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, 1999.
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 value New York Stock Exchange
Series B Convertible Preferred Stock, $.10 par value New York Stock Exchange
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, 2000 was $96,595,760, 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 1, 2000 was 14,461,741, including 276,268 shares of redeemable
Common Stock.
Documents Incorporated by Reference:
Definitive proxy statement filed pursuant to Regulation 14A in connection with
the 2000 annual meeting of stockholders Part III.
<PAGE>
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"), the nation's ninth largest 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
businesses include Handy & Harman ("H&H"), a diversified industrial
manufacturing company whose strategic business units encompass (a) manufacturing
and selling of non-precious metal wire, cable and tubing products, including
carbon steel, stainless steel and specialty alloys; (b) manufacturing and
selling of precious metals products and precision electroplated materials and
stamped parts; and (c) manufacturing and selling of other specialty products
supplied to roofing, construction, 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, automotive and
appliance industries.
WPC believes that it is one of the lowest-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 labor agreement reached in 1997 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% of 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 (a)
manufacturing and selling of non-precious metal wire, cable and tubing products,
primarily stainless steel and specialty alloy; (b) manufacturing and selling of
precious metals products and precision electroplated materials and stamped
parts; and (c) manufacturing and selling of other specialty products supplied to
roofing, construction, 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, utility,
telecommunications and medical industries.
<PAGE>
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.
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 and Ohio Coatings Company ("OCC").
H&H will continue to focus on high margin products and innovative
technology, while seeking growth through strategic acquisitions.
H&H's business strategy is to limit exposure to low margin, capital
intensive businesses and focus on high margin strategic businesses. In the mid
1990s, 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 focuses 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, and in June 1996, H&H
acquired ele Corporation, which provides a value-added reel-to-reel molding
capability appropriate for the semiconductor lead frame and sensors 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, both by internal growth and
acquisitions. 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. Unimast continued its
expansion with the July 1999 acquisition of Vinyl Corp., a manufacturer of vinyl
construction accessories.
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-added products have been realized during the 1990s as
(i) fabricated products operations were expanded, (ii) Wheeling-Nisshin's second
coating line increased its requirements of cold-rolled coils from
Wheeling-Pittsburgh Steel Company ("WPSC"), a subsidiary of WPC, and (iii) the
Company acquired Unimast in March 1995. In addition, the OCC joint venture
should enable the Company to increase tin mill product shipments in 2000 up to
an additional 31,000 tons compared to 1999 levels.
<PAGE>
<TABLE>
<CAPTION>
Historical Product Mix
----------------------
Year Ended December 31
----------------------
1999 1998 1997(1) 1996(1) 1995
---- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Product Category:
Higher Value-Added Products:
Cold Rolled Products--Trade .............................. 9.8% 9.9% 4.5% 7.6% 7.5%
Cold Rolled Products--Wheeling-Nisshin ................... 18.0 17.2 6.2 15.6 17.9
Coated Products(2) ....................................... 10.7 14.0 9.0 18.7 20.3
Tin Mill Products ........................................ 9.1 6.5 2.6 7.0 6.7
Fabricated Products ...................................... 14.3 14.1 31.3 16.6 14.1
Unimast(2) ............................................... 11.3 11.2 20.7 8.4 5.2
------ ------ ------ ------ ------
Higher Value-Added Products as a percentage
of total shipments ....................................... 73.2% 72.9% 74.3% 73.9% 71.7%
Hot Rolled Products .......................................... 26.8 26.8 16.0 26.1 28.3
Semi-Finished ................................................ -- 0.3 9.7 -- --
------ ------ ------ ------ ------
Total ........................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
Average Net Sales Per Ton .................................... $ 479 $ 524 $ 606 $ 544 $ 543
</TABLE>
(1) The allocation among product categories was affected by the strike.
(2) Reclassified for comparability.
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 blackplate and
tinplate. Blackplate 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 are concentrated in a variety of container markets, WPC also markets
products for automotive applications, such as oil filters and gaskets. WPC has
phased out its existing 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 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, and will
act as a distributor of the joint venture's products.
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.
<PAGE>
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, light commercial buildings and certain
residential roofing applications.
Highway Products. Highway products consist of bridge form, which are
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 294,000 tons of steel products in
1999 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. Unimast also uses
non-prime galvanized substrate for a material portion of its requirements,
providing the Company an additional outlet for some portion of its non-prime
products. Unimast has facilities in Franklin Park, Illinois; Warren, Ohio;
McDonough, Georgia; Baytown, Texas; Boonton, New Jersey; New Brighton,
Minnesota; Brooksville and Miami, Florida; Goodyear, Arizona and East Chicago,
Indiana.
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.
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 steel 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 473,000 tons, or 19.4% of WPC's total tons shipped in 1999 and
approximately 428,000 tons, or 19.1% in 1998.
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 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
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 all of OCC's products.
Nittetsu markets the product as a sales agent for the Company. In 1999 and 1998,
OCC had an operating income of $2.1 million and $0.3 million, respectively.
<PAGE>
Non-Steel Businesses
Handy & Harman
H&H, through several subsidiaries, manufactures a wide variety of
non-precious 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 carbon steel and stainless steel wire products redrawn
from rods are produced for such diverse applications as bearings, cable lashing,
hose reinforcement, nails, knitted mesh, wire rope, cloth, air bags and antennas
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) the "fabrication value", which includes 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 materials
and stamped parts (often using gold, silver, palladium and various base metals
on such materials and stamped parts) 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.
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 25.9% of its net sales
in 1997, 27.2% in 1998, and 27.5% in 1999. No single customer accounted for more
than 10% of net sales in 1997 or 1998. Wheeling-Nisshin accounted for 10.2% of
net sales in 1999. 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. 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.
<PAGE>
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
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Major Customer Category 1999 1998 1997(1) 1996(1) 1995
- ----------------------- ---- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Construction ................................ 25% 27% 44% 28% 22%
Steel Service Centers ....................... 28 27 26 24 27
Converters/Processors ....................... 25 29 13 23 26
Agriculture ................................. 5 5 11 7 6
Containers .................................. 10 7 2 6 6
Automotive .................................. 1 -- 2 5 5
Appliances .................................. 2 2 1 4 4
Exports ..................................... 1 1 -- -- 1
Other ....................................... 3 2 1 3 3
--- --- --- --- ---
Total .............................. 100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
(1) The allocation among customer categories was affected by the strike.
Construction. The shipments to the construction industry are heavily
influenced by the sales of Wheeling Corrugating and Unimast. Wheeling
Corrugating services the non-residential and agricultural building and highway
industries, principally through shipments of hot dipped galvanized and painted
cold rolled products. With its acquisitions during the 1980s and early 1990s of
regional facilities, Wheeling Corrugating has doubled its 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 1980s 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.
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.
<PAGE>
Automotive. Unlike the majority of its competitors, WPC is not
heavily dependent on shipments to the automotive industry. However, WPC has
established 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.
Appliances. 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.
Handy & Harman
Handy & Harman 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 1999, no customer
accounted for more than 3.5% 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, 1999, is estimated to be 19.6 million gross tons.
WPC generally consumes approximately 2.5 million gross tons of iron ore pellets
in its blast furnaces. The Company's pro rata cash operating cost of Empire
currently approximates the market price of ore. WPC obtains approximately one
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 2002 from world-class suppliers.
WPC has a long-term supply agreement with a 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
1999, approximately 1.6 million tons of coking coal were consumed in the
production of blast furnace coke by WPC. WPC sells 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 8.75% of its steel melt. The
cost of these materials has been susceptible in the past to price fluctuations,
but worldwide competition in the steel industry has frequently limited the
ability of steel producers to raise finished product prices to recover higher
material costs. Certain of WPC's raw material supply contracts provide for price
adjustments in the event of increased commodity or energy prices.
Unimast's raw material requirements consist 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 during the
year 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 294,000 tons for the year ended December 31,
1999.
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
<PAGE>
continue to be affected by world market conditions. Nonetheless, H&H has not
experienced any problem in obtaining the 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 problem in obtaining the 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 375,883 net tons at December 31, 1999,
compared to 365,622 net tons at December 31, 1998. All orders related to the
backlog at December 31, 1999 are expected to be shipped during the first half of
2000, subject to delays at the customers' request. The order backlog represents
orders received but not yet completed or shipped. In times of strong demand, a
higher order backlog may allow the Company to increase production runs, thereby
enhancing production efficiencies.
Capital Investments
The Company believes that it must continuously strive to improve
productivity and 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 1999 were approximately $104.0
million, including $7.7 million on environmental projects. From 1995 to 1999,
capital expenditures aggregated approximately $307.8 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 2000 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. The Company anticipates
that capital expenditures will approximate depreciation, on average, over the
next few years.
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, 1999
aggregated 7,549 employees, of which 3,348 were represented by the United Steel
Workers of America ("USWA"), and 975 by other unions. The remainder consisted of
1,850 salaried employees and 1,376 non-union operating employees. At December
31, 1999, WPC had 4,436 employees, H&H had 2,366 employees and Unimast had 747
employees.
On August 12, 1997, WPSC and USWA entered into a five-year labor
agreement.
<PAGE>
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 has been significant additional flat-rolled minimill capacity
constructed in recent years. These minimills and processors 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 fluctuated
between 88 million and slightly over 115 million tons since 1991. A number of
steel substitutes, including plastics, aluminum, composites and glass, have
reduced the growth of domestic steel consumption.
Steel imports of flat-rolled products as a percentage of domestic
apparent consumption, excluding semi-finished steel, have been approximately 20%
in 1997, 27% in 1998 and 23% in 1999. 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 that compete directly with Unimast, there are few
manufacturers that carry a comparable variety of products. Unimast competes on a
national basis and is increasing its presence in the Western U.S. 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 conduct activities in other product lines in which H&H
is not involved. Competition is based on quality, service and price, each of
which is of equal importance.
There are many companies, domestic and foreign, which manufacture
non-precious wire and tubing products, and other specialty products of the type
manufactured by H&H. Competition is based on quality, service, price and new
product introduction, each of which is of equal importance.
<PAGE>
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 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:
<TABLE>
<CAPTION>
Other Major Facilities
Location and Operations Capacity Tons/Year Major Products
- ----------------------- ------------------ --------------
<S> <C>
Allenport, Pennsylvania:
Continuous pickler, tandem mill,
temper mill and annealing lines..................... 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
</TABLE>
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 product facilities at Fort Payne, Alabama;
Houston, Texas; Lenexa, Kansas; Louisville, Kentucky; Minneapolis, Minnesota;
Warren, Ohio; Gary, Indiana; Emporia, Virginia; Grand Junction, Colorado; and
Klamath Falls and Brooks, Oregon.
WPC maintains regional sales offices in Atlanta, Chicago, Detroit,
Philadelphia, Pittsburgh and its corporate headquarters in Wheeling, West
Virginia.
Unimast has facilities located at Franklin Park, Illinois; Warren,
Ohio; McDonough, Georgia; Baytown, Texas; Boonton, New Jersey; New Brighton,
Minnesota; Brooksville and Miami, Florida; and East Chicago, Indiana.
<PAGE>
Handy & Harman
H&H, acquired in April 1998, has 23 active operating plants in the
United States, Canada, England, Denmark and Singapore (50% owned) with a total
area of approximately 1,860,000 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 offices, have a total
area of approximately 53,000 square feet) and owns nine non-operating or
discontinued locations with a total area of approximately 416,000 square feet.
H&H considers its manufacturing plants and services facilities to be well
maintained and efficiently equipped, and therefore suitable for the work being
done. The productive capacity and extent of utilization of its facilities is
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; Liversedge, England; Evansville and
Indianapolis, Indiana; Cockeysville, Maryland; Agawam, Westfield and North
Attleboro, Massachusetts; Middlesex and Willingboro, New Jersey; Canastota and
Oriskany, New York; Tulsa and Broken Arrow, Oklahoma; Norristown, Pennsylvania;
East Providence, Rhode Island; Cudahy, Wisconsin; and Singapore (50% owned).
All plants are owned in fee except for the Canastota, Fort Smith,
Middlesex, and Westfield plants, which are leased.
<PAGE>
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
$12.4 million, $9.5 million and $7.7 million for 1997, 1998 and 1999,
respectively. WPC anticipates spending approximately $13.6 million in the
aggregate on major environmental compliance projects through the year 2002,
estimated to be spent as follows: $6.7 million in 2000, $3.1 million in 2001,
and $3.8 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 ("CERCLA")
or similar state statutes at several waste sites. WPC is subject to joint and
several liability imposed by CERCLA 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 CERCLA laws. WPC believes, based
upon information currently available, that its liability for clean-up and
remediation costs in connection with the Buckeye Reclamation Landfill will be
between $1.5 million and $2.0 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 Clean Air 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 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 requiring certain soil
and groundwater testing and monitoring. The surface impoundment has been removed
and a final closure plan has been submitted to the EPA. WPC is waiting for
approval from the EPA to implement the plan. Until the EPA responds to WPC, the
full extent and cost of remediation cannot be ascertained.
