reimbursement of Executive for reasonable legal and tax advice, sought by him relative to this Agreement, which is incurred prior to his execution of this Agreement, up to a maximum of Fifteen Thousand United States Dollars ($15,000 U.S.). (d) BUSINESS EXPENSE. Reimbursement of the Executive, upon proper accounting, for reasonable expenses and disbursements incurred by him in the course of the performance of his duties hereunder. (e) VACATION. The Executive shall be entitled to four (4) weeks of vacation each year of this Agreement or such longer period as shall be provided to senior executives of the Company, without reduction in salary. (f) ANNUAL PHYSICAL. The Company shall pay the cost, or reimburse Executive for any cost not covered by health insurance, of one comprehensive physical examination during each year of this Agreement. (g) RELOCATION BENEFIT. Executive shall be entitled to the Company's standard relocation benefit for newly-hired senior executives. 8. PENSION. Provided Executive is in the continuous employ of the Company from the date hereof through age 62, he shall be entitled upon retirement to receive a retirement benefit -10- 11 at the rate of $6,200 per month payable to the Executive for life. In the event of the Executive's death prior to the payment of 120 monthly payments, the payments shall be made to such person as the Executive shall designate to the Company in writing until 120 monthly payments have been made. 9. DURATION AND TERMINATION. (a) DURATION. The term of this Agreement shall commence on the date hereof and shall terminate on the third anniversary hereof and shall automatically be extended for successive three-year terms unless earlier terminated pursuant to the provisions hereof, provided that the Company or the Executive shall each have the right to terminate this Agreement at the end of the initial term or any succeeding term on not less than sixty (60) days prior written notice to the other party (in which event all rights and benefits of Executive hereunder other than the pension benefit under Section 8 and except as provided in this Section 9 shall cease upon such termination's effective date). Upon termination of this Agreement for any reason, the Executive shall be deemed to have resigned from all offices and director positions with the Company and its Existing Subsidiaries. (b) TERMINATION AT ANY TIME BY COMPANY. This Agreement shall be terminable by the Company at any time for any reason, including death or Disability (as hereinafter defined) of the Executive, upon not less than 30 days' prior written notice to the Executive and all rights and benefits of the Executive hereunder (other than those arising under Section 10 hereof) -11- 12 shall cease, except that the Executive will have the right to receive from the Company (i) a payment of One Million and Two Hundred Thousand Dollars ($1,200,000) within thirty (30) days of delivery of the notice of termination or within sixty (60) days of the date of death or Disability of the Executive (the "Termination Payment"), (ii) all amounts accrued but unpaid hereunder up to and including the date of termination including, without limitation, any pro rata portion of the Executive's salary or bonus remaining unpaid as of the date of termination, (iii) the pension benefit under Section 8 if vested at the date of his termination and (iv) the continuation of all medical insurance provided to the Executive as contemplated by Section 6 hereof for a period of one (1) year following the termination date. Notwithstanding the foregoing, if the Company terminates this Agreement "for cause", then no Termination Payment shall be made to the Executive and all rights, benefits and obligations of the Executive under this Agreement shall cease, except for the Executive's rights under Sections 9(b)(ii), 9(b)(iii) and 10 hereof and the pension benefit under Section 8 if vested at the date of termination. "For cause" shall mean: (i) the Executive's willful and material breach in respect of his duties under this Agreement if such breach continues unremedied for thirty (30) days after written notice thereof from the Board of WPC, WHX or WPSC to the Executive specifying the acts constituting the breach and requesting that they be remedied; or (ii) the Executive is convicted or pleads guilty to a felony, -12- 13 during the employment period other than for conduct undertaken in good faith in furtherance of the interests of the Company. "Disability" shall mean that due to illness, accident or other physical or mental incapacity, the Board of WPC, WHX or WPSC has in good faith determined that the Executive is unable to substantially perform his usual and customary duties under this Agreement for more than four (4) consecutive months or six (6) months in any calendar year. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to Disability prior to the Executive's termination, the Executive shall continue to receive his full base salary, together with all benefits provided in this Agreement. (c) RIGHTS OF TERMINATION BY EXECUTIVE. The Executive shall have the right, by written notice to the Company, to elect to terminate this Agreement within sixty (60) days following a Change of Control (as defined below) or if the Executive (i) is demoted (other than his removal as an officer or director of WHX), or (ii) no longer holds the office of President or Chief Executive Officer of WPSC. In the event that Executive makes such election, the Executive shall be entitled to receive from the Company the items set forth in Paragraph 9(b)(i) through 9(b)(iv) within sixty (60) days of receipt by the Company of a written notice of Executive's election. (d) CHANGE IN CONTROL. For the purposes of this Agreement, a "Change in Control" means (i) the, direct or -13- 14 indirect, sale, lease, exchange or other transfer of all or substantially all (50% or more) of the assets of WPC, WHX or WPSC to any individual, corporation, partnership, trust or other entity or organization (a "Person") or group of Persons acting in concert as a partnership or other group (a "Group of Persons") other than a Person (an "Affiliate") controlling, controlled by or under common control with, any of WPC, WHX or WPSC, as the case may be, (ii) the merger, consolidation or other business combination of WPC, WHX or WPSC with or into another corporation with the effect that the shareholders of WPC, WHX or WPSC, as the case may be, immediately prior to the business combination hold 50% or less of the combined voting power of the then outstanding securities of the surviving Person of such merger ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, (iii) the replacement of a majority of the Board of WPC, WHX or WPSC, over any period of two years or less, from the directors who constituted the Board of WPC, WHX or WPSC, as the case may be, at the beginning of such period, and such replacement(s) shall not have been approved by the Board of WPC, WHX or WPSC, as the case may be, as constituted at the beginning of such period, (iv) a Person or Group of Persons shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") of -14- 15 securities of WHX, or of WPC or WPSC following an Initial public Offering by such company, representing 50% or more of the combined voting power of the then outstanding securities of WHX, WPC or WPSC, as the case may be, ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors. Notwithstanding the foregoing, an Initial Public Offering or a "spin-off" of all or any portion of the shares of Common Stock of WPC or WPSC shall not constitute a Change in Control under this Agreement. 10. INDEMNIFICATION. The Company shall defend and hold the Executive harmless to the fullest extent permitted by applicable law and the Company's By-Laws and Certificate of Incorporation in connection with any claim, action, suit, investigation or proceeding arising out of or relating to performance by the Executive of services for, or action of the Executive as, or arising by reason of the fact that the Executive is or was, a Director, officer, employee or agent of the Company or any parent, subsidiary or affiliate of the Company, or of any other person or enterprise at the Company's request. Expenses incurred by the Executive in defending a claim, action, suit, investigation or proceeding shall be paid by the Company in advance of the final disposition thereof upon the receipt by the Company of any undertaking by or on behalf of the Executive to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified hereunder. The foregoing rights are not exclusive and do not limit any rights accruing to the -15- 16 Executive under any other agreement or contract or under applicable law. 11. SUCCESSORS AND ASSIGNS. The rights and obligations of the Company hereunder shall run in favor and be obligations of the Company, its successors and assigns. The rights of the Executive hereunder shall inure to the benefit of the Executive's legal representatives, executors, heirs and beneficiaries. Termination of Executive's employment shall not operate to relieve him of any remaining obligations under Section 3 hereof. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation or otherwise) to all or a significant portion of the assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Except as otherwise provided in Section 4(e) regardless, of whether such agreement is executed by a successor, this Agreement shall continue to be binding upon the Company and any successor and assign in accordance with the operation of law and such successor and assign shall be deemed the "Company" for purposes of this Agreement. 12. ARBITRATION OF ALL DISPUTES. (a) Any controversy or claim arising out of or relating to this Agreement or the breach thereof (including the -16- 17 arbitrability of any controversy or claim), shall be settled by arbitration in the City of Pittsburgh, Commonwealth of Pennsylvania, by three arbitrators, one of whom shall be appointed by the Company, one by the Executive and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the American Arbitration Association. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Section 12. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and the Executive. The award of the arbitrators shall be binding upon the parties. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. (b) In the event that it shall be necessary or desirable for the Executive to retain legal counsel and/or incur other costs and expenses in connection with the enforcement of any or all of his rights under this Agreement, and provided that the Executive substantially prevails in the enforcement of such rights, the Company shall pay (or the Executive shall be entitled to recover from the Company, as the case may be) the Executive's reasonable attorneys' fees and costs and expenses in connection with the enforcement of his rights, including the enforcement of any arbitration award, up to $50,000 in the aggregate. -17- 18 13. NOTICES. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given upon receipt if delivered by hand, sent by telecopier or courier, and three (3) days after such communication is mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, to the other party, in each case addressed as follows: (a) if to WHX, WPC or WPSC, as the case may be: WHX Corporation 110 East 59th Street New York, New York 10022 Attn: Corporate Secretary Wheeling-Pittsburgh Corporation 1134 Market Street Wheeling, West Virginia 26003 Attn: Corporate Secretary Wheeling-Pittsburgh Steel Corporation 1134 Market Street Wheeling, West Virginia 26003 Attn: Corporate Secretary With a copy (which shall not constitute notice) to: Steven Wolosky, Esquire Olshan Grundman Frome & Rosenzweig LLP 505 Park Avenue New York, New York 10022 -18- 19 (b) if to the Executive: James G. Bradley 218 Harbel Drive St. Clairsville, Ohio 43950 with a copy (which shall not constitute notice) to: Robert B. Williams, Esq. Williams Coulson 1500 Two Chatham Center Pittsburgh, Pennsylvania 15219 Addresses may be changed by written notice sent to the other party at the last recorded address of that party. 14. SEVERABILITY. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. 15. PRIOR UNDERSTANDING. This Agreement embodies the entire understanding of the parties hereto, and supersedes all other oral or written agreements or understandings between them regarding the subject matter hereof. No change, alteration or modification hereof may be made except in a writing, signed by all parties hereto. The headings in this Agreement are for convenience and reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof. 16. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be original, but all such counterparts shall -19- 20 constitute one and the same instrument, and all signatures need not appear on any one counterpart. 17. CHOICE OF LAWS. Subject to the provisions of Paragraph 12 and without regard to the effect of principles of conflicts of laws thereof, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the Commonwealth of Pennsylvania, and this Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania. -20- 21 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. WHEELING-PITTSBURGH STEEL CORPORATION By: /s/ John W. Testa -------------------------------- Name: John W. Testa Title: Vice President WHX CORPORATION By: /s/ Howard Mileaf -------------------------------- Name: Howard Mileaf Title: General Counsel WHEELING-PITTSBURGH CORPORATION By: /s/ John W. Testa -------------------------------- Name: John W. Testa Title: Vice President /s/ James G. Bradley ------------------------------------ James G. Bradley -21- EX-10.18 8 EMPLOYMENT AGREEMENT: R.D. LEBLANC 1 EMPLOYMENT AGREEMENT This Agreement (the "Agreement"), dated as of April 7, 1998, will confirm that Handy & Harman, a New York corporation (the "Company") and WHX Corporation, a Delaware corporation (the "Parent Company") have offered, and you have accepted, the position of President and Chief Executive Officer of the Company and Executive Vice President of the Parent Company. 1. The initial term of your employment shall be from April 7, 1998 through April 7, 2001, subject to earlier termination pursuant to the provisions set forth below, and shall automatically be extended for successive one-year terms unless either you or the Company shall advise the other upon not more than 60 days nor less than 30 days notice that such term shall not be renewed; provided that if the Agreement shall not be renewed by the Company, you shall be entitled to the benefits set forth in Section 8(c) hereof as if your employment had been terminated pursuant to Section 7(c) hereof. 2. You agree to use your best efforts to promote the interest of the Company and the Parent, and devote your full business time and energies to the business and affairs of the Company and the Parent. You agree to perform such services as are customary to your position and as shall from time to time be assigned to you by the Board of Directors of the Parent Company. 3. Your annual base salary shall be no less than $400,000, less applicable federal, state and local tax deductions, payable in accordance with the Company's and the Parent Company's customary payroll practices. Any increases in your annual salary shall be in the sole discretion of the Parent Company's Board of Directors. -1- 2 4. (a) You shall be eligible to participate in the following compensation plans that may be offered from time to time by the Company, in accordance with the terms and provisions of such plans and their successors and assigns and subject to the discretion of the Compensation Committee of the Parent Company's Board of Directors (the "Committee"): the Handy & Harman Management Incentive Plan (the "Bonus Plan"), the Handy & Harman Long-Term Incentive Plan (the "Incentive Plan"), and the Parent Company's 1991 Incentive and Non-Qualified Stock Option Plan (the "Option Plan") in each case as described below. (b) You shall be eligible to participate in the Bonus Plan beginning in respect of the 1998 plan year; provided, however, that any bonus amounts payable thereunder are contingent upon the Company's attainment of performance goals established by the Committee in its sole discretion. (c) You shall continue to be eligible and to participate in the Incentive Plan in respect of the 1997-through-1999 cycle and subsequent cycles; provided, however, that any awards granted and any amounts payable thereunder are contingent upon the Company's attainment of performance goals established by the Committee. (d) You shall be granted, effective as of April 23, 1998, options (the "Options") to purchase 260,000 shares of common stock of the Parent Company pursuant to the Option Plan. The Options shall (i) be granted under, and subject to the terms of, the Option Plan, (ii) have a ten (10) year term (subject to earlier termination as provided in the Option Plan and the form of grant agreement thereunder), (iii) vest and become exercisable with respect to one-third of the shares of common stock subject thereto on each of the first three (3) anniversaries of the date of -2- 3 grant and (iv) have an exercise price per share of common stock equal to the fair market value of the common stock as of April 23, 1998. 5. (a) You shall be eligible to participate in all Company and Parent Company employee benefit plans and programs which are made generally available to salaried employees of the Company and the Parent Company, in accordance with the terms and provisions of such plans. (b) You shall be eligible to participate in the Handy & Harman Supplemental Executive Retirement Plan and the Handy & Harman Executive Life Insurance and Post-Retirement Life Insurance Program, in each case in accordance with the terms and provisions of such plans. (c) The Company and the Parent Company shall reimburse you for annual financial, estate and tax planning and tax preparation expenses up to a maximum of 3% of your annual base salary in effect on January 1 of the tax year. (d) You shall be provided with a Company-owned automobile in accordance with the Company's existing policies and procedures in place for other executive officers of the Company. 6. (a) The Company and the Parent Company shall reimburse you for all reasonable business expenses incurred by you in accordance with the Company's and the Parent Company's policies on reimbursement for business expenses as then in effect. (b) The Company and the Parent Company shall reimburse you for annual membership fees and expenses with respect to your membership in a country club selected by you. -3- 4 (c) You and your spouse shall be entitled to receive post-retirement health insurance benefits from the Company under the Company's Post-Retirement Medical Plan in effect for employees of the Company prior to 1992 on such terms and conditions in place for other employees covered by the Plan. 7. (a) The Company and the Parent Company may terminate your employment at any time, without prior notice, for any of the following reasons: (i) your engaging in conduct which is materially injurious to the Company or the Parent Company, their subsidiaries or affiliates, or any of their respective customer or supplier relationships, monetarily or otherwise; (ii) your engaging in any act of fraud, misappropriation or embezzlement or any act which would constitute a felony (other than minor traffic violations); or (iii) your material breach of this Agreement. (b) If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties hereunder for at least 120 days within any twelve (12) consecutive months, excluding vacation time actually used in accordance with the Company's or the Parent Company's policies thereon, your employment may be terminated by the Company or the Parent Company, upon written notice in accordance with paragraph 8 hereof without further notice. (c) The Company or the Parent Company, in their sole discretion, may terminate your employment at any time for any reason other than those stated in paragraphs 7(a) or 7(b) upon thirty (30) days prior written notice. 8. (a) If your employment is terminated by the Company or the Parent Company pursuant to paragraph 7(a), you shall receive your base salary through the date of -4- 5 termination and the Company or the Parent Company shall have no further obligations to you under this Agreement. (b) If your employment is terminated by the Company or the Parent Company pursuant to paragraph 7(b) or by your death, you or your personal representative, guardian, or the representative of your estate shall continue to receive your then current base salary plus annual Bonus Plan awards equal to the average annual Bonus Plan compensation you earned during the three preceding years, through the end of the term or for a period of twenty-four (24) months, whichever is longer, payable in accordance with the Company's or the Parent Company's customary payroll practices. However, your base salary shall be offset by any payment you receive pursuant to the Company's or the Parent Company's disability plans and programs. Thereafter, the Company or the Parent Company shall have no further obligations under this Agreement to you, your estate, personal representative, guardian, or your beneficiaries. (c) If your employment is terminated by the Company or the Parent Company pursuant to paragraph 7(c), you shall be entitled to the following severance and benefits: (i) The Company or the Parent Company shall pay you a severance payment (the "Severance Payment") equal to two (2) years' full base salary at your highest rate in effect during the twelve (12) months preceding the date on which the Notice of Termination is given plus two (2) times the average annual Bonus Plan compensation you earned during the three (3) preceding years. To the extent that the initial term of your employment exceeds twenty-four (24) months, the Company or the Parent Company shall be responsible for the severance for that period similarly calculated; -5- 6 (ii) The Company or the Parent Company shall pay you the Severance Payment no later than the thirtieth (30th) day following the Date of Termination. (iii) During the period you are receiving any payments or benefits under paragraphs 8(b) or 8(c), you agree to promptly notify the Company and the Parent Company upon your acceptance of any other employment and upon your eligibility for any medical benefits, insurance, financial planning or use of a company-owned vehicle by your new employer, you shall no longer be eligible to participate in the corresponding aspects of the Company's and the Parent Company's benefit plans and arrangements. 9. You shall be entitled to terminate your employment for "Good Reason", which shall mean the occurrence of one of the following circumstances: (i) if the Parent Company elects to sell or otherwise reconstitute the Company such that a change would cause you to have a substantial diminution in the nature or status of your responsibilities from those in effect immediately prior to such change; (ii) a reduction in your annual base salary as in effect on the date of such change; (iii) the Parent Company causes the relocation of the office in which you are located prior to the change to a location more than fifty (50) miles from Rye, New York, except for required travel on the business of the Company or the Parent Company to an extent substantially consistent with your present business travel obligations; (iv) pursuant to an action taken by the Company or the Parent Company, you are selectively excluded from a compensation, bonus, stock option or stock ownership plan -6- 7 otherwise in existence at the time of the change or thereafter put into effect for the benefit of others in a similar situation unless substantially equivalent benefits are provided to you; (v) except as a required by law, the failure to continue to provide you with benefits at least as favorable as those enjoyed by you under the employee benefit and welfare plans of the Company or the Parent Company in which you were participating at the time of the change or the taking of any action by the Company which would materially reduce any of the benefits enjoyed by you at the time of the change; or (vi) the failure of the Company or the Parent Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement. 10. Upon the occurrence of any of the aforestated set forth in Section 9, you shall for Good Reason upon notice pursuant to Section 16 hereof to the Company or Parent Company, if such occurrence is not cured within 30 days of receipt of such notice, be entitled to the following benefits: (a) The Company or the Parent Company shall pay you a severance payment (the "Severance Payment") equal to two (2) years' full base salary at your highest rate in effect during the twelve (12) months preceding the date on which the Notice of Termination is given plus two (2) times the average annual Bonus Plan compensation you earned during the three preceding years; (b) For a twenty-four (24) month period after termination of your employment, the Company or the Parent Company shall arrange to provide you with life, medical and dental insurance benefits, financial planning and a company-owned automobile substantially -7- 8 similar to those which you are receiving or entitled to receive immediately prior to the Notice of Termination, unless you are eligible to receive such benefits from a subsequent employer; (c) The Company or the Parent Company shall pay you the Severance Payment no later than the thirtieth (30th) day following the Date of Termination. 11. Your continued employment shall not constitute consent to, or as a waiver of rights with respect to, any circumstance constituting Good Reason hereunder for a period of sixty (60) days following the occurrence of such event, and thereafter such circumstance shall be deemed waived as an event giving rise to a termination pursuant to Section 9. 