In June 1995, the EPA informally requested corrective action
affecting other areas of the Follansbee facility. The EPA sought to require WPC
to perform a site investigation of the Follansbee plant. WPC actively contested
the EPA's jurisdiction to require a site investigation, but subsequently agreed
to comply with a final administrative order issued by the EPA in June 1998 to
conduct a Resource Conservation and Recovery Act ("RCRA") facility investigation
to determine the nature and extent of soil and groundwater contamination and
appropriate clean up methods. The Company anticipates spending up to $1 million
in year 2000 for sampling at the site.
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, 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.
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. In January 1996, the
EPA and the Company entered into a consent decree. Although the Company has paid
the civil penalties due pursuant to the terms of the consent decree, the Company
continues to accrue stipulated penalties to such consent decree. As of December
1999, the Company has accrued stipulated penalties of approximately $2.7
million.
<PAGE>
In June 1999, the Ohio Attorney General filed a lawsuit against WPC
alleging certain hazardous waste law violations at its Steubenville and
Yorkville, Ohio facilities and certain water pollution law violations at the
Company's Yorkville, Ohio facility relating primarily to the alleged unlawful
discharge of spent pickle liquor. The lawsuit contains forty-four separate
counts and seeks preliminary and permanent injunctive relief in addition to
civil penalties. Settlement negotiations with Ohio EPA are on-going and Ohio EPA
has demanded a civil penalty of $300,000.
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 its Steubenville and Mingo Junction, Ohio facilities
occurring from 1992 through 1996. In November 1999, Ohio EPA and WPC entered
into a consent decree settling the civil penalties related to this matter for
approximately $250,000. The consent decree also obligates the Company to pay
certain stipulated penalties for future air violations.
WPC has experienced discharges of oil through NPDES permitted
outfalls at its Mingo Junction, Ohio and Allenport, Pennsylvania plants. WPC
spent approximately $0.8 million and $1.5 million in 1998 and 1999,
respectively, to investigate and clean up oil spills at its Mingo Junction, Ohio
facility. WPC anticipates spending approximately $1.4 million to install a slip
lined pipe and an automated oil recovery system at its Mingo Junction, Ohio
facility. WPC has not yet received any notices of violation from the regulatory
agencies for such oil spills.
The EPA conducted a multimedia inspection of WPC's Steubenville,
Mingo Junction, Yorkville, and Martins Ferry, Ohio facilities in March and June
1999. The inspection covered all environmental regulations applicable to these
plants. WPC has received a Notice of Violation from EPA for alleged air
violations, but has not yet received notice of any violations of water or waste
laws. The air Notice of Violation does not specify the amount of penalties
sought by EPA. WPC is exploring settlement with EPA regarding such air
violations.
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 $12.7 million
at December 31, 1998 and $14.7 million at December 31, 1999. These accruals were
initially determined by WPC in January 1991, based on all then available
information. As new information becomes available, including information
provided by third parties, and changing laws and regulations, the liabilities
are reviewed and the accruals adjusted quarterly. 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 of WPC. However, as further
information comes into WPC's possession, it will continue to reassess such
evaluations.
<PAGE>
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 sought 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 were 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.
The Company has settled its claims against its co-defendant,
Plessey, Inc., and its claims against Twin City. As a result of those
settlements, a resolution of the Park Ridge lawsuit was reached on August 24,
1999 with no material effect to the Company.
Shareholder Lawsuits
Two purported class action lawsuits were commenced in connection
with the unsolicited tender offer commenced by WHX in December 1998 to acquire
all of H&H's shares for $30 per share in cash (the "Initial WHX Offer"). Both of
these purported class actions are not actively being pursued by the plaintiff at
the present time.
<PAGE>
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") that 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 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 instituted proceedings to determine whether the SEC should
enter an order requiring the Company (a) to cease and desist from committing or
causing any future violation of the rules alleged to have been violated and (b)
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.
Last year, an administrative law judge of the SEC held an evidentiary hearing on
the merits, but a decision has not been rendered to date. Although there can be
no assurance that an adverse decision will not be rendered, the Company intends
to continue to vigorously defend against the SEC's charges.
General Litigation
On October 27, 1998, the Company 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. The
Company asked the Court for injunctive relief to prohibit such sales. On
November 6, 1998, defendants removed the case from Belmont County to the U.S.
District Court for the Southern District of Ohio. The Company subsequently
amended its complaint to allege violations of the 1916 Antidumping Act by nine
trading companies. The amended complaint sought treble damages and injunctive
relief. The Court dismissed WPC's state law causes of action, but allowed it to
proceed with its claims under the 1916 Antidumping Act. In early June 1999, the
U.S. District Court issued an order holding that injunctive relief is not
available as a remedy under the 1916 Antidumping Act. The Company has appealed
the Court's decision to the Sixth Circuit Court of Appeals. The Company has
reached out-of-court settlements with six of the nine steel trading companies
named in this lawsuit. The Company's claims for treble damages, but not
injunctive relief, against the three remaining defendants were subsequently
dismissed as a result of settlement negotiations.
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.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1999 special meeting of stockholders was held on November 8,
1999.
(b) Matters voted on at the meeting and the number of votes cast.
<TABLE>
<CAPTION>
Votes Against
Voted for Or Withheld Abstentions
--------- ----------- -----------
<S> <C> <C> <C>
(1) Approval of amendment to the Certificate 7,617,374 3,303,247 332,538
of Incorporation and the By-Laws, until
June 30, 2001, to eliminate the right of
stockholders to call a special meeting of
stockholders and to permit only the
Chairman of the Board or the Board of
Directors to call special meetings of
stockholders.
(2) Approval of amendment to the Certificate of 7,620,307 3,293,195 339,657
Incorporation and the By-Laws,
until June 30, 2001, to eliminate stockholder
action by written consent.
(3) Approval of amendment to the Certificate of 7,693,931 3,216,266 342,962
Incorporation to require, until June 30,
2001, an affirmative vote of 66 2/3% of the
voting stock in order to (a) amend, repeal
or adopt any provision inconsistent with any
of the adopted amendments to the Certificate
of Incorporation proposed and (b) for
stockholders to amend any provision of the
By-Laws with respect to By-Law amendments.
</TABLE>
<PAGE>
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 1, 2000 was 14,461,741, including 276,268 shares of Redeemable Common
Stock. In 1998 and 1999, the Company purchased 1.8 million shares and 3.6
million shares, respectively, of Common Stock in open market purchases. The
repurchased shares have been retired.
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
---- ---
1999
First Quarter.............................. $ 11.750 $ 7.625
Second Quarter............................. 9.000 6.375
Third Quarter.............................. 10.375 6.438
Fourth Quarter............................. 10.063 7.813
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, 2000, there were approximately 11,645 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.
<PAGE>
Item 6. Selected Financial Data
Five-Year Statistical
(Thousands of Dollars)
<TABLE>
<CAPTION>
1999 1998 1997* 1996* 1995
---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Profit and Loss:
Net sales ........................................ $ 1,716,800 $ 1,645,498 $ 642,096 $ 1,232,695 $ 1,364,614
Cost of products sold (excluding
depreciation and amortization
and profit sharing) .......................... 1,430,389 1,376,431 720,722 1,096,228 1,147,899
Depreciation and amortization .................... 104,856 96,870 49,445 68,956 67,700
Profit sharing ................................... -- -- -- -- 6,718
Selling, administrative and general expense ...... 142,388 120,981 68,190 70,971 66,531
Special charge ................................... -- -- 92,701 -- --
----------- ----------- ----------- ----------- -----------
Operating income (loss) .......................... 39,167 51,216 (288,962) (3,460) 75,766
Interest expense on debt ......................... 87,851 78,096 29,047 25,963 22,830
Other income ..................................... 26,420 89,696 50,668 25,974 47,139
----------- ----------- ----------- ----------- -----------
Income (loss) before taxes ....................... (22,264) 62,816 (267,341) (3,449) 100,075
Tax provision (benefit) .......................... (6,430) 23,386 (93,569) (4,107) 19,014
----------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary items ......... (15,834) 39,430 (173,772) 658 81,061
Extraordinary items--net of tax .................. 896 2,241 (25,990) -- (3,043)
----------- ----------- ----------- ----------- -----------
Net income (loss) ................................ (14,938) 41,671 (199,762) 658 78,018
Preferred stock dividends ........................ 20,608 20,608 20,657 22,313 22,875
----------- ----------- ----------- ----------- -----------
Net income (loss) available to
common stock ................................. $ (35,546) $ 21,063 $ (220,419) $ (21,655) $ 55,143
=========== =========== =========== =========== ===========
Basic income (loss) per share:
Income (loss) before extraordinary items ......... $ (2.30) $ 1.04 $ (8.83) $ (.83) $ 2.25
Extraordinary items--net of tax .................. .06 .12 (1.18) -- (.12)
----------- ----------- ----------- ----------- -----------
Net income (loss) per share ...................... $ (2.24) $ 1.16 $ (10.01) $ (.83) $ 2.13
=========== =========== =========== =========== ===========
Average number of common shares
outstanding (in thousands) ....................... 15,866 18,198 22,028 26,176 25,850
Financial Position:
Cash, cash equivalents and short term
investments, net of short term
borrowings ................................... $ 174,590 $ 230,584 $ 305,934 $ 412,359 $ 439,493
Working capital .................................. 294,276 408,878 329,372 491,956 541,045
Property, plant and equipment--net ............... 816,501 819,077 738,660 755,412 793,319
Plant additions and improvements ................. 104,035 48,250 36,779 35,436 83,282
Total assets ..................................... 2,673,566 2,712,084 2,061,920 1,718,779 1,796,467
Long-term debt ................................... 847,720 893,356 350,453 268,198 285,676
Stockholders' equity ............................. 377,471 446,512 453,393 714,437 768,405
Number of stockholders of record:
Common ........................................... 11,666 11,915 12,273 12,697 13,408
Series A Convertible Preferred ................... 32 31 42 42 28
Series B Convertible Preferred ................... 74 69 79 62 48
Employment
Employment costs ................................. $ 443,333 $ 394,701 $ 204,004 $ 321,347 $ 343,416
Average number of employees ...................... 7,535 7,470 4,420 5,706 5,996
</TABLE>
WHX CORPORATION
* The financial results of the Company for the fourth quarter of 1996 and all
of 1997 were adversely affected by the strike.
<PAGE>
Notes to Five-Year Statistical Summary
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 one 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 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.
During 1999, the Company purchased and retired $20.5 million
aggregate principal amount of 10 1/2% Senior Notes in the open market, resulting
in an extraordinary gain of $0.9 million, net of tax.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Overview
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.
1999 Compared to 1998
Net sales for 1999 increased to $1.7 billion from $1.6 billion in
1998. Sales declined by $29.9 million at the Company's WPC operations as
increased steel shipments were offset by a continued weakness in steel prices.
WPC's sales were also negatively impacted as a result of reduced sales of coke
during 1999 as compared to 1998, which included sales of excess coke produced
during WPC's ten-month strike which ended August 1997. Comparative sales
increased by $115.8 million at H&H, reflecting 1999 as the first full reporting
year having been acquired on April 13, 1998. On a pro forma basis, H&H sales
actually declined in 1999 compared to 1998 by $4.5 million, reflecting lower
precious metal and stainless steel pricing in 1999. Sales increased $12.0
million to $217.4 million at Unimast compared to $205.4 million in 1998,
reflecting record steel shipments of over 294,000 tons in 1999.
Costs for 1999 increased to $1.43 billion from $1.38 billion in
1998. Operating costs increased by $8.1 million at the Company's WPC operations,
reflecting the higher volume of shipments partially offset by lower raw material
costs and the absence of coke sales as compared to 1998. Included in the 1998
costs are unfavorable physical inventory adjustments of $4.5 million. H&H's
operating costs in 1999 increased by $77.1 million, reflecting a full reporting
year in 1999 compared to a partial year in 1998. On a pro forma basis, H&H
operating costs declined by $16.8 million, reflecting lower raw material costs
in 1999 versus 1998. Unimast's operating costs in 1999 increased by $1.6 million
compared to 1998 reflecting the general increase in the level of operating
activity.
Depreciation and amortization expense increased to $104.9 million in
1999 from $96.9 million in 1998. Increased depreciation is principally due to
H&H reporting a full year in 1999, compared to a partial year in 1998.
Amortization increased $1.4 million reflecting the full year goodwill
amortization acquired in the H&H acquisition.
Selling, administrative and general expense for 1999 increased by
$21.4 million to $142.4 million in 1998. The increase is primarily due to H&H
reporting a full year in 1999 compared to a partial year in 1998.
Interest expense increased to $87.9 million in 1999 from $78.1
million in 1998. The increase is due to the outstanding 10 1/2% Senior Notes
issued in March 1998 for the purchase of H&H, as well as the assumption of H&H's
outstanding indebtedness.
Other income decreased $63.3 million to $26.4 million in 1999 as
compared to $89.7 million in 1998. The decrease is due primarily to the
difference in realized and unrealized gains on short-term investments in 1999
compared to 1998.
The tax benefit for 1999 and the provision for 1998 were $6.4
million and $23.4 million, respectively, and are based on pre-tax income or loss
before extraordinary items. The Company pays taxes under the alternative minimum
tax system and records the effect of deferred tax assets and liabilities caused
by temporary tax adjustments.