12. Any termination of your employment by the Company, the Parent Company or by you shall be communicated by written "Notice of Termination" to the other party hereto in accordance with Section 16 hereof. For purposes of this Agreement, a Notice of Termination shall mean a notice indicating the specific termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. Further, you agree that upon termination that you will resign effective as of the date of termination from any and all directorships you may hold in the Company or the Parent Company and their subsidiaries. 13. "Date of Termination" shall mean (30) days after the date specified in the Notice of Termination. 14. Arbitration; Certain Costs. Any dispute or controversy between the Company or Parent Company and you, whether arising out of or relating to the Agreement, the breach of the Agreement, or otherwise, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Rules then in effect and judgment on the award -8- 9 rendered by the arbitrator may be entered in any court having jurisdiction thereof. Such arbitration shall take place in the New York City metropolitan area. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and you. The arbitrator shall have the authority to award any remedy or relief that a court of competent jurisdiction could order or grant, including, without limitation, the issuance of an injunction. However, either party may, without inconsistency with this arbitration provision, apply to any court having jurisdiction over such dispute or controversy and seek interim provisional, injunctive or other equitable relief until the arbitration award is rendered or the controversy is otherwise resolved. In the event that it shall be necessary or desirable for you to retain legal counsel and/or incur other costs and expenses in connection with this arbitration provision, and provided that you substantially prevail in the enforcement of such rights, the Company or Parent Company shall pay (or you shall be entitled to recover from the Company or Parent Company, as the case may be) your reasonable attorneys' fees and costs and expenses in connection with any application under this arbitration provision, including the enforcement of any arbitration award, up to $50,000 in the aggregate. Except as necessary in court proceedings to enforce this arbitration provision or an award rendered hereunder, or to obtain interim relief, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of the Company or Parent Company. 15. You have previously executed the Non-Competition Agreement annexed hereto. 16. Any notices required by this Agreement shall be in writing and shall be deemed to have been given when delivered by hand, sent by facsimile (so long as an original is mailed within 24 hours of such facsimile transmission), mailed by United States certified mail, return -9- 10 receipt requested, postage prepaid, or sent by nationally-recognized overnight mail service, as follows: if to you: Mr. Robert D. LeBlanc 83 Keeler Drive Ridgefield, Connecticut 06877 if to the Company: 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Paul E. Dixon, Esq. Senior Vice President and General Counsel if to the Parent Company: WHX Corporation 110 East 59th Street, 30th Floor New York, New York 10022 Attention: General Counsel and or to such other address as the parties may furnish to the other in writing in accordance with this paragraph. Notices of change of address shall only be effective upon receipt. 17. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to its conflict of laws principles. 18. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, arrangements and understandings among the Company, the Parent Company and you with respect to such subject matter. This Agreement can be modified only by a writing signed by you, the Company and the Parent Company. If any provision of this Agreement shall be held to be void or -10- 11 unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. This Agreement shall inure to the benefit of and be binding upon the Company's and the Parent Company's successors and assigns. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. HANDY & HARMAN By: /s/ Paul Dixon ---------------------------------------- Name: Paul Dixon Title: Senior Vice President and General Counsel WHX CORPORATION By: /s/ Howard Mileaf ---------------------------------------- Name: Howard Mileaf Title: General Counsel Agreed to this 18th day of June, 1998 /s/ Robert D. LeBlanc - ---------------------------------------- Robert D. LeBlanc -11- EX-10.19 9 A/R EMPLOYMENT AGREEMENT: P.J. MOONEY 1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT effective as of the 24th day of December, 1998, by and between WHEELING-PITTSBURGH STEEL CORPORATION ("WPSC"), a Delaware corporation with a principal place of business at 1134 Market Street, Wheeling, West Virginia, 26003, WHX CORPORATION ("WHX"), a Delaware corporation with a principal place of business at 110 East 59th Street, New York, New York, 10022 and WHEELING-PITTSBURGH CORPORATION ("WPC"), a Delaware corporation with a principal place of business at 1134 Market Street, Wheeling, West Virginia, 26003 (WPSC, WHX and WPC are collectively referred to as the "Company") and Paul J. Mooney (the "Executive"). WHEREAS, the Executive is employed by the Company pursuant to an Employment Agreement dated as of October 17, 1997 (the "Initial Employment Agreement") and the parties hereto each desire to amend and restate the Initial Employment Agreement upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto do agree as follows: 1. EMPLOYMENT. (a) The Company hereby employs the Executive, and the Executive hereby accepts such employment, as Executive Vice President and Chief Financial Officer of WPC and WPSC and Vice President of WHX, with his principal office being located in either Pittsburgh, -1- 2 Pennsylvania, Wheeling, West Virginia or in a geographic area around the Pittsburgh, Pennsylvania area no farther in distance than Wheeling, West Virginia, upon the terms and subject to the conditions contained herein. (b) Executive agrees that effective upon an Initial Public Offering (as hereinafter defined) or Sale Transaction (as hereinafter defined) of WPC, Executive will resign as an officer of WHX or, in the case of an Initial Public Offering or Sale Transaction of WPSC, as an officer of WPC also. (c) WPSC, WPC and WHX represent and warrant to Executive that this Agreement has been duly and validly authorized and executed by and on behalf of each of them in accordance with their respective Certificate of Incorporation and By-Laws and that this Agreement constitutes the lawful and valid obligation of WPSC, WPC and WHX enforceable against each of WPSC, WPC and WHX in accordance with its terms. 2. DUTIES. (a) The Executive shall perform all duties of the positions referenced in paragraph 1 of this Agreement consistent with the powers and duties of such offices set forth in WPSC's, WPC's or WHX's, as appropriate, By-Laws, as well as any other duties, commensurate with the Executive's positions that are assigned by the Board of Directors of WPSC, WPC or WHX. (b) Throughout his employment hereunder, Executive shall devote his full time, attention, knowledge and skills during reasonable business hours in furtherance of the business of the Company and will faithfully, diligently and to the best of his ability perform the duties described above and further the best interests of the Company or its subsidiaries. During -2- 3 his employment, the Executive shall not engage, and shall not solicit any employees of the Company to engage, in any commercial activities which are in any way in competition with the activities of the Company or its subsidiaries, or which may in any way interfere with the performance of his duties or responsibilities to the Company. (c) The Executive shall at all times be subject to, observe and carry out such rules, regulations, policies, directions and restrictions as the Company, consistent with Executive's rights and duties under this Agreement, may from time to time establish and those imposed by law. 3. EXECUTIVE COVENANTS. In order to induce the Company to enter into this Agreement, the Executive hereby agrees as follows: (a) Except when disclosure is in the interest of the Company or is compelled by law, or disclosure is consented to or directed by the Chairman or the Board of Directors (the "Board") of WPC, WHX or WPSC, the Executive shall keep confidential and shall not divulge to any other person or entity, during