Loss before extraordinary items in 1999 totaled $15.8 million or
$2.30 per diluted share of Common Stock compared to income before extraordinary
items of $39.4 million, or $.99 per diluted share of Common Stock in 1998. The
1999 extraordinary gain of $1.4 million ($.9 million net of tax) and the 1998
extraordinary gain of $3.4 million ($2.2 million net of tax) reflects the
discount on the purchase of $20.5 million and $48.0 million aggregate principal
amount of 10 1/2% Senior Notes, respectively, in the open market.
<PAGE>
Net loss for 1999 totaled $14.9 million, or $2.24 per diluted share
of Common Stock after deduction of preferred stock dividends. The 1998 net
income was $41.7 million, or $1.11 per diluted share of Common Stock after
deduction of preferred stock dividends.
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 April 1998 acquisition of H&H,which provided
1998 sales of $350.3 million and (iii) Unimast's 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 $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 or loss before
extraordinary items. 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 items in 1998 totaled $39.4 million, or
$.99 per diluted 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.
<PAGE>
Net income in 1998 totaled $41.7 million, or $1.11 per diluted 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 diluted share of Common Stock
after deduction of preferred stock dividends.
Liquidity and Capital Resources
Net cash flow provided by operating activities for 1999 totaled
$163.9 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) provided $25.5 million of funds. Accounts
receivable increased $47.4 million (excluding a $5.0 million sale of trade
receivables under the Receivables Facility) due to increased sales. Inventories,
valued principally by the LIFO method for financial reporting purposes, totaled
$441.9 million at December 31, 1999, a decrease of $26.2 million from the prior
year end. Trade payables increased $38.8 million due to higher operating levels.
Net cash flow used in investing activities for 1999 totaled $111.8 million
including capital expenditures of $104.0 million. Net cash used in financing
activities totaled $57.3 million including repayments of long-term debt of $44.4
million, as well as $30.6 million utilized for Common Stock repurchases in the
open market.
For the year ended December 31, 1999, the Company spent $104.0
million (including capitalized interest) on capital improvements, including $7.7
million on environmental control projects.
On July 30, 1998, H&H entered into a $300 million Senior Secured
Credit facility (the "Facilities") with Citibank, N.A. 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 at December
31, 1999 were (a) in the case of the Term A Facility, the Delayed Draw Facility
and the Revolving Credit Facility, calculated at LIBOR + 1.5% and (b) in the
case of the Term B facility, calculated at LIBOR + 2.25%. 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.
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. During the first quarter of
1999, the Company purchased and retired $20.5 million aggregate principal amount
of 10 1/2% Senior Notes in the open market for $19.1 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 of 1933. 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 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 the WPC's then
outstanding and future operating subsidiaries.
<PAGE>
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.
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 and two of the Company's subsidiaries: Wheeling Construction Products, Inc.
("WCPI") and Pittsburgh Canfield Company ("PCC") (the Receivables Facility). In
1995 WPSC entered into an agreement to include the receivables generated by
Unimast Incorporated ("Unimast"), a wholly-owned subsidiary of WHX, in the pool
of accounts receivable sold. In May 1999, the Receivables Facility was extended
through May 2003 and increased to $100 million on a revolving basis. Effective
June 1999, Unimast withdrew from participation in the facility. Accounts
receivable at December 31, 1999 exclude $100 million representing uncollected
accounts receivable sold with recourse limited to the extent of uncollectible
balances. Fees paid by WPSC under this Receivables Facility were based upon
variable rates that range from 4.94% to 7.42%. Based on the Company's collection
history, the Company believes that credit risk associated with the above
arrangement is immaterial.
On April 30, 1999, WPSC entered into a Third 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 including a $25 million sub-limit for letters of credit. The RCF
agreement expires May 3, 2003. Interest rates are based on the Citibank prime
rate plus 1.25% and/or a Eurodollar rate plus 2.25%. The margin over the prime
rate and the Eurodollar rate can fluctuate based upon performance. A commitment
fee of 0.5% 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, PCC and WCPI 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. WPSC, PCC and WCPI are
wholly-owned subsidiaries of WPC. Certain financial covenants associated with
leverage, 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
Revolving Credit Facility. Borrowings outstanding against the RCF at December
31, 1999 totaled $79.9 million. Letters of credit outstanding under the RCF were
$0.1 million at December 31, 1999.
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 WPSC and H&H plans as
they existed before the merger.
In 1999, the Company repurchased approximately 3.6 million shares of
Common Stock for $30.6 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 1999 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 or results of
operations.
As of December 31, 1999, the company had cash and short-term
investments, net of related investment borrowings, of $174.6 million. During
1999, the Company purchased $20.5 million aggregate principal amount of its 10
1/2% Senior Notes due 2005 in the open market.
WHX's company-wide Year 2000 Project was ready on schedule. The
project addressed all aspects of computing in the company, including mainframe
systems, external data interface to customers, suppliers, banks, government,
mainframe controlling software, voice and data systems, internal networks and
personal computers, plant process control systems, building controls, and
surveying major suppliers and customers to assure their readiness.
<PAGE>
Mainframe business systems, external data interfaces, mainframe
software, voice and data systems, internal networks, personal computers and
building controls, as well as process control and auxiliary systems proved to be
Year 2000 compliant during the January 1, 2000 date rollover. Critical suppliers
and customers are being monitored with no major problems identified to date.
The total costs associated with the Year 2000 project are not
expected to be material to the Company's financial condition or results of
operations. The total amount expended on the project through January 2000 is
approximately $3.5 million. Funds were provided through departmental expenses
budgeted at the beginning of the project.
Failure to correct a Year 2000 problem could have resulted in an
interruption of certain normal business activities or operations. The Company
believes that the implementation of the Year 2000 project prevented any
interruptions. The Company will continue to monitor critical business systems
for possible Year 2000 systems issues.
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 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
2000 from cash on hand and funds generated from operations.
Non-current accrued environmental liabilities totaled $12.7 million
at December 31, 1998 and $14.7 million at December 31, 1999. These accruals were
initially determined by the Company in January 1991, based on all then-available
information. As new information becomes available, including information
provided by third parties, and changing laws and regulations, the liabilities
are reviewed and the accruals adjusted quarterly. 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. 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 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 in net income or as an element of comprehensive income. SFAS 133
is effective for fiscal years beginning after June 15, 2000. 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.
<PAGE>
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 fluctuation 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 fluctuation 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.
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, 1999, the Company held $45.2 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 1999, a hypothetical 10% decrease in the value of the equity trading
securities would have resulted in a $4.5 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, 1999, the Company held $17.2 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, 1999, associated with the
Company's available for sale securities totaled $1.5 million, net of tax. At
year-end 1999, a hypothetical 10% decrease in the value of the equity available
for sale securities would have resulted in a $1.1 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.
<PAGE>
Interest Rate Risk
The Company is subject to the effects of interest rate fluctuation
on certain of its financial instruments. A sensitivity analysis of the projected
incremental effect of a hypothetical 10% change in 1999 year-end interest rates
on the fair value of WHX's financial instruments is provided in the following
table:
<TABLE>
<CAPTION>
Fair
Carrying Market Incremental(1)
Value Value Incr./(Decr.)
----- ----- -------------
(Dollars in Thousands)
<S> <C> <C> <C>
Financial assets:
Investments in fixed income securities........................ $ 581,250 $ 581,250 $ (25,938)
Financial liabilities:
Fixed-rate long-term debt (including amounts due
within one year).......................................... $ 555,665 $ 534,360 $ 34,025
</TABLE>
(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 table above.
At December 31, 1999, the Company's investment portfolio included
U.S. government fixed income securities totaling $581.3 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 1999, the Company recognized realized
and unrealized losses totaling $49.4 million in connection with its fixed-income
securities investment portfolio. The Company's exposure to increase 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.
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, 1999, 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 result 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 arrangements.
<PAGE>
Safe Harbor
The Company's quantitative and qualitative disclosures about market
risk include forward-looking statements with respect to management's opinion
about the risk 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.
<PAGE>
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, 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,
1999 and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and the
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
February 10, 2000
<PAGE>
Item 8. Financial Statements and Supplementary Data
Consolidated Statement of Operations (in Thousands except per share)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
Net sales .................................................. $ 1,716,800 $ 1,645,498 $ 642,096
Cost and expenses:
Cost of products sold, excluding depreciation .............. 1,430,389 1,376,431 720,722
Depreciation and amortization .............................. 104,856 96,870 49,445
Selling, administrative and general expense ................ 142,388 120,981 68,190
Special charge ............................................. -- -- 92,701
----------- ----------- -----------
1,677,633 1,594,282 931,058
Operating income (loss) .................................... 39,167 51,216 (288,962)
Interest expense on debt ................................... 87,851 78,096 29,047
Other income ............................................... 26,420 89,696 50,668
----------- ----------- -----------
Income (loss) before taxes and extraordinary
items .................................................. (22,264) 62,816 (267,341)
Tax provision (benefit) .................................... (6,430) 23,386 (93,569)
----------- ----------- -----------
Income (loss) before extraordinary items ................... (15,834) 39,430 (173,772)
Extraordinary items--net of tax ............................ 896 2,241 (25,990)
----------- ----------- -----------
Net income (loss) .......................................... (14,938) 41,671 (199,762)
Dividend requirement for preferred stock ................... 20,608 20,608 20,657
----------- ----------- -----------
Net income (loss) available to common stock ................ $ (35,546) $ 21,063 $ (220,419)
=========== =========== ===========
Basic income (loss) per share of common stock
Income (loss) before extraordinary item .................... $ (2.30) $ 1.04 $ (8.83)
Extraordinary item--net of tax ............................. .06 .12 (1.18)
----------- ----------- -----------
Net income (loss) per share ................................ $ (2.24) $ 1.16 $ (10.01)
=========== =========== ===========
Income (loss) per share of common stock
--assuming dilution
Income (loss) before extraordinary item .................... $ (2.30) $ .99 $ (8.83)
Extraordinary item--net of tax ............................. .06 .12 (1.18)
----------- ----------- -----------
Net income (loss) per share--assuming dilution ............. $ (2.24) $ 1.11 $ (10.01)
=========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WHX CORPORATION
<PAGE>
Consolidated Balance Sheet (in Thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1999 1998
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................... $ 10,775 $ 16,004
Short term investments ....................................................... 659,356 702,082
Trade receivables, less allowance for doubtful accounts
of $2,306 and $2,366 ..................................................... 141,091 97,552
Inventories .................................................................. 441,869 467,130
Prepaid expenses and deferred charges ........................................ 14,622 11,136
----------- -----------
Total current assets ......................................................... 1,267,713 1,293,904
Investment in associated companies ........................................... 80,490 84,978
Property, plant and equipment, at cost less
accumulated depreciation and amortization ................................ 816,501 819,077
Intangibles, net of amortization ............................................. 280,766 288,216
Deferred income taxes ........................................................ 123,033 110,935
Intangible asset--pensions ................................................... -- 50,449
Prepaid pension .............................................................. 40,336 --
Deferred charges and other assets ............................................ 64,727 64,525
----------- -----------
$ 2,673,566 $ 2,712,084
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables ............................................................... $ 171,229 $ 132,412
Short term debt .............................................................. 599,447 559,501
Payroll and employee benefits ................................................ 78,162 69,845
Federal, state and local taxes ............................................... 14,473 12,516
Deferred income taxes--current ............................................... 67,793 69,551
Interest and other ........................................................... 40,523 40,589
Long-term debt due in one year ............................................... 1,810 612
----------- -----------
Total current liabilities .................................................... 973,437 885,026
Long-term debt ............................................................... 847,720 893,356
Pension liability ............................................................ -- 5,952
Other employee benefit liabilities ........................................... 400,425 423,225
Other liabilities ............................................................ 71,181 54,383
----------- -----------
2,292,763 2,261,942
----------- -----------
Redeemable common stock--282 shares and 298 shares ........................... 3,332 3,630
----------- -----------
Stockholders' Equity:
Preferred stock--$.10 par value; authorized 10,000
shares; issued and outstanding: 5,883 shares ............................. 589 589
Common stock $.01 par value; authorized 60,000
shares; issued and outstanding: 14,145 and 17,545 shares ................. 141 175
Accumulated other comprehensive income ....................................... 945 5,472
Additional paid-in capital ................................................... 553,861 582,795
Accumulated earnings (deficit) .............................................. (178,065) (142,519)
----------- -----------
377,471 446,512
----------- -----------
$ 2,673,566 $ 2,712,084
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WHX CORPORATION
<PAGE>
Consolidated Statement of Cash Flows (in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998* 1997*
---- ----- -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................................. $ (14,938) $ 41,671 $(199,762)
Items not affecting cash from operating activities:
Depreciation and amortization ................................................. 104,856 96,870 49,776
Other postretirement benefits ................................................. (8,065) (8,409) 2,322
Extraordinary items, net of tax ............................................... (896) (2,241) 25,990
Income taxes .................................................................. (9,264) 19,575 (94,029)
(Gain) loss on asset dispositions ............................................. 408 (8,998) 2,335
Special charges, net of current portion ....................................... -- -- 69,137
Pension expense ............................................................... 4,341 9,236 9,327
Equity loss (income) in affiliated companies .................................. (4,343) (5,699) 1,644
Decrease (increase) in working capital elements, net of effect of acquisitions:
Trade receivables ............................................................. (47,427) (7,487) (43,188)
Trade receivables sold ........................................................ 5,000 26,000 24,000