the term of the Executive's employment or thereafter, any of the business secrets or other confidential information regarding the Company or the Company's other subsidiaries which have not otherwise become public knowledge. (b) All papers, books and records of every kind and description relating to the business and affairs of the Company, whether or not prepared by the Executive, shall be the sole and exclusive property of the Company, and the Executive shall surrender them to the Company at any time upon request by the Chairman or the Board of WPC, WHX or WPSC. (c) During the term of Executive's employment hereunder, and for a period of three (3) years thereafter, the Executive shall not, without the prior written consent of the Board -3- 4 of WHX (i) participate as a director, stockholder or partner, or have any direct or indirect financial interest as creditor, in any business which directly or indirectly competes, within the United States of America, with the Company or the Company's other subsidiaries which exist now or as of the date of the termination of this Agreement (the "Existing Subsidiaries"); provided, however, that nothing in this Agreement shall restrict the Executive from holding up to two (2%) percent of the outstanding capital stock or other securities of any publicly traded entity; (ii) solicit any customers of the Company or its Existing Subsidiaries on behalf of himself, or any other person, firm or company; or (iii) directly or indirectly, act in the capacity of an executive officer, employee or in any other capacity for any company or other entity which competes with WPSC in the carbon steel manufacturing industry and which has at least 5% of its annual dollar sales comprised of products which directly compete with the Company's or the Existing Subsidiaries' products; provided, however, that nothing in this paragraph 3(c) shall prevent the Executive from holding or maintaining any positions or interests held by him subsequent hereto with the consent of the Board of WHX (or the Board of WPC from and after the consummation of an Initial Public Offering or Sale Transaction of WPC or the Board of WPSC from and after the consummation of an Initial Public Offering or Sale Transaction by WPSC. (d) The parties agree that the Executive's services are unique and that any breach or threatened breach of the provisions of this Section 3 will cause irreparable injury to the Company and that money damages will not provide an adequate remedy. Accordingly, the Company shall, in addition to other remedies provided by law, be entitled to such equitable and injunctive relief as may be necessary to enforce the provisions of this Section 3 against the Executive or any other person or entity participating in such breach or threatened breach. -4- 5 Nothing contained herein shall be construed as prohibiting the Company from pursuing any other and additional remedies available to it, at law or in equity, for such breach or threatened breach including any recovery of damages from the Executive or termination of his employment as provided in Paragraph 9(b). 4. BASE SALARY AND BONUSES. As full compensation for Executive's services hereunder and in exchange for his promises contained herein, the Company shall compensate the Executive in the following manner (subject to Paragraph 4(c)): (a) BASE SALARY. The Company shall compensate Executive at the base salary rate of Two Hundred Seventy-Five Thousand United States Dollars ($275,000 U.S.) per annum, payable in equal installments on the same basis as other senior salaried officers of the Company. Such annual salary may be increased in the future by such amounts and at such times as the Board of WHX or the Compensation Committee thereof (or the Board or Compensation Committee of (x) WPC from and after the consummation of an Initial Public Offering or Sale Transaction of WPC or (y) WPSC from and after the consummation of an Initial Public Offering or Sale Transaction of WPSC) shall deem appropriate in its sole discretion. (b) BONUSES. (i) SIGNING BONUS: The Executive has received $90,000 of a signing bonus of One Hundred Twenty Thousand United States Dollars ($120,000 U.S.) in accordance with the Initial Employment Agreement, the receipt of which is hereby acknowledged. The Executive shall be entitled to receive the balance thereof of $30,000 on October 17, 1999. -5- 6 (ii) ANNUAL BONUSES: Beginning with the calendar year 1998 and in each year or portion thereof thereafter during the term of this Agreement, the Board of WHX or the Compensation Committee of WHX (or the Board or Compensation Committee of (x) WPC from and after the consummation of the Initial Public Offering or Sale Transaction of WPC or (y) WPSC from and after the consummation of an Initial Public Offering or Sale Transaction of WPSC) shall grant the Executive a bonus in accordance with the terms of WPSC's Management Incentive Program. (c) WITHHOLDINGS. The amounts set forth in subparagraphs (a) and (b) above shall be subject to appropriate payroll withholding and any similar deductions required by law. (d) INITIAL PUBLIC OFFERING; SALE. During the term of this Agreement, upon (i) the consummation of an underwritten initial public offering under the Securities Act of 1933, as amended (an "Initial Public Offering," including for this purpose a "spin-off" that creates publicly traded securities) of WPC or WPSC (or any successor or assign of either entity) or (ii)(x) the, direct or indirect, sale, lease, exchange or other transfer of all or substantially all (50% or more) of the assets or capital stock of WPC or WPSC to any individual, corporation, partnership, trust or other entity or organization (a "Person") or group of Persons acting in concert as a partnership or other group (a "Group of Persons") other than a Person (an "Affiliate") controlling, controlled by or under common control with, any of WPC, WHX or WPSC, as the case may be, or (y) the merger, consolidation or other business combination of WPC or WPSC with or into another corporation with the effect that the shareholders of WPC or WPSC, as the case may be, immediately prior to the business combination hold 50% or less of -6- 7 the combined voting power of the then outstanding securities of the surviving Person of such merger ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors ((ii)(x) or (ii)(y) being a "Sale Transaction"), the Company shall pay to the Executive, within thirty (30) days after the date of the closing of the Initial Public Offering or Sale Transaction, the sum of (i) One Million Dollars ($1,000,000) (the "Payment") plus, if all or any portion of the Payment is subject to the tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Excise Tax"), an additional amount (the "Gross Up Amount"), so that the amount retained by the Executive (net of any Excise Tax on the Payment and the Gross Up Amount and any federal, state and local income tax on the Gross Up Amount (calculated using the highest marginal rates applicable to individuals)) shall be equal to the Payment and (ii) Eight Hundred Twenty-Five Thousand Dollars ($825,000) (the "Additional Payment"). In the event that during the term of this Agreement and prior to an Initial Public Offering or Sale Transaction a WHX Change of Control (as hereinafter defined) shall occur, the Company shall pay to the Executive, within thirty (30) days after the date of the WHX Change of Control, the Additional Payment. For purposes of this Agreement, WHX Change of Control means (i) the direct or indirect, sale, lease, exchange or other transfer of all or substantially all (50% or more) of the assets of WHX to a Person or Group of Persons other than an Affiliate controlling, controlled by or under common control with, WHX, (ii) the merger, consolidation or other business combination of WHX with or into another corporation with the effect that the stockholders of WHX immediately prior to the business combination hold 50% or less of the combined voting power of the then outstanding securities of the surviving Person of such merger ordinarily (and apart from rights accruing under special circumstances) having the right to vote in -7- 8 the election of directors, (iii) the replacement of a majority of the Board of WHX over any period of two years or less, from the directors who constituted the Board of WHX at the beginning of such period, and such replacement(s) shall not have been approved by the Board of WHX as constituted at the beginning of such period, (iv) a Person or Group of Persons shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") of securities of WHX representing 50% or more of the combined voting power of the then outstanding securities of WHX ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors. If an Initial Public Offering or Sale Transaction shall occur after a WHX Change of Control and the Executive shall have received or shall have the right to receive the Additional Payment (but for the 30 day payment period) then, upon an Initial Public Offering or Sale Transaction the Executive shall only be entitled to receive the Payment and Gross Up Amount as applicable. From and after the consummation of an Initial Public Offering or Sale Transaction involving WPC or WPSC, WHX, and in the case of an Initial Public Offering or a Sale Transaction involving WPSC, WPC and WHX, shall be relieved of all obligations under this Agreement (other than the obligation to make the Payment required by this Paragraph 4), with no further action required by WHX and WPC, as appropriate, to terminate its obligations hereunder. The Payment shall not preclude, set off or be in lieu of Executive's participation in any option pool created by WPC or WPSC in connection with an Initial Public Offering or Sale Transaction. -8- 9 5. LONG-TERM INCENTIVE PLAN. The Executive shall be entitled to participate, to the extent he is eligible under the terms and conditions thereof, in any stock option plan, stock award plan, omnibus stock plan, or similar incentive plan currently in existence or hereafter established by the Company, in the manner and to the same extent as the Company's other senior executive officers, such participation to include 40,000 options under the 1991 WPC Incentive and Nonqualified Stock Option Plan ("1991 Plan"), which options were granted upon the effectiveness of the Initial Employment Agreement, in accordance with the provisions of the 1991 Plan. Awards to the Executive under any such plan shall be made as provided in such plan and at such times and in such amounts as shall be determined in the sole discretion reasonably exercised of the Stock Option Committee of WHX subject to confirmation by the Board of WHX or the Compensation Committee of WHX (or the Board or Compensation Committee of WPC from and after the consummation of an Initial Public Offering or Sale Transaction of WPC or the Board or Compensation Committee of WPSC from and after the consummation of an Initial Public Offering or Sale Transaction of WPSC). Except as provided above, the Executive shall not be entitled to participate in any bonus incentive or similar plan for salaried employees of the Company and Executive's right to receive a bonus shall be exclusively determined by the provisions of Paragraph 4(b) hereof. 6. BENEFIT PLANS. During the term of his employment, the Executive shall be entitled to participate in the Company's management employee benefits and retirement plans, as they are in existence on the date of this Agreement, or as they may be amended or added hereafter, to the same extent as the Company's other senior executive officers. The Company shall be under no -9- 10 obligation solely as a result of this Agreement to institute or continue the existence of any employee benefit plan. 7. OTHER BENEFITS. The Executive shall be provided the following additional benefits: (a) LEASED AUTOMOBILE. A leased Buick, Oldsmobile, Mercury or comparable automobile of United States manufacture for his business and personal use. The Company shall keep such automobile adequately insured and will pay or reimburse the Executive for the cost of maintenance, repair and gasoline for such automobile. (b) CLUB MEMBERSHIPS. Reimbursement of the Executive for the cost of his and his immediate family's membership in one country club, including reimbursement of a $10,000 voting transfer fee to be paid or payable by the Executive, and his membership in one business club, and for his business-related use for both clubs. (c) LEGAL AND TAX ADVICE. In recognition of the Executive's need to carefully consider the terms herein, the reimbursement of Executive for reasonable legal and tax advice, sought by him relative to this Agreement, which is incurred prior to his execution of this Agreement, up to a maximum of Twenty Thousand United States Dollars ($20,000 U.S.). (d) BUSINESS EXPENSE. Reimbursement of the Executive, upon proper accounting, for reasonable expenses and disbursements incurred by him in the course of the performance of his duties hereunder. (e) VACATION. The Executive shall be entitled to four (4) weeks of vacation each year of this Agreement or such longer period as shall be provided to senior executives of the Company, without reduction in salary. -10- 11 (f) ANNUAL PHYSICAL. The Company shall pay the cost, or reimburse Executive for any cost not covered by health insurance, of one comprehensive physical examination during each year of this Agreement. 8. SUPPLEMENTAL PENSION. As additional compensation, the Company will provide nonqualified deferred compensation to the Executive after termination of his employment. The amount of the deferred compensation will be measured solely by the cash surrender value, at the time payment of the deferred compensation is due, of one or more life insurance contracts (as defined in Internal Revenue Code ss. 7702) on the life of the Executive, purchased by or on behalf of the Company solely with the annual premiums described below. Such life insurance contracts shall provide such insurance coverage and contract terms (consistent with the premium limits described below), and shall be purchased from such one or more insurance companies, as shall be acceptable to the Executive. On the first business day of each calendar year during the Executive's service under this Agreement (or under the Initial Employment Agreement), the Company shall provide for the payment of total premiums, under all such life insurance contracts in the aggregate, equal to the sum of: 1. Twenty-Five Thousand Dollars ($25,000) annual lump sum provided by the Company without reduction of the Executive's regular salary or performance bonus otherwise payable under this Agreement (or under the Initial Employment Agreement) during the calendar year. -11- 12 2. An additional annual amount equal to the amount, if any, by which the Executive has elected to have his regular salary, otherwise payable in cash during the calendar year, reduced for this purpose. 3. An additional annual amount equal to the amount, if any, by which the Executive has elected to have his performance bonus (if any), otherwise payable in cash during the calendar year, reduced for this purpose. The Executive shall elect in writing, no later than the end of the preceding calendar year, the specific amounts (or definite formula to determine the specific amounts) of additional premiums to be paid for in each calendar year by reduction of his regular salary or bonus payments. However, such additional premium amounts shall be limited in the aggregate (or, at the Executive's election, insurance coverage shall be augmented as necessary) so that the additional premium amount applied to any insurance contract in any calendar year is less than the amount that would cause such contract to be classified as a modified endowment contract under Internal Revenue Code Section 7702A. The Company or the Deferred Compensation Trust described hereinafter (the "Deferred Compensation Trust" or "Trust") shall be the sole owner of all such life insurance contracts, except that the Executive, at his election, shall have the right to designate the beneficiary of death benefits under the contracts. In the event of the Executive's death while the life insurance contracts are in force and owned by the Company or the Deferred Compensation Trust, the insurance companies' payment of death benefits thereunder to the Executive's designated beneficiary (the "Beneficiary") shall totally discharge the Company's obligation under this Section 8, except that the Company or the -12- 13 Trust shall pay to such Beneficiary any salary or bonus reduction amounts elected by the Executive for the calendar year in which his death occurs to the extent that such amounts have not been paid to insurance companies as additional premiums during that calendar year. The Company will set aside assets in the Deferred Compensation Trust to provide for the systematic funding, during the Executive's period of active service, of the deferred compensation promised to the Executive under this Agreement. Such Deferred Compensation Trust (which may also include assets set aside to fund other similar deferred compensation obligations of the Company) shall be irrevocable except in the event of the Company's subsequent bankruptcy or insolvency, in which case the assets of the Trust shall be subject to the claims of the Company's general creditors, including the Executive. The Company intends, and the Executive acknowledges, that the Executive's rights under this Agreement shall be solely those of a general creditor of the Company, and nothing in this Agreement nor in any instruments creating the Deferred Compensation Trust nor in any life insurance contract, shall be construed to create any rights in the Executive superior to those of other general creditors of the Company. The Company intends that the Deferred Compensation Trust shall make all payments due under this Agreement to the Executive or his Beneficiary, to the extent the Trust is funded. The Executive acknowledges, on behalf of himself and any Beneficiary claiming under him, that the Company is absolved of any liability or responsibility for any payment due hereunder to the extent such payment shall have been duly made to the Executive (or Beneficiary, as the case may be) by the Deferred Compensation Trust. -13- 14 The deferred compensation provided hereunder shall be paid to the Executive in accordance with the life insurance contracts obtained pursuant to the first paragraph of this Section 8. 