Inventories ................................................................... 26,214 (4,821) (69,355)
Short term investments-trading ................................................ 51,638 (142,069) (70,239)
Investment account borrowings ................................................. 8,040 212,012 206,649
Other current assets .......................................................... (3,406) 38,383 (12,639)
Other current liabilities ..................................................... 46,600 (38,661) 69,411
Other items--net .................................................................. 5,098 613 15,705
--------- --------- ---------
Net cash provided by (used in) operating activities ............................... 163,856 225,975 (12,916)
--------- --------- ---------
Cash flows from investing activities:
Plant additions and improvements .............................................. (104,035) (48,250) (36,779)
Short term investments--available for sale .................................... (14,971) 6,740 (26,290)
Handy & Harman acquisition, net of cash acquired .............................. -- (402,632) (13,222)
Clinch-on acquisition ......................................................... -- (8,335) --
Vinyl Corp acquisition, net of cash acquired .................................. (12,827) -- --
Other investments ............................................................. 3,212 -- (7,150)
Proceeds from sales of assets ................................................. 11,222 835 1,217
Dividends from affiliated companies ........................................... 5,594 5,000 2,500
--------- --------- ---------
Net cash used in investing activities ............................................. (111,805) (446,642) (79,724)
--------- --------- ---------
Cash flows from financing activities:
Long-term debt proceeds, net of issuance cost ................................. -- 561,749 340,455
Long-term debt retirement ..................................................... (44,438) (267,321) (268,766)
Premium on early debt retirement .............................................. -- -- (32,600)
Letter of credit collateralization ............................................ 8,229 1,520 16,984
Short-term borrowings (payments) .............................................. 31,906 (18,929) 89,546
Common stock purchases ........................................................ (30,591) (20,228) (55,604)
Preferred stock purchases ..................................................... -- -- (9,839)
Preferred stock dividends ..................................................... (20,608) (20,608) (20,657)
Redemption of equity issues ................................................... (209) 300 (897)
Dividends on minority interest in consolidated
subsidiaries ................................................................ (1,569) (814) --
--------- --------- ---------
Net cash provided by (used in) financing activities ............................... (57,280) 235,669 58,622
--------- --------- ---------
Increase (decrease) in cash and cash equivalents .................................. (5,229) 15,002 (34,018)
Cash and cash equivalents at beginning of year .................................... 16,004 1,002 35,020
--------- --------- ---------
Cash and cash equivalents at end of year .......................................... $ 10,775 $ 16,004 $ 1,002
========= ========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WHX CORPORATION
* Reclassified to conform to 1999 presentation
<PAGE>
Consolidated Statement of Changes in Stockholders' Equity (Dollars and shares in
thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Preferred Treasury Comprehensive Comprehensive
Stock Stock Stock Income Income
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1997................................ $ 245 $ 614 $ (1,382) --
Net loss............................................... -- -- -- (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)............................. -- -- --
Stock options exercised (1,735 shares)................. 2 -- --
WPN stock option....................................... -- -- --
401K contribution (107 shares)......................... 1 -- --
Purchase of treasury stock (5,537 shares).............. -- -- (55,602)
Retirement of treasury stock
(5,489 shares)..................................... (55) -- 54,766
Retirement of preferred stock (254 shares)............. -- (25) --
Preferred dividends.................................... -- -- --
------- ------- ---------------- ----------------
Balance December 31, 1997.............................. 193 589 (2,218) 15,754
Net income............................................. -- -- -- 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)............................. -- -- --
Stock options exercised (161 shares)................... 1 -- --
401K contribution (89 shares).......................... 1 -- --
Purchase of treasury stock
(1,780 shares)..................................... -- -- (20,228)
Retirement of treasury stock
(1,985 shares)..................................... (20) -- 22,446
Preferred dividends.................................... -- -- --
------- ------- ---------------- ----------------
Balance December 31, 1998.............................. 175 589 0 5,472
Net loss............................................... -- -- -- (14,938)
Other comprehensive income, net of tax
Unrealized gains arising during period................. 3,393
Reclassification adjustment for
gains included in net income....................... (7,332)
Foreign currency translation
adjustments........................................ (588)
--------------
Other comprehensive income............................. (4,527) (4,527)
--------------
Comprehensive income................................... (19,465)
==============
EIP shares sold (1 share).............................. -- --
Stock options exercised (11 shares).................... -- -- --
401k contribution (182 shares)......................... 2 -- --
Purchase of treasury stock
(3,594 shares)..................................... -- -- (30,591)
Retirement of treasury stock
(3,594 shares)..................................... (36) -- 30,591
Preferred dividends.................................... -- -- --
------- ------- ---------------- ----------------
Balance December 31, 1999.............................. $ 141 $ 589 $ 0 $ 945
======= ======= ================ ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated Capital in
Earnings Excess of
(Deficit) Par Value
--------- ---------
<S> <C> <C>
Balance January 1, 1997................................ $ 56,837 $ 658,123
Net loss............................................... (199,762) --
Other comprehensive income, net of tax
Unrealized gains arising during period.................
Foreign currency translation adjustments...............
Other comprehensive income.............................
Comprehensive income...................................
EIP shares sold (4 shares)............................. 67
Stock options exercised (1,735 shares)................. 1,388
WPN stock option....................................... 6,678
401K contribution (107 shares)......................... 927
Purchase of treasury stock (5,537 shares).............. -- --
Retirement of treasury stock
(5,489 shares)..................................... -- (54,712)
Retirement of preferred stock (254 shares)............. -- (9,814)
Preferred dividends.................................... (20,657) --
---------------- --------------
Balance December 31, 1997.............................. (163,582) 602,657
Net income............................................. 41,671 --
Other comprehensive income, net of tax
Unrealized gains arising during period.................
Reclassification adjustment for
gains included in net income.......................
Foreign currency translation adjustments...............
Other comprehensive income.............................
Comprehensive income...................................
EIP shares sold (9 shares)............................. -- 137
Stock options exercised (161 shares)................... -- 1,339
401K contribution (89 shares).......................... -- 1,088
Purchase of treasury stock
(1,780 shares)..................................... -- (22,426)
Retirement of treasury stock
(1,985 shares)..................................... -- --
Preferred dividends.................................... (20,608) --
---------------- --------------
Balance December 31, 1998.............................. (142,519) 582,795
Net loss............................................... (14,938) --
Other comprehensive income, net of tax
Unrealized gains arising during period.................
Reclassification adjustment for
gains included in net income.......................
Foreign currency translation
adjustments........................................
Other comprehensive income.............................
Comprehensive income...................................
EIP shares sold (1 share).............................. -- 10
Stock options exercised (11 shares).................... -- 78
401k contribution (182 shares)......................... -- 1,533
Purchase of treasury stock
(3,594 shares)..................................... -- --
Retirement of treasury stock
(3,594 shares)..................................... -- (30,555)
Preferred dividends.................................... (20,608) --
---------------- --------------
Balance December 31, 1999.............................. $ (178,065) $ 553,861
================ ==============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WHX CORPORATION
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
The accounting policies presented below have been followed in
preparing the accompanying consolidated financial statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiary companies. All significant intercompany accounts and transactions are
eliminated in consolidation. The Company uses the equity method of accounting
for investments in unconsolidated companies owned 20% or more.
Business Segment
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 businesses include Handy & Harman ("H&H"), a diversified
industrial manufacturing company whose strategic business units encompass (a)
manufacturing and selling of non-precious metal wire, cable and tubing products
including carbon steel, stainless steel and specialty alloys; (b) manufacturing
and selling of precious metals products and precision electroplated material and
stamped parts; and (c) manufacturing and selling of other specialty products
supplied to roofing, construction, 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
disclosure 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 amounts of cash and cash equivalents, receivables,
short-term borrowings, accounts payable, accrued interest, and variable-rate
long-term debt approximate fair value because of the short maturity of those
instruments or the variable nature of underlying interest rates. 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 1999 and 1998, approximately 80% and 75%, respectively, of
inventories are valued using the LIFO method.
<PAGE>
Property, Plant and Equipment
WPC's 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.
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 for periods ranging
from 15 to 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 excess 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, Other Postretirement and Postemployment 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 tax qualified defined contribution
pension plans covering 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
Principle Board 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. Costs of future expenditures for environmental remediation
obligations are not discounted to their present value. Recoveries of
environmental remediation costs from other parties are recorded as assets when
their receipt is deemed probable.
<PAGE>
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 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 Accounting Principles Board Opinion No. 16 ("APB 16"). Accordingly, the
assets and liabilities of Handy & Harman 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 pro forma disclosure is presented as if the Handy &
Harman acquisition had occurred on January 1 of the respective periods.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1998 1997
---- ----
(in millions, except per share)
<S> <C> <C>
Revenue.............................................. $ 1,765.8 $ 1,093.2
Income (loss) before extra-ordinary items............ 36.5 (194.6)
Net income (loss).................................... 38.8 (220.6)
Basic income (loss) per share:....................... $ 1.00 $ (10.95)
Diluted income (loss) per share:..................... $ .95 $ (10.95)
</TABLE>
The results of Handy & Harman included in the pro forma have been
adjusted to exclude merger related transaction costs.
Note C--Special Charge--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.
<PAGE>
The special charge 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 the Company 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 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 an service. For the hourly employees, company
contributions are made for each hour worked based on the age of its employees.
As of December 31, 1999, $131.1 million of fully vested funds were
held in trust for benefits earned under the hourly defined contribution pension
plans. Approximately 87% of the trust assets were invested in equities, 12% in
fixed income investments, and 1% in cash and cash equivalents.
As of December 31, 1999, $41.6 million of fully vested funds are
held in trust for benefits earned under the salaried employees defined
contribution plan. Approximately 87% of the assets are invested in equities, 12%
are in fixed income investments, and 1% in cash and cash equivalents. All plan
assets are invested by professional investment managers.
All pension provisions charged against income totaled $12.6
million, $14.2 million and $9.8 million in 1997, 1998 and 1999, 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 $130.3 million at December 31, 1999.
As part of the new 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, 1998.
The
<PAGE>
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
H&H 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.
In addition to the aforementioned defined benefit plans, for
certain operations, H&H has a non-qualified pension plan for current and retired
employees.
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.
The following table presents a reconciliation of beginning and
ending balances of the projected benefit obligation.
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Benefit obligation at January 1....................................... $ 309,723 $ 172,431
Service cost.......................................................... 6,683 6,163
Interest cost......................................................... 20,122 16,495
Actuarial (gain)/loss................................................. (25,879) 6,771
Benefits paid......................................................... (23,541) (30,232)
Plan amendments -implementation....................................... 10 813
Business combinations................................................. -- 122,442
Transfers from DC plans............................................... 3,242 14,270
---------------- ---------------
Benefit obligation at December 31..................................... $ 290,360 $ 309,153
================ ===============
</TABLE>
<PAGE>
The following table presents a reconciliation of beginning and ending balances
of the fair value of plan assets.
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Fair value of plan assets at January 1........... $ 297,740 $ 5,180
Actual return on plan assets..................... 30,161 33,390
Employer Contributions........................... -- --
Benefits paid.................................... (23,531) (30,232)
Business combinations............................ -- 275,132
Transfers from DC plans.......................... 3,242 14,270
---------------- ---------------
Fair value of plan assets at December 31......... $ 307,612 $ 297,740
================ ===============
Funded status.................................... $ 17,252 $ (11,413)
Unrecognized prior service cost.................. 64,716 71,017
Unrecognized actuarial (gain)/loss............... (42,090) (15,107)
---------------- ---------------
Net amount recognized............................ $ 39,878 $ 44,497
================ ===============
</TABLE>
The following table presents the amounts recognized in the statement of
financial position.
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Prepaid benefit cost............................. $ 39,878 $ --
Accrued benefit liability........................ -- (5,952)
Intangible asset................................. -- 50,449
Accumulated other comprehensive income........... -- --
---------------- ---------------
Net amount recognized............................ $ 39,878 $ 44,497
================ ===============
</TABLE>
The following table presents the components of net periodic pension cost.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost................................. $ 6,683 $ 6,163 $ 2,278
Interest cost................................ 20,122 16,494 4,172
Expected return on plan assets............... (28,994) (18,619) --
Curtailment loss............................. -- -- 66,676
Amortization of prior service cost........... 6,524 6,509 2,877
Recognized actuarial (gain)/loss............. 6 (1,401) --
------------ -------------- --------------
Total........................................ $ 4,341 $ 9,146 $ 76,003
============ ============== ==============
</TABLE>
The following table presents the weighted-average assumptions at December 31,
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................. 8.0% 6.5% 7.0%
Expected return on assets...................... 10.0% 10.0% 10.0%
Rate of compensation increase.................. 4.0% 4.0% N/A
</TABLE>
<PAGE>
The following table presents the plans with the accumulated benefit obligation
in excess of plan assets.
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Projected benefit obligation.................. $ 619 $ 309,153
Accumulated benefit obligation................ 308 303,692
Fair value of assets.......................... 0 297,740
</TABLE>
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,
1997, 1998 and 1999, the 401(k) plans held 275,537 shares, 301,252 shares and
452,769 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 6.5% at December 31, 1998 and, 8.0% at
December 31, 1999.
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
is 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.
The following table presents a reconciliation of beginning and
ending balances of the Accumulated Postretirement Benefit Obligation ("APBO").
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
APBO at January 1........................................... $ 306,839 $ 308,812
Service cost................................................ 2,650 2,264
Interest cost............................................... 19,396 19,539
Actuarial (gain)............................................ (28,943) (3,359)
Benefits paid............................................... (22,772) (28,074)
Business combinations....................................... -- 7,657
---------------- ---------------
APBO at December 31......................................... $ 277,170 $ 306,839
================ ===============
</TABLE>
<PAGE>
The following table presents a reconciliation of beginning and ending balances
of the fair value of plan assets.
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Fair value of plan assets at January 1................................... $ 424 $ 7,795
Actual return on plan assets............................................. 23 137
Benefits paid............................................................ (447) (7,508)
---------------- ---------------
Fair value of plan assets at December 31................................. $ -- $ 424
================ ===============
The following table presents the amounts recognized in the statement of
financial position as of December 31.
Funded status............................................................ $ (277,170) $ (306,415)
Unrecognized prior service cost.......................................... (32,649) (36,568)
Unrecognized actuarial gain.............................................. (92,572) (70,094)
---------------- ---------------
Net amount recognized.................................................... $ (402,391) $ (413,077)
================ ===============
</TABLE>
The following table presents the components of net periodic benefit cost.
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost........................................................ $ 2,650 $ 2,264 $ 2,488
Interest cost....................................................... 19,396 19,539 20,950
Expected return on plan assets...................................... (6) (156) --
Amortization of prior service cost.................................. (3,309) (3,918) --
Recognized actuarial gain........................................... (3,918) (5,696) (7,490)
------------ -------------- --------------
Total............................................................... $ 14,813 $ 12,033 $ 15,948
============ ============== ==============
</TABLE>
The following table presents the weighted-average assumptions at December 31,
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate....................................................... 8.0% 6.5% 7.0%
Expected return on assets........................................... 8.0% 8.0% 8.0%
Health care cost trend rate......................................... 8.0% 8.5% 9.0%
</TABLE>
For measurement purposes, medical costs are assumed to increase at
annual rates as stated above and declining gradually to 5.5% 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 $20.4 million,
and net periodic benefit cost of $3.8 million. A 1% decrease in the health care
cost trend rate would result in approximate decreases of $18.2 million in APBO
and net periodic benefit cost of $3.4 million.
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, 1999 the actuarially determined liability
discounted at 8.0% covering 460 assigned retirees and dependents and 166
orphans, totaled $9.5 million. 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. The Company recorded an extraordinary charge
of $1.7 million (net of tax) in 1997 related to assignment of additional
orphans.
<PAGE>
Note E--Income Taxes
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Income Taxes Before Extraordinary Items
Current
Federal tax provision (benefit) .................... $ (96) $ 1,854 $ --
State tax provision ................................ 3,055 1,573 460
Foreign tax provision (benefit) .................... (125) 22 --
--------- --------- -------
Total income taxes current ................ 2,834 3,449 460
--------- --------- -------
Deferred
Federal tax provision (benefit) .................... (9,264) 19,575 (94,029)
State tax provision ................................ -- 362 --
--------- --------- -------
Income tax provision (benefit) ......................... $ (6,430) $ 23,386 $ (93,569)
========= ========= =========
Total Income Taxes
Current
Federal tax provision (benefit) .................... $ (96) $ 1,854 $ --
State tax provision ................................ 3,055 1,573 460
Foreign tax provision (benefit) .................... (125) 22 --
--------- --------- ---------
Total income taxes current ................ 2,834 3,449 460
--------- --------- ---------
Deferred
Federal tax provision (benefit) .................... (8,782) 20,781 (108,024)
State tax provision ................................ -- 362 --
--------- --------- ---------
Income tax provision (benefit) ......................... $ (5,948) $ 24,592 $(107,564)
========= ========= =========
Components of Total Income Taxes
Operations ............................................. $ (6,430) $ 23,386 $ (93,569)
Extraordinary items .................................... 482 1,206 (13,995)
--------- --------- ---------
Income tax provision (benefit) ......................... $ (5,948) $ 24,592 $(107,564)
========= ========= =========
</TABLE>
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:
<PAGE>
Deferred Income Tax Sources
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Millions)
<S> <C> <C>
Assets
Postretirement and postemployment employee benefits................................ $ 142.7 $ 146.5
Operating loss carryforwards (expiring in 2005 to 2019)............................ 72.8 67.6
Minimum tax credit carryforwards (indefinite carryforward)......................... 52.0 52.1
Provision for expenses and losses.................................................. 47.2 49.0
Leasing activities................................................................. 20.3 22.2
State income taxes................................................................. 1.2 2.5
Miscellaneous other................................................................ 7.5 5.8
--------- ---------
Deferred Tax Assets................................................... $ 343.7 $ 345.7
--------- ---------
Liabilities
Property plant and equipment....................................................... $ 160.7 $ 173.1
Inventory ...................................................................... 69.0 66.3
Pension ...................................................................... 23.4 25.6
State income taxes................................................................. 4.1 8.5
Miscellaneous other................................................................ 6.5 2.7
--------- ---------
Deferred Tax Liability................................................ $ 263.7 $ 276.2
--------- ---------
Valuation allowance................................................................ (24.8) (28.1)
--------- ---------
Deferred Income Tax Asset--Net........................................ $ 55.2 $ 41.4
========= =========
</TABLE>
As of December 31, 1999, 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 have been recorded in
1997, 1998 or 1999.
During 1999, the valuation allowance decreased $3.2 million due to
the expiration of tax credit carryovers and a change in judgement about the
realizability of net operating losses in future periods.
During 1998, the valuation allowance increased $8.1 million,
primarily due to a change in judgment 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 in any year. Post-change of control net operating losses do not have an
annual offset limitation.
Total federal and state income taxes paid in 1997, 1998 and 1999
were $0.7 million, $1.2 million and $3.5 million, respectively.
Federal tax returns have been examined by the Internal Revenue
Service ("IRS") through 1987. The Company is currently undergoing an IRS
examination of tax returns for the years 1995-1997. Management believes that
there will be no material adjustments to the income tax returns filed in those
years. The statute of limitations has expired for years through 1995. Management
believes it has adequately provided for all taxes on income.
<PAGE>
The provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to pretax income as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Income (loss) before taxes and extraordinary item.................. $ (22,264) $ 62,816 $ (267,341)
================ ============ =================
Tax provision (benefit) at statutory rate.......................... $ (7,792) $ 21,986 $ (93,569)
Increase (reduction) in tax due to:
Percentage depletion........................................... (530) (829) (1,092)
Equity earnings................................................ (1,300) (1,484) 338
Goodwill amortization.......................................... 2,375 1,983 --
State income tax net of federal effect......................... 1,986 1,258 299
Recognition of pre-acquisition benefits........................ -- (4,519) --
Change in valuation allowance.................................. (3,246) 4,904 --
Net effect of foreign tax rate................................. 624 94 --
Adjustment of prior year's tax................................. 575 -- --
Other miscellaneous............................................ 878 (7) 455
---------------- ------------ -----------------
Tax provision (benefit)............................................ $ (6,430) $ 23,386 $ (93,569)
================ ============ =================
</TABLE>
<PAGE>
Note F--Short Term Investments
The composition of the Company's short-term investments are as
follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Trading Securities:
U. S. Treasury Securities............................................... $ 581,250 $ 640,125
U. S. Government Agency Mortgage Backed Obligations..................... 2,038 3,880
Equities................................................................ 45,238 30,308
Other................................................................... 13,628 4,537
Available-for-sale securities:
Equities................................................................ 17,202 23,232
---------------- ---------------
$ 659,356 702,082
================ ===============
</TABLE>
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 that comprise the investment balance with the
exception of equity securities, for which average cost is used. At December 31,
1999 and 1998, unrealized holding gains on available-for-sale securities of $2.2
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 held at period end and
included in other income for 1999 and 1998 were a gain of $10.6 million and a
loss of $8.0 million, respectively. At December 31, 1999 and 1998 the Company
had short term margin borrowings of $495.5 million and $487.5 million,
respectively, related to the short term investments.
In 1999, the Company reclassified $26.2 million of
available-for-sale investments to the trading category and recorded an
unrealized gain upon transfer of $11.3 million. As a result of the
reclassification, the Company recorded an unfavorable reclassification
adjustment within other comprehensive income of $7.3 million, net of related
income tax benefit of $3.8 million. 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 with in other comprehensive income of $16.6 million, net of related
income tax benefit of $9.1 million.
Note G--Inventories
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Finished products.......................................................... $ 86,724 $ 80,021
In-process................................................................. 131,626 130,204
Raw materials.............................................................. 81,210 98,710
Precious metals............................................................ 117,639 122,653
Other materials and supplies............................................... 28,033 33,373
445,232 464,961
LIFO reserve............................................................... (3,363) 2,169
------------------ -----------------
$ 441,869 $ 467,130
================== =================
</TABLE>
During 1997, 1998 and 1999, certain inventory quantities were
reduced, resulting in liquidations of LIFO inventories, the effect of which
increased income by approximately, $.6 million, $1.8 million and $2.1 million in
1997, 1998 and 1999, respectively.
<PAGE>
Note H--Property, Plant and Equipment
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Land and mineral properties.............................................. $ 42,151 $ 42,583
Buildings, machinery and equipment....................................... 1,270,212 1,221,534
Construction in progress................................................. 51,197 24,273
------------------ -----------------
1,363,560 1,288,390
Accumulated depreciation and amortization................................ 547,059 469,313
------------------ -----------------
$ 816,501 $ 819,077
================== =================
</TABLE>
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 1998 and
1999 depreciation under the modified units of production method was $1.1 million
or 2.0% more and $0.7 million or 1.3% more respectively, than straight-line
depreciation.
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.
Note I--Long-Term Debt
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C>
Senior Unsecured Notes due 2007, 9 1/4%................................ $ 274,175 $ 274,071
Term Loan Agreement due 2006, floating rate............................ 75,000 75,000
Senior Unsecured Notes due 2005, 10 1/2%............................... 281,490 302,000
Handy & Harman Senior Secured Credit Facility.......................... 201,064 228,654
Other.................................................................. 17,801 14,243
------------------ -----------------
849,530 893,968
Less portion due within one year....................................... 1,810 612
------------------ -----------------
Total Long-Term Debt (1)............................................... $ 847,720 $ 893,356
================== =================
</TABLE>
(1) The fair value of long-term debt at December 31, 1998 and December
31, 1999 was $851.5 million and $828.2 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: 2000, $1,810; 2001, $10,621; 2002, $17,872; 2003, $11,493;
and 2004, $46,322.
A summary of the financial agreements at December 31, 1999 follows:
Revolving Credit Facility
On April 30, 1999, WPSC entered into a Third 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, including a $25 million sub-limit for Letters of Credit.
The RCF agreement expires May 3, 2003. Interest rates are based on
the Citibank prime rate plus 1.25% 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 0.5% is charged on the unused portion. The
letter of credit fee is 2.25% and is also performance based.
<PAGE>
Borrowings are secured primarily by 100% of the eligible inventory
of WPSC, Pittsburgh-Canfield Corporation ("PCC") and Wheeling Construction
Products, Inc. ("WCPI") 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. WPSC, PCC and WCPI are wholly-owned
subsidiaries of WPC. 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, 1999 totaled $79.9
million, which are included within short-term borrowings in the consolidated
balance sheet. Letters of credit outstanding under the RCF were $0.1 million at
December 31, 1999.
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,
legally 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.
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. The 9 1/4% Senior Notes mature on
November 15, 2007.
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 therein),
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 all of
the Company'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 (viii) restrictions on
consolidations, mergers and sales of assets.
<PAGE>
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.
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. 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%
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 after November 15, 1999, subject to a premium of
1.0% of the principal amount thereof or after November 15, 2000 with no premium.
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 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 therein),
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; (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.
During the first quarter of 1999, the Company purchased and retired
$20.5 million aggregate principal amount of 10 1/2% Senior Notes in the open
market resulting in a $0.9 million gain, net of tax.
<PAGE>
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, N.A., 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 at December
31, 1999 are (a) in the case of the Term A Facility, the Delayed Draw Facility
and the Revolving Credit Facility, calculated at LIBOR + 1.50% and (b) in the
case of the Term B facility, calculated at LIBOR + 2.25%. 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 $14.6
million at December 31, 1999.
Unimast Revolving Credit Agreement
On November 24, 1998, Unimast Incorporated ("Unimast") entered into
a Revolving Credit Agreement ("RCA") with The First National Bank of Chicago
("First"), 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 on either First's current corporate base rate plus .625% or a
Eurodollar rate plus 2.125%. Each of these rates can fluctuate based upon
performance. An aggregate commitment fee of .5% is charged on the unused
portion. 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. 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, 1999 totaled $24.0 million, and were included
within short-term borrowings in the consolidated balance sheet. No letters of
credit were outstanding under the RCA.