9. DURATION AND TERMINATION. (a) DURATION. The term of this Agreement shall commence on the date hereof and shall terminate on the third anniversary of the date hereof, except as otherwise provided herein, and shall automatically be extended for successive three-year terms unless earlier terminated pursuant to the provisions hereof, provided that the Company and the Executive shall each have the right to terminate this Agreement at the end of the initial term or any succeeding term on not less than sixty (60) days prior written notice to the other party (in which event all rights and benefits of Executive hereunder other than the supplemental pension benefit under Section 8 shall cease upon such termination's effective date). Upon the termination of this Agreement for any reason, the Executive shall be deemed to have resigned from all officer and director positions with the Company and its Existing Subsidiaries. (b) TERMINATION AT ANY TIME BY COMPANY. This Agreement shall be terminable by the Company at any time for any reason, including death or Disability (as hereinafter defined) of the Executive, upon not less than 30 days' prior written notice to the Executive and all rights and benefits of the Executive hereunder (other than those arising under Section 10 hereof) shall cease, except that the Executive will have the right to receive from the Company (i) $825,000 immediately following the date of termination (less an amount equal to the portion of the Twenty-Five Thousand ($25,000) Dollar per annum payment made pursuant to Section 8 for the calendar year in which termination of employment occurred which represents -14- 15 the pro-rata portion of the payment for the balance of such calendar year, I.E., if the last date of employment is July 1, then Twelve Thousand and Five Hundred ($12,500) Dollars shall be deducted from the Eight Hundred Twenty-Five Thousand ($825,000) Dollars payment obligation) within thirty (30) days of delivery of the notice of termination (the "Termination Payment"), (ii) all amounts accrued but unpaid hereunder up to and including the date of termination including, without limitation, any pro rata portion of the Executive's salary or bonus remaining unpaid as of the date of termination, (iii) all of the supplemental pension benefits accrued under Section 8 and (iv) the continuation of all medical insurance provided to the Executive as contemplated by Section 6 hereof for a period of one (1) year following the termination date PROVIDED HOWEVER that the Company shall not be required to make the Termination Payment under this Section 9(b)(i), if prior to the date of termination of this Agreement by the Company pursuant to this Section 9(b), the Executive shall have previously received or shall have the right to receive (but for the passage of the 30 day payment period) the Additional Payment pursuant to Section 4(d) of the Agreement. Notwithstanding the foregoing, if the Company terminates this Agreement "for cause", then no Termination Payment shall be made to the Executive and all rights, benefits and obligations of the Executive under this Agreement shall cease, except the Executive's rights under Sections 8, 9(b)(ii), 9(b)(iii) and 10 hereof. "For cause" shall mean: (i) the Executive's willful and material breach in respect of his duties under this Agreement if such breach continues unremedied for thirty (30) days after written notice thereof from the Board of WPC, WHX or WPSC to the Executive specifying the acts constituting the breach and requesting that they be remedied; or (ii) the Executive is convicted or pleads guilty to a felony, during the employment period other than for conduct -15- 16 undertaken in good faith in furtherance of the interests of the Company. "Disability" shall mean that due to illness, accident or other physical or mental incapacity, the Board of WPC, WHX or WPSC has in good faith determined that the Executive is unable to substantially perform his usual and customary duties under this Agreement for more than four (4) consecutive months or six (6) months in any calendar year. During any period that the Executive fails to perform his duties hereunder as a result of incapacity due to Disability prior to the Executive's termination, the Executive shall continue to receive his full base salary, together with all benefits provided in this Agreement. (c) RIGHTS OF TERMINATION BY EXECUTIVE. The Executive shall have the right, by written notice to the Company, to elect to terminate this Agreement, in which event the Company shall pay to the Executive, within thirty (30) days after the date of termination of the Executive's employment, the sum of Eight Hundred Twenty-Five Thousand Dollars ($825,000) (less an amount equal to the portion of the Twenty-Five Thousand ($25,000) Dollar per annum payment made pursuant to Section 8 for the calendar year in which termination of employment occurred which represents the pro-rata portion of the payment for the balance of such calendar year, I.E., if the last date of employment is July 1, then Twelve Thousand and Five Hundred ($12,500) Dollars shall be deducted from the Eight Hundred Twenty-Five Thousand ($825,000) Dollar payment obligation), if the Executive is (A) demoted (other than his removal as an officer or director of WHX or WPC as provided in this Agreement) or (B) no longer holds the office of Executive Vice President or Chief Financial Officer of WPSC or WPC (except as otherwise provided in this Agreement in the case of WPC). Notwithstanding the provisions of the previous sentence of this Section 9(c), in the event the Executive terminates this Agreement pursuant to this Section 9(c) -16- 17 and the Executive shall have previously received or shall have the right to receive the Additional Payment pursuant to Section 4(d) of this Agreement (but for the passage of the thirty (30) day payment period), then the Executive shall not receive the Eight Hundred Twenty-Five Thousand ($825,000) Dollar payment pursuant to this Section 9(c) and shall only receive the payment and benefit set forth in the next sentence of this Section 9(c). In the event that Executive makes the election referred to in Section 9(c), the Executive shall be entitled to receive from the Company the items set forth in Paragraph 9(b)(ii) through 9(b)(iv) within sixty (60) days of receipt by the Company of a written notice of Executive's election. 