Interest Cost
Aggregate interest costs on debt and amounts capitalized during the
three years ended December 31, 1999, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Aggregate interest expense on debt...................... $ 90,885 $ 80,159 $ 31,274
Less: Capitalized interest.............................. 3,034 2,063 2,227
Interest expense........................................ $ 87,851 $ 78,096 $ 29,047
Interest paid........................................... $ 89,006 $ 73,070 $ 29,589
</TABLE>
<PAGE>
Note J--Stockholders' Equity
The authorized capital stock of WHX consists of 60,000,000 shares
of Common Stock, $.01 par value, of which 14,427,212 shares (including
redeemable Common Stock) were outstanding as of December 31, 1999 and 10,000,000
shares of Preferred Stock, $0.10 par value, of which 2,907,825 shares of Series
A Convertible Preferred Stock and 2,975,100 shares of Series B Convertible
Preferred Stock were outstanding as of December 31, 1999. In 1998 and 1999, the
Company purchased 1,780,307 shares and 3,594,300 shares, respectively, of Common
Stock in open market purchases.
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. No additional shares were purchased during 1998 or 1999. During
1999, an additional 175 shares have been converted into Common Stock.
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 524,900 shares of Series B Convertible Preferred
Stock in open market purchases. No additional shares were purchased during 1998
or 1999.
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
<PAGE>
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, 1999, 282,177 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 3,500,000 shares of Common Stock has been reserved
for issuance upon exercise of Options under the 1991 Plan, as amended. 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
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.
<PAGE>
A Summary of the Option Plans:
<TABLE>
<CAPTION>
Number of Options
1991 D & O WPN Option Price Weighted Average
Plan Plan Grants Or Range Option Price
---- ---- ------ -------- ------------
<S> <C> <C> <C> <C> <C>
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.................. 1,198,527 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............. 2,364,037 511,666 2,000,000 12.277
--------------- --------------- ---------------
Granted.................. 484,500 25,000 -- 7.625-12.4375 9.192
Cancelled................ (108,610) -- -- 8.75-14.625 13.580
Exercised................ (10,650) -- -- 7.25-8.75 7.342
--------------- --------------- ---------------
Balance 12/31/99............. 2,729,277 536,666 2,000,000 12.01
=============== =============== ===============
</TABLE>
Options outstanding at December 31, 1999 which are exercisable
totaled 3,517,206 and have a weighted average option price of $11.68. Options
outstanding at December 31, 1999 had a weighted-average remaining life of 6.5
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, 1998
or 1999. Had the Company elected to account for stock-based compensation under
the provisions of SFAS No. 123 during 1997, the effect on net income and
earnings per share 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. Had
the Company elected to account for stock-based compensation under the provision
of SFAS No. 123 during 1999, the effect on net income would have been an
additional expense of $2.9 million, net of related income tax benefit of $1.6
million, or $.18 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 53.2%, risk-free interest rate of 6.6%, 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 1997 and 1999, the conversion of 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 redeemable common stock and exercise of
outstanding stock options. A reconciliation of the income and shares used in the
computation follows:
<PAGE>
Reconciliation of Income and Shares in EPS calculation
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
Income (loss) Shares Per-Share
(Numerator) (Denominator) Amount
(Dollars and Shares in Thousands)
<S> <C> <C> <C>
Loss before extraordinary item............................. $ (15,834)
Less: Preferred stock dividends............................ 20,608
-------------------
Basic EPS and Diluted EPS
Loss available to common stockholders.................. $ (36,442) 15,866 $ (2.30)
=================== ================ =================
</TABLE>
The assumed conversion of stock options, preferred stock and
redeemable common stock would have an anti-dilutive effect on earnings per
share.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
Income Shares Per-Share
(Numerator) (Denominator) Amount
(Dollars and Shares in Thousands)
<S> <C> <C> <C>
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 and warrants................................... -- 566
Convertible preferred stock............................ -- --
Redeemable common stock................................ -- 298
------------------- ----------------
Diluted EPS
Income available to common stockholders
plus assumed conversions........................... $ 18,822 $ 19,062 $ .99
=================== ================ =================
</TABLE>
<PAGE>
The assumed conversion of preferred stock would have an
anti-dilutive effect on earnings per share.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
Income Shares Per-Share
(Numerator) (Denominator) Amount
(Dollars and Shares in Thousands)
<S> <C> <C> <C>
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)
=================== ================ =================
</TABLE>
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
("CERCLA") or similar state statutes at several waste sites. The Company is
subject to joint and several liability imposed by CERCLA 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 CERCLA. The
Company believes, based upon information currently available, that the Company's
liability for clean up and remediation costs in connection with the Buckeye
Reclamation Landfill will be between $1.5 and $2.0 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 $12.4 million, $9.5 million and $7.7 million for 1997, 1998 and
1999, respectively. The Company anticipates spending approximately $13.6 million
in the aggregate on major environmental compliance projects through the year
2002, estimated to be spent as follows: $6.7 million in 2000, $3.1 million in
2001, and $3.8 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 $12.7 million
at December 31, 1998 and $14.7 million at December 31, 1999. 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 its present
environmental obligations.
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.
<PAGE>
Note L--Related Party Transactions
The Chairman of the Board of the Company is the president and sole
shareholder of WPN Corp. ("WPN"). 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 provides certain financial, management advisory and
consulting services to the Company. Such services include, among others,
identification, evaluation and negotiation of acquisitions, 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 received a monthly fee of $520,833 in 1999. In 1998, WPN
received a monthly fee of $458,333 from January 1 until April 13 and $520,833
from April 14 until December 31. In addition, in October 1999, the Board of
Directors awarded WPN an additional bonus of $3,280,000 and in September 1998,
the Board of Directors awarded WPN an additional bonus of $3,750,000, each in
recognition of the returns 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 of the renewal date.
In 1997, the stockholders approved a grant of an option to purchase
1,000,000 shares of Common Stock to WPN 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.
Note M-- Other Income
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Interest and investment income............................ $ 26,499 $ 88,781 $ 52,092
Equity income (loss)...................................... 4,343 5,699 (1,644)
Receivables securitization fees........................... (5,876) (6,192) (3,826)
Other, net................................................ 1,454 1,408 4,046
----------------- ------------------ -----------------
$ 26,420 $ 89,696 $ 50,668
================= ================== =================
</TABLE>
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 and two of the Company's subsidiaries: WCPI and PCC (the "Receivables
Facility"). In 1995, WPSC entered into an agreement to include the receivables
generated by Unimast in the pool of accounts receivable sold. In May 1999, the
Receivables Facility was extended through May 2003 and increased to $100 million
on a revolving basis. Effective June of 1999, Unimast withdrew from
participation in the facility. Accounts receivable at December 31, 1999 exclude
$100 million representing uncollected accounts receivable sold with recourse
limited to the extent of uncollectible balances. Fees paid by WPSC under this
Receivables Facility were based upon variable rates that range from 4.94% to
7.42%. Based on the Company's collection history, the Company believes that
credit risk associated with the above arrangement is immaterial.
<PAGE>
Note O-- Information on Significant Joint Ventures
WPC owns 35.7% of Wheeling-Nisshin Inc. (Wheeling-Nisshin).
Wheeling-Nisshin had total debt outstanding at December 31, 1999 and 1998 of
approximately $4.1 million and $11.6 million, respectively. WPC derived
approximately 16.2% and 14.6% of its revenues from sale of steel to
Wheeling-Nisshin in 1999 and 1998. WPC received dividends of $5.0 million
annually from Wheeling-Nisshin in 1999 and 1998. Amounts due WPC at December 31,
1999 totaled $12.9 million. Audited financial statements of Wheeling-Nisshin are
presented under Item 14 because it is considered a significant subsidiary of the
Company under SEC regulations.
WPC owns 50.0% of Ohio Coatings Company (OCC). OCC had totaled debt outstanding
at December 31, 1999 and 1998 of approximately $53.6 million and $57.2 million,
respectively. WPC derived approximately 9.2% and 6.1% of its revenues from sale
of steel to OCC in 1999 and 1998 respectively. Amounts due WPC at December 31,
1999 totaled $31.2 million, including an advance of $14.4 million.
Note P-- Extraordinary Items
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Premium (discount) on early debt retirement............... $ (1,925) $ (4,779) $ 32,600
Unamortized debt issuance cost............................ 547 1,332 4,770
Coal retiree medical benefits............................. -- -- 2,615
Income tax effect......................................... 482 1,206 (13,995)
----------------- ------------------ --------------------
$ (896) $ (2,241) $ 25,990
================= ================== ====================
</TABLE>
In the first quarter of 1999, the Company purchased and retired
$20.5 million aggregate principal amount of 10 1/2% Senior Notes in the open
market resulting in a $0.9 million gain, net of tax.
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 $2.2 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 WPC's 9 3/8% Senior Notes at a total
cost of $298.8 million.
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.
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Income Data
Net sales.................................................. $ -- $ -- $ --
Cost of products sold, excluding depreciation.............. (4,380) 252 (3,000)
Depreciation............................................... 989 1,583 1,263
Selling, general and administrative expense................ 5,883 5,843 7,428
----------------- ------------------ ----------------
Operating income(expense).................................. (2,492) (7,678) (5,691)
Interest expense on debt................................... 30,855 26,385 --
Other income............................................... 26,652 87,308 51,342
----------------- ------------------ ----------------
Income (loss) before tax and extraordinary item............ (6,695) 53,245 45,651
Tax provision (benefit).................................... (1,735) 18,586 15,978
----------------- ------------------ ----------------
Income (loss) before extraordinary item.................... (4,960) 34,659 29,673
Extraordinary item (net of tax)............................ 896 2,241 --
----------------- ------------------ ----------------
Net income (loss).......................................... $ (4,064) $ 36,900 $ 29,673
================= ================== ================
Balance Sheet Data
Assets
Current assets............................................. $ 665,745 $ 704,735 $ 590,011
Non-current assets......................................... 667,803 703,351 291,842
----------------- ------------------ ----------------
Total Assets........................................... $ 1,333,548 $ 1,408,086 $ 881,853
================= ================== ================
Liabilities and Stockholders' Equity
Current liabilities........................................ $ 506,794 $ 504,835 $ 282,931
Non-current liabilities.................................... 284,822 305,629 4,809
Stockholder's equity....................................... 541,932 597,622 594,113
----------------- ------------------ ----------------
Total Liabilities and Stockholders' Equity............. $ 1,333,548 $ 1,408,086 $ 881,853
================= ================== ================
</TABLE>
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 agreements, which generally require
separate segment tax calculations. The benefit, if any, of WPC NOL carryforwards
are allocated to WPC.
<PAGE>
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:
<TABLE>
<CAPTION>
Segment
1999 WPC H&H * Unimast All Other Total
- ---- --- ----- ------- --------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenue.................................. $ 1,081,657 $ 466,116 $ 217,409 $ -- $ 1,765,182
Intersegment revenues.................... 48,382 -- -- -- 48,382
Net interest expense..................... 37,931 17,755 1,900 30,855 88,441
Depreciation and amortization............ 77,724 22,190 3,953 989 104,856
Equity income (loss)..................... 3,358 1,302 -- (317) 4,343
Income taxes............................. (20,723) 12,270 3,758 (1,735) (6,430)
Extraordinary Item....................... -- -- -- 896 896
Segment net income (loss)................ (34,485) 10,005 13,063 (4,064) (15,481)
Segment assets........................... $ 1,278,022 $ 650,452 $ 98,411 $ 1,333,548 $ 3,360,433
Investment in equity -
method subsidiaries.................... 64,229 5,182 -- 11,079 80,490
Capital expenditures..................... $ 72,146 $ 16,981 $ 3,929 $ 10,979 $ 104,035
1998
Revenue.................................. $ 1,111,541 $ 350,286 $ 205,444 $ -- $ 1,667,271
Intersegment revenues.................... 21,773 -- -- -- 21,773
Net interest expense..................... 36,699 13,188 2,462 26,385 78,734
Depreciation and amortization............ 76,321 15,585 3,381 1,583 96,870
Equity income (loss)..................... 5,333 588 -- (222) 5,699
Income taxes............................. (3,101) 7,271 630 18,586 23,386
Extraordinary item....................... -- -- -- 2,241 2,241
Segment net income (loss)................ (6,503) 4,785 6,582 36,900 41,764
Segment assets........................... $ 1,256,367 $ 668,362 $ 60,697 $ 1,408,086 $ 3,393,512
Investment in equity -
method subsidiaries.................... 69,075 4,507 -- 11,396 84,978
Capital expenditures..................... $ 33,595 $ 10,701 $ 3,954 $ -- $ 48,250
1997
Revenue.................................. $ 489,662 -- $ 156,678 $ -- $ 646,340
Intersegment revenues.................... 4,244 -- -- -- 4,224
Net interest expense..................... 27,204 -- 2,296 -- 29,500
Depreciation and amortization............ 46,203 -- 1,979 1,263 49,445
Equity income (loss)..................... (1,206) -- -- (438) (1,644)
Income taxes............................. (110,035) -- 488 15,978 (93,569)
Extraordinary item....................... (25,990) -- -- -- (25,990)
Segment net income (loss)................ (230,453) -- 1,086 29,673 (199,694)
Segment assets........................... $ 1,424,568 -- $ 54,538 $ 881,853 $ 2,360,959
Investment in equity-
method subsidiaries.................... 68,742 -- -- 11,667 80,409
Capital expenditures..................... $ 33,755 $ -- $ 3,024 $ -- $ 36,779
</TABLE>
Consolidated
1999 Adjustments Total
- ---- ----------- -----
Revenue.................................. $ (48,382) $1,716,800
Intersegment revenues.................... -- 48,382
Net interest expense..................... (590) 87,851
Depreciation and amortization............ -- 104,856
Equity income (loss)..................... -- 4,343
Income taxes............................. -- (6,430)
Extraordinary Item....................... -- 896
Segment net income (loss)................ 543 (14,938)
Segment assets........................... $ (686,867) $ 2,673,566
Investment in equity -
method subsidiaries.................... -- 80,490
Capital expenditures..................... $ -- $ 104,035
1998
Revenue.................................. $ (21,773) $ 1,645,498
Intersegment revenues.................... -- 21,773
Net interest expense..................... (638) 78,096
Depreciation and amortization............ -- 96,870
Equity income (loss)..................... -- 5,699
Income taxes............................. -- 23,386
Extraordinary item....................... -- 2,241
Segment net income (loss)................ (93) 41,671
Segment assets........................... $ (681,428) $ 2,712,084
Investment in equity -
method subsidiaries.................... -- 84,978
Capital expenditures..................... $ -- $ 48,250
1997
Revenue.................................. $ (4,244) $ 642,096
Intersegment revenues.................... -- 4,244
Net interest expense..................... (453) 29,047
Depreciation and amortization............ -- 49,445
Equity income (loss)..................... -- (1,644)
Income taxes............................. -- (93,569)
Extraordinary item....................... -- (25,990)
Segment net income (loss)................ (68) (199,762)
Segment assets........................... $ (299,039) $ 2,061,920
Investment in equity-
method subsidiaries.................... -- 80,409
Capital expenditures..................... $ -- $ 36,779
* 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
<TABLE>
<CAPTION>
Revenues Long-lived Assets
-------- -----------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United States......... $ 1,690,841 $ 1,596,831 $ 642,096 $ 878,692 $ 887,659 $ 819,069
Foreign............... 25,959 48,667 -- 18,299 16,396 --
-------------- ------------- ------------ ------------ ----------- -------------
$ 1,716,800 $ 1,645,498 $ 642,096 $ 896,991 $ 904,055 $ 819,069
</TABLE>
Foreign revenue is based on the country in which the legal
subsidiary is domiciled. Revenue from no single foreign county was material to
the consolidated revenues of the Company.
<PAGE>
Note S--Acquisition of Handy & Harman and Other
The fair value of the assets acquired and liabilities assumed in
acquisitions are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Other Handy & Harman Other
(Dollars in Thousands)
<S> <C> <C> <C>
Current assets.................................... $ 2,145 $ 269,374 $ 2,188
Property, plant & equipment....................... 1,722 124,148 503
Other long-term assets............................ -- 155,426 --
Goodwill.......................................... 9,627 291,931 10,121
Current liabilities............................... (667) (120,790) (157)
Debt.............................................. -- (229,600) (4,320)
Other long-term liabilities....................... -- (74,635) --
-------------- --------------- -------------
Purchase price, net of cash acquired.............. $ 12,827 $ 415,854 $ 8,335
============== =============== =============
</TABLE>
Note T--Quarterly Information (Unaudited)
Financial results by quarter for the two fiscal years ended
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
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) Income (Loss) Items Income Income
----- ------ ------ ------ ----- ------ ------
(Dollars, Except Per Share, in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
1999:
1st Quarter.......... $ 396,925 $ 47,788 $ 896 $ (35,596) $ (2.45) $ (2.40) $(2.40)
2nd Quarter.......... 413,783 78,158 -- 15,432 .62 .62 .46
3rd Quarter.......... 447,607 79,216 -- 11,109 .38 .38 .34
4th Quarter.......... 458,485 81,249 -- (5,883) (.78) (.78) (.78)
1998:(1)
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)
</TABLE>
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) 1998 results reflect the acquisition of H&H from April 13, 1998.
Note U--Subsequent Event (Unaudited)
On March 10, 2000, WPC reached an agreement with certain of its
insurance carriers relating to several outstanding claims. As a result, WPC will
record a gain of approximately $7.5 million in the first quarter of 2000.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
NOT APPLICABLE.
<PAGE>
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 2000 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 2000 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
2000 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 2000 Annual Meeting of Stockholders.
<PAGE>
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.
<PAGE>
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 cash flows present fairly, in all material
respects, the financial position of Wheeling-Nisshin, Inc. (the Company) at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. 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
auditing standards generally accepted in the United States, 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.
As discussed in Note 3 to the financial statements, effective January 1, 1999,
the Company has given retroactive effect to the change in accounting for
inventories from the last-in, first-out (LIFO) method to the first-in, first-out
(FIFO) method.
February 18, 2000, except for Note 9,
which is dated March 10, 2000
<PAGE>
WHEELING-NISSHIN, INC.
BALANCE SHEETS
December 31, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,044 $ 21,278
Investments 39,493 48,659
Trade accounts receivable, net of allowance for bad debts of
$250 in 1999 and 1998 (Note 9) 16,856 10,262
Inventories (Notes 3 and 4) 20,248 13,287
Prepaid income taxes -- 1,045
Deferred tax assets (Note 7) 3,985 3,303
Other current assets 841 432
-------- --------
Total current assets 100,467 98,266
-------- --------
Property, plant and equipment, net (Note 5) 103,454 111,788
Debt issuance costs, net of accumulated amortization
of $1,879 in 1999 and $1,792 in 1998 22 109
Other assets 696 602
-------- --------
Total assets $204,639 $210,765
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 9,348 $ 5,381
Due to affiliates (Note 9) 9,449 3,968
Accrued interest 83 237
Accrued income taxes 809 --
Other accrued liabilities 3,653 3,970
Accrued profit sharing 2,195 6,290
Current portion of long-term debt (Note 6) 4,106 6,775
-------- --------
Total current liabilities 29,643 26,621
-------- --------
Long-term debt, less current portion (Note 6) -- 4,824
Deferred tax liabilities (Note 7) 27,220 26,271
Other long-term liabilities (Note 10) 2,500 2,500
-------- --------
Total liabilities 59,363 60,216
-------- --------
Contingencies (Note 10)
Shareholders' equity:
Common stock, no par value; authorized, issued and
outstanding, 7,000 shares 71,588 71,588
Retained earnings 73,688 78,961
-------- --------
Total shareholders' equity 145,276 150,549
-------- --------
Total liabilities and shareholders' equity $204,639 $210,765
======== ========
</TABLE>
<PAGE>
WHEELING-NISSHIN, INC.
STATEMENTS OF INCOME
For the years ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net sales (Note 9) $ 347,087 $ 379,415 $ 396,278
Cost of goods sold, excluding depreciation (Notes 3 and 9) 316,275 328,405 354,730
--------- --------- ---------
Gross profit 30,812 51,010 41,548
--------- --------- ---------
Selling, general and administrative expenses 6,880 6,594 5,233
Depreciation and amortization 12,772 13,002 12,955
--------- --------- ---------
Operating income 11,160 31,414 23,360
--------- --------- ---------
Other income (expense):
Interest and other income 3,049 3,002 2,203
Interest expense (464) (985) (1,398)
--------- --------- ---------
2,585 2,017 805
--------- --------- ---------
Income before income taxes 13,745 33,431 24,165
Provision for income taxes (Note 7) 5,018 12,259 8,938
--------- --------- ---------
Net income $ 8,727 $ 21,172 $ 15,227
========= ========= =========
Earnings per share $ 1.25 $ 3.02 $ 2.18
========= ========= =========
</TABLE>
<PAGE>
WHEELING-NISSHIN, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Retained
Stock Earnings Total
<S> <C> <C> <C>
Balance at December 31, 1996 $ 71,588 $ 63,562 $ 135,150
Net income, as restated (Note 3) -- 15,227 15,227
Cash dividends ($1 per share) -- (7,000) (7,000)
--------- --------- ---------
Balance at December 31, 1997, as restated 71,588 71,789 143,377
Net income, as restated (Note 3) -- 21,172 21,172
Cash dividends ($2 per share) -- (14,000) (14,000)
--------- --------- ---------
Balance at December 31, 1998, as restated 71,588 78,961 150,549
Net income -- 8,727 8,727
Cash dividends ($2 per share) -- (14,000) (14,000)
--------- --------- ---------
Balance at December 31, 1999 $ 71,588 $ 73,688 $ 145,276
========= ========= =========
</TABLE>
<PAGE>
WHEELING-NISSHIN, INC.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 8,727 $ 21,172 $ 15,227
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,772 13,002 12,955
Loss on disposal of property and equipment 65 6 --
Deferred income taxes 267 545 644
Net change in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (6,594) 6,102 3,401
(Increase) decrease in inventories (6,961) 2,163 6,783
Decrease (increase) in prepaid and accrued income taxes 1,854 (906) (3,322)
(Increase) decrease in other assets (503) 190 197
Increase (decrease) in accounts payable 3,967 (5,303) (10,542)
Increase in due to affiliates 5,481 612 3,356
Decrease in accrued interest (154) (130) (130)
(Decrease) increase in other accrued liabilities (5,397) 2,750 (1,879)
--------- --------- ---------
Net cash provided by operating activities 13,524 40,203 26,690
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures, net (3,431) (222) (959)
Proceeds from sale of land -- 24 --
Purchase of investments (113,509) (44,214) (43,700)
Maturity of investments 122,675 24,055 35,100
--------- --------- ---------
Net cash provided by (used in) investing activities 5,735 (20,357) (9,559)
--------- --------- ---------
Cash flows from financing activities:
Payments on long-term debt (7,493) (6,881) (6,835)
Payment of dividends (14,000) (14,000) (7,000)
--------- --------- ---------
Net cash used in financing activities (21,493) (20,881) (13,835)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (2,234) (1,035) 3,296
Cash and cash equivalents:
Beginning of the year 21,278 22,313 19,017
--------- --------- ---------
End of the year $ 19,044 $ 21,278 $ 22,313
========= ========= =========
Supplemental cash flow disclosures: Cash paid during the year for:
Interest $ 618 $ 1,115 $ 1,528
========= ========= =========
Income taxes $ 2,935 $ 12,622 $ 11,616
========= ========= =========
Supplemental schedule of noncash investing and
financing activities:
Acquisition of property, plant and equipment
included in other long-term liabilities (Note 10) $ -- $ -- $ 2,500
========= ========= =========
</TABLE>
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)
1. Description of Business
Wheeling-Nisshin, Inc. (the Company) is engaged in the production and
marketing of galvanized and aluminized steel products at a manufacturing
facility in Follansbee, West Virginia. Principally all of the Company's
sales are to ten trading companies located primarily in the United
States. At December 31, 1999, 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 percent and 35.7 percent 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
The Company follows Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires that securities be classified as trading,
held-to-maturity, or available-for-sale. The Company's investments,
which consist of certificates of deposit, government bonds and
commercial paper, are classified as held-to-maturity and are recorded at
cost. The certificates of deposit amounted to $4,000 and $0 at December
31, 1999 and 1998, respectively, and are maintained at one financial
institution. Government bonds amounted to $900 at December 31, 1999 and
1998. Commercial paper amounted to $34,593 and $47,759 at December 31,
1999 and 1998, respectively.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method. Until 1998, the
Company used the last-in, first-out (LIFO) method to value its
inventories, which was approximately $510 and $1,343 higher than it was
under the FIFO method at December 31, 1998 and 1997, respectively.
Effective January 1, 1999, the Company changed to the FIFO method (refer
to Note 3).
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated
depreciation.
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 are removed from the accounts.
Gains or losses on sales are reflected in other income.
Depreciation is provided using the straight-line method over the
estimated useful lives of the assets.
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
The carrying value of property, plant and equipment is evaluated
periodically in relation to the operating performance and future
undiscounted cash flows of the underlying operations. Adjustments are
made if the sum of expected future net cash flows is less than book
value.
Debt Issuance Costs
Debt issuance costs associated with long-term debt secured to finance
the construction of the Company's original manufacturing facility and
the second production line were capitalized and are being amortized
using the effective interest method over the term of the related debt.
Income Taxes
The Company follows 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 The Company follows SFAS No. 128, "Earnings per
Share," which requires the disclosure of basic and diluted earnings per
share.
Earnings per share is calculated by dividing net income by the weighted
average number of shares of common stock outstanding during each period.
3. Accounting Change
Effective January 1, 1999, the Company elected to change its method of
inventory valuation from the LIFO method to the FIFO method. The Company
believes the FIFO method provides a better matching of inventory costs
with product sales. The change has been applied retroactively by
restating the financial statements for prior years. The effect of this
restatement was to increase net income for the year ended December 31,
1998 by $523 or $.07 per share and to decrease net income by $846 or
$.12 per share for the year ended December 31, 1997. The cumulative
effect of the change as of January 1, 1997 was not material.