10. INDEMNIFICATION. The Company shall defend and hold the Executive harmless to the fullest extent permitted by applicable law and the Company's By-Laws and Certificate of Incorporation in connection with any claim, action, suit, investigation or proceeding arising out of or relating to performance by the Executive of services for, or action of the Executive as, or arising by reason of the fact that the Executive is or was, a Director, officer, employee or agent of the Company or any parent, subsidiary or affiliate of the Company, or of any other person or enterprise at the Company's request. Expenses incurred by the Executive in defending a claim, action, suit, investigation or proceeding shall be paid by the Company in advance of the final disposition thereof upon the receipt by the Company of any undertaking by or on behalf of the Executive to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified hereunder. The foregoing rights are not exclusive and do not limit any rights accruing to the Executive under any other agreement or contract or under applicable law. 11. SUCCESSORS AND ASSIGNS. The rights and obligations of the Company hereunder shall run in favor and be obligations of the Company, its successors and assigns. The rights of the -17- 18 Executive hereunder shall inure to the benefit of the Executive's legal representatives, executors, heirs and beneficiaries. Termination of Executive's employment shall not operate to relieve him of any remaining obligations under Section 3 hereof. The Company shall require any successor or assign (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation or otherwise) to all or a significant portion of the assets of the Company, by agreement in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed by a successor, this Agreement shall be binding upon any successor and assign in accordance with the operation of law and such successor and assign shall be deemed the "Company" for purposes of this Agreement. 12. ARBITRATION OF ALL DISPUTES. (a) Any controversy or claim arising out of or relating to this Agreement or the breach thereof (including the arbitrability of any controversy or claim), shall be settled by arbitration in the City of Pittsburgh, Commonwealth of Pennsylvania, by three arbitrators, one of whom shall be appointed by the Company, one by the Executive and the third of whom shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the appointment of a third arbitrator, then the third arbitrator shall be appointed by the American Arbitration Association. The arbitration shall be conducted in accordance with the rules of the American Arbitration Association, except with respect to the selection of arbitrators which shall be as provided in this Section 12. The cost of any arbitration proceeding hereunder shall be borne equally by the Company and the Executive. The award of the arbitrators shall be binding upon -18- 19 the parties. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. (b) In the event that it shall be necessary or desirable for the Executive to retain legal counsel and/or incur other costs and expenses in connection with the enforcement of any or all of his rights under this Agreement, and provided that the Executive substantially prevails in the enforcement of such rights, the Company shall pay (or the Executive shall be entitled to recover from the Company, as the case may be) the Executive's reasonable attorneys' fees and costs and expenses in connection with the enforcement of his rights, including the enforcement of any arbitration award, up to $50,000 in the aggregate. 13. NOTICES. All notices, requests, demands and other communications hereunder must be in writing and shall be deemed to have been duly given upon receipt if delivered by hand, sent by telecopier or courier, and three (3) days after such communication is mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, to the other party, in each case addressed as follows: (a) if to WHX, WPC or WPSC, as the case may be: WHX Corporation 110 East 59th Street New York, New York 10022 Attn: Corporate Secretary Wheeling-Pittsburgh Corporation 1134 Market Street Wheeling, West Virginia 26003 Attn: Corporate Secretary Wheeling-Pittsburgh Steel Corporation -19- 20 1134 Market Street Wheeling, West Virginia 26003 Attn: Corporate Secretary With a copy (which shall not constitute notice) to: Steven Wolosky, Esquire Olshan Grundman Frome & Rosenzweig LLP 505 Park Avenue New York, New York 10022 (b) if to the Executive: Paul J. Mooney 323 Parkway Drive Pittsburgh, Pennsylvania 15228 with a copy (which shall not constitute notice) to: Dennis R. Bonessa, Esquire Reed Smith Shaw & McClay 435 6th Avenue Pittsburgh, PA 15219 Addresses may be changed by written notice sent to the other party at the last recorded address of that party. 14. SEVERABILITY. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. 15. PRIOR UNDERSTANDING. This Agreement embodies the entire understanding of the parties hereto, and supersedes all other oral or written agreements or understandings between them regarding the subject matter hereof, including without limitation the Initial Employment Agreement. No change, alteration or modification hereof may be made except in a writing, signed -20- 21 by all parties hereto. The headings in this Agreement are for convenience and reference only and shall not be construed as part of this Agreement or to limit or otherwise affect the meaning hereof. 16. EXECUTION IN COUNTERPARTS. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 17. CHOICE OF LAWS. Subject to the provisions of Paragraph 12 and without regard to the effect of principles of conflicts of laws thereof, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the Commonwealth of Pennsylvania, and this Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania. 18. THIRD PARTY BENEFICIARY. The provisions of this Agreement as to the Company shall also be binding upon and inure to the benefit of WPSC. -21- 22 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written. WHEELING-PITTSBURGH STEEL CORPORATION By: /s/ Paul Bucha ----------------------------------------------- Name: Paul Bucha Title: Chairman WHX CORPORATION By: /s/ Howard Mileaf ----------------------------------------------- Name: Howard Mileaf Title: Vice President - General Counsel WHEELING-PITTSBURGH CORPORATION By: /s/ James Bradley ----------------------------------------------- Name: James Bradley Title: President /s/ Paul J. Mooney -------------------------------------------------- Paul J. Mooney -22- EX-21.1 10 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21.1 WHX CORPORATION SUBSIDIARIES - ---------------------------- CONSUMERS MINING COMPANY, a Pennsylvania corporation CHAMPION METAL PRODUCTS, INC., a Delaware corporation MINGO OXYGEN COMPANY, an Ohio corporation PITTSBURGH-CANFIELD CORPORATION, a Pennsylvania corporation UNIMAST INCORPORATED, an Ohio corporation WHX ENTERTAINMENT CORPORATION, a Delaware corporation WHEELING-PITTSBURGH CAPITAL CORPORATION, a Delaware corporation WPC LAND CORPORATION, an Ohio corporation WHEELING-PITTSBURGH CORPORATION, a Delaware corporation WHEELING-PITTSBURGH STEEL CORPORATION, a Delaware corporation WHEELING CONSTRUCTION PRODUCTS, INC., a Delaware corporation WHEELING-EMPIRE COMPANY, a Delaware corporation WP STEEL VENTURE CORPORATION, a Delaware corporation WHEELING-PITTSBURGH FUNDING, INC., a Delaware corporation W-P COAL COMPANY, a West Virginia corporation CAMDEL METALS CORPORATION, a Delaware corporation CONTINENTAL INDUSTRIES, INC. an Oklahoma corporation ele CORPORATION, a California corporation HANDY & HARMAN, a New York Coroporation HANDY & HARMAN OF CANADA, LIMITED, an Ontario, Canada corporation HANDY & HARMAN ELECTRONIC MATERIALS CORPORATION, a Florida corporation HANDY & HARMAN (EUROPE) LIMITED, a UK corporation HANDY & HARMAN INTERNATIONAL, LTD., a Delaware corporation HANDY & HARMAN PERU, INC., a Delaware corporation HANDY & HARMAN TUBE COMPANY, INC., a Delaware corporation HANDY & HARMAN UK HOLDINGS LIMITED, a UK corporation INDIANA TUBE CORPORATION, a Delaware corporation INDIANA TUBE DANMARK A/S a Denmark corporation LUCAS-MILHAUPT, INC., a Wisconsin corporation MARYLAND SPECIALTY WIRE, INC., a Delaware corporation MICRO-TUBE FABRICATORS, INC., a Delaware corporation OLYMPIC MANUFACTURING GROUP, INC., a Delaware corporation RIGBY-MARYLAND (STAINLESS), LTD, a UK corporation SUMCO INC., an Indiana corporation WILLING B WIRE CORPORATION, a Delaware corporation WHX METALS CORPORATION, a Delaware corporation WHX AVIATION CORPORATION, a Delaware corporation GT ACQUISITION CORPORATION, a Delaware corporation EX-23.1 11 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements listed below of WHX Corporation of our reports dated February 18, 1999 and February 16, 1999, appearing on pages 23 and 51, respectively, of this Form 10-K. ON FORM S-3: File No. 33-54831 File No. 33-63845 ON FORM S-8: File No. 33-54801 File No. 33-56281 File No. 333-36985 File No. 333-64217 PricewaterhouseCoopers LLP Pittsburgh, Pennsylvania March 19, 1999 EX-27 12 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from the WHX Corporation consolidated Financial Statements as of December 31, 1998 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 16,004 702,082 97,552 2,366 467,130 1,293,904 1,288,390 469,313 2,712,084 885,026 893,356 0 589 175 445,748 2,712,084 1,645,498 1,645,498 1,376,431 1,594,282 0 0 78,096 62,816 23,386 39,430 0 2,241 0 41,671 1.16 1.11
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