1998 1997
Retained earnings, as previously reported $ 79,284 $ 72,635
Effect of change (323) (846)
------------ ------------
Retained earnings, as restated $ 78,961 $ 71,789
============ ============
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Inventories
Inventories consisted of the following at December 31:
1999 1998
Raw materials $ 11,043 $ 7,576
Finished goods 9,205 5,711
------------- ---------------
$ 20,248 $ 13,287
============= ===============
5. Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
Estimated Useful Lives
(Years) 1999 1998
<S> <C> <C> <C>
Buildings and building improvements 15-31.5 $ 34,773 $ 34,674
Land improvements 15 3,097 3,097
Machinery and equipment 3-15 165,583 165,569
Office equipment 10 2,797 3,262
--------------- --------------
206,250 206,602
Less accumulated depreciation (107,034) (95,816)
--------------- --------------
99,216 110,786
Land 1,002 1,002
Construction in process 3,236 -
--------------- --------------
$ 103,454 $ 111,788
=============== ==============
</TABLE>
Depreciation expense was $12,685, $12,915 and $12,871 in 1999, 1998 and
1997, respectively.
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Long-Term Debt
Long-term debt consisted of the following at December 31:
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 1999, 1998 and
1997.
1999 1998
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 6.65% at
December 31, 1999 and 6.66% at December
31, 1998. The bonds are payable in equal
semi-annual installments of $2,853 plus
interest through September 2000. $ 4,106 $ 11,529
Capital lease obligations accruing
interest at rates ranging from 10% to
13.8%, payable in monthly installments
through December 1999. - 70
---------- ----------
4,106 11,599
Less current portion 4,106 6,775
---------- ----------
$ - $ 4,824
========== ==========
7. Income Taxes
The provision for income taxes for the years ended December 31 consisted
of:
1999 1998 1997
Current:
U.S. Federal $ 4,445 $ 11,005 $ 7,771
State 306 709 523
Deferred 267 545 644
------------ ------------ ------------
$ 5,018 $ 12,259 $ 8,938
============ ============ ============
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Reconciliation of the federal statutory and effective tax rates for
1999, 1998 and 1997 is as follows:
1999 1998 1997
Federal statutory rate 35.0 % 35.0 % 35.0 %
State income taxes 1.6 1.6 1.5
Other, net (0.1) 0.1 0.5
----------- ---------- ---------
36.5 % 36.7 % 37.0 %
=========== ========== =========
The deferred tax assets and liabilities recorded on the balance sheets
as of December 31 are as follows:
1999 1998
Deferred tax assets:
Accrued expenses $ 1,897 $ 1,143
Other 2,088 2,160
------------- ------------
3,985 3,303
------------- ------------
Deferred tax liabilities:
Depreciation and amortization 23,492 22,729
Other 3,728 3,542
------------- ------------
27,220 26,271
------------- ------------
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 of 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 $636 in 1999, $1,120 in 1998 and $876 in 1997.
<PAGE>
WHEELING-NISSHIN, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. 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 $574
in 1999, $490 in 1998 and $415 in 1997.
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
$2,090 in 1999, $6,290 in 1998 and $4,644 in 1997.
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 1999, 1998 and 1997. Accrued postretirement benefits
were approximately $271 and $203 at December 31, 1999 and 1998,
respectively.
9. Related Party Transactions
The Company has a supply 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 $170,458,
$164,473 and $24,533 of raw materials and processing services from
Wheeling-Pittsburgh in 1999, 1998 and 1997, respectively. The amounts
due Wheeling-Pittsburgh for such purchases are included in due to
affiliates in the accompanying balance sheets.
In 1999, the Company received notice from Wheeling-Pittsburgh as to a
pricing dispute under the supply agreement for amounts owed for raw
material purchases during the third and fourth quarters of 1999. On
March 10, 2000, the Company reached a settlement in the amount of
approximately $2,000 with Wheeling-Pittsburgh over the pricing dispute.
The settlement amount has been recorded in the 1999 financial
statements.
The Company also sells products to Wheeling-Pittsburgh. Such sales
totaled $1,175, $1,916 and $6,408 in 1999, 1998 and 1997, respectively,
of which $302 and $228 remained unpaid at December 31, 1999 and 1998,
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 $845, $333
and $435 in 1999, 1998 and 1997, respectively, all of which were paid at
December 31, 1999 and 1998.
10. 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
<PAGE>
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.
In 1999, the plaintiffs requested the Pennsylvania Supreme Court to
review the order of the Superior Court in its entirety, including the
vacating of the verdict and the awarding of counsel fees, and their
request was granted, on the limited questions whether the trial court
had jurisdiction to rule on the plaintiffs' motions for counsel fees
while the appeal was pending and whether the Superior Court errored in
ruling on the merits of the appeal without first getting an explanatory
statement from the trial court. The Company intends to vigorously oppose
efforts to have the Supreme Court interfere with the Superior Court's
favorable rulings as well as vigorously defend against the plaintiffs'
claims assuming a new trial is held. The Company has been advised by its
Special Counsel that it has various legal bases for relief, if a new
trial is 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.
11. 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, government bonds and certificates
of deposit were $40,220 and $48,844 at December 31, 1999 and 1998,
respectively. These amounts were determined based on the investment cost
plus interest receivable at December 31, 1999 and 1998.
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.
<PAGE>
(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 Certificate of Designations filed with the
Delaware Secretary of State on September 22, 1994
- - Incorporated herein by reference to Exhibit
4.3 to the Company's Form S-3 Registration
Statement (No. 33-54831).
*3.3 Certificate of Amendment to Certificate of
Incorporation filed with the Delaware Secretary of
State on January 23, 1997.
3.3 Certificate of Amendment to Certificate of
Incorporation filed with the Delaware Secretary of
State on January 23, 1997 - Incorporated herein by
reference to Exhibit 99.2 to the Form 8-K filed
November 11, 1999-K.
3.4 Amended and Restated By-Laws of the Company -
Incorporated herein by reference to Exhibit 99.2
to the Form 8-K filed November 11, 1999-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 Third Amended and Restated Credit Agreement dated
as of April 30, 1999, among WPSC, the lenders
party thereto and Citibank, N.A., as Agent
4.5 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.
- Incorporated herein by reference to Exhibit 4.11
to the 1998 Form 10-K.
10.1 Form of Key Employee Deferred Compensation
Agreement--Incorporated herein by reference to
Exhibit 10.1 to the 1990 10-K.
<PAGE>
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.
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 - Incorporated herein by reference to
Exhibit 10.9 to the 1998 Form 10-K.
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 Amendment No. 3 to 1991 Incentive and Nonqualified
Stock Option Plan of the Company - Incorporated
herein by reference to Exhibit 4.D to the
Company's Form S-8 filed September 24, 1998.
10.12 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.
10.13 1997 Directors Stock Option Plan-- Incorporated
herein by reference to Exhibit 10.11 to the 1997
Form 10-K.
10.14 WPN Corp. Stock Option Grant Letter dated July 29,
1993 - Incorporated herein by reference to Exhibit
10.13 to the 1998 Form 10-K.
10.15 WPN Corp. Stock Option Grant Letter dated August
4, 1997--Incorporated herein by reference to
Exhibit 10.12 to the 1997 Form 10-K.
<PAGE>
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).- Incorporated herein by reference to
Exhibit 10.16 to the 1998 Form 10-K.
10.17 Agreement dated as of April 23, 1998 by and
between the Company and James G. Bradley.-
Incorporated herein by reference to Exhibit 10.17
to the 1998 Form 10-K.
10.18 Agreement dated as of April 17, 1998 by and
between the Company and Robert D. LeBlanc.-
Incorporated herein by reference to Exhibit 10.18
to the 1998 Form 10-K.
10.19 Amended and Restated Agreement dated as of
December 24, 1998 by and between the Company and
Paul J. Mooney.- Incorporated herein by reference
to Exhibit 10.19 to the 1998 Form 10-K.
10.20 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.
*21.1 Subsidiaries of Registrant.
*23.1 Consent of Pricewaterhouse Coopers LLP
*27. Financial Data Sheet
* - filed herewith.
(b) REPORTS ON FORM 8-K.
Corporation's Form 8-K filed with the Securities and Exchange Commission
on November 12, 1999 relating to the amending of the Corporation's
Certificate of Amendment and By-Laws.
Corporation's Form 8-K filed with the Securities Exchange Commission on
December 8, 1999 relating to the press release announcing the meeting date
and record date for the 2000 Annual Stockholders Meeting.
<PAGE>
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 February
, 2000.
WHX CORPORATION
<TABLE>
<CAPTION>
<S> <C> <C>
By /S/ James G. Bradley Date March 27, 2000
-------------------------------------------------- --------------------------------------
James G. Bradley, Executive Vice President of
WHX Corporation and President and Chief
Executive Officer of Wheeling Pittsburgh Steel
Corporation.
(Co-Principal Executive Officer)
By /s/ Robert D. LeBlanc Date March 27, 2000
-------------------------------------------------- --------------------------------------
Robert D. LeBlanc, Executive Vice President
of WHX Corporation and President and Chief
Executive Officer of Handy & Harman
(Co-Principal Executive Officer)
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C> <C>
By /s/ Arnold G. Nance March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Arnold G. Nance, Vice President - Finance Date
(Principal Accounting Officer)
By /s/ Ronald LaBow March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Ronald LaBow, Chairman of the Board Date
By /s/ Neil D. Arnold March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Neil D. Arnold, Director Date
By /s/ Paul W. Bucha March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Paul W. Bucha, Director Date
By /s/ Robert A. Davidow March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Robert A. Davidow, Vice Chairman Date
By /s/ William Goldsmith March 27, 2000
------------------------------------------------------- -----------------------------------------------------
William Goldsmith, Director Date
By /s/ Marvin L. Olshan March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Marvin L. Olshan, Director Date
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
By /s/ Robert D. LeBlanc March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Robert D. LeBlanc, Director & Executive Vice President Date
(Co-Principal Executive Officer)
By /s/ Raymond S. Troubh March 27, 2000
------------------------------------------------------- -----------------------------------------------------
Raymond S. Troubh, Director Date
</TABLE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
WHX CORPORATION
Under Section 242 of the General Corporation Law
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
It is hereby certified that:
1. The name of the corporation is WHX Corporation (the
"Company").
2. The Certificate of Incorporation of the Company (the
"Certificate of Incorporation") is hereby amended in accordance with the
following resolutions:
RESOLVED, that Article SIXTH of the Certificate of
Incorporation is hereby amended and restated in its entirety to read as
follows:
"SIXTH: A. NUMBER, ELECTION AND TERMS OF DIRECTORS.
Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified
circumstances, the number of directors shall be fixed from
time to time exclusively by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of
directors which the Corporation would have if there were no
vacancies (the "Whole Board"); provided, however, that in no
event shall the Whole Board be greater than ten (10)
directors.
B. CLASSIFICATION OF BOARD OF DIRECTORS. The Board of
Directors shall be divided into three classes, designated
Class I, Class II and Class III, as nearly equal in number as
possible, and the term of office of directors of one class
shall expire at each annual meeting of stockholders, and in
all cases as to each director until his successor shall be
elected and shall qualify or until his earlier resignation,
removal from office, death or incapacity. The initial term of
office of directors of Class I expire at the annual meeting of
stockholders in 1997; that of Class II shall expire at the
annual meeting in 1998; and that of Class III shall expire at
the annual meeting in 1999; and in all cases as to each
director until his successor shall be elected and shall
qualify or until his earlier resignation, removal from office,
death or
-1-
<PAGE>
incapacity. At each annual meeting of stockholders the number
of directors equal to the number of directors of the class
whose term expires at the time of such meeting (or, if less,
the number of directors properly nominated and qualified for
election) shall be elected by a plurality of the votes cast to
hold office until the third succeeding annual meeting of
stockholders after their election, and until his successor
shall be elected and shall qualify or until his earlier
resignation, removal from office, death or other incapacity,
subject to the provisions of Section D and Section E of this
Article SIXTH.
C. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Subject to the rights of any series of Preferred Stock, newly
created directorships resulting from any increase in the
authorized number of directors or any vacancies of the Board
of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause (other
than a vacancy resulting from removal by the stockholders, in
which case such vacancy shall be filled by the stockholders)
shall be filled only by a majority vote of the directors then
in office, though less than a quorum. Additional
directorships resulting from an increase in the number of
directors shall be apportioned by the Board of Directors
among the classes as equally as possible, other vacancies of
the Board of Directors filled between annual meetings of
stockholders shall be to the class of directors to which the
director previously belonged that is being replaced.
Directors so chosen shall hold office until the next annual
election of directors at which the term of the class to which
he has been elected expires and until his successor shall
have been duly elected and qualified, or until his earlier
death, resignation or removal. No decrease in the number of
authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
D. REMOVAL. Subject to the rights of the holders of
any series of Preferred Stock, any director, or the entire
Board of Directors, may be removed from office at any time
only for cause and only by the affirmative vote of the
holders of at least a majority of the voting power of all of
the then outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, voting together as a single class.
E. COMPLIANCE WITH COMMUNICATIONS ACT OF 1934. No
person shall serve (or continue to serve) as officer or
director of the Corporation if the Board of Directors
concludes that such person's service (or continued service)
would constitute a violation of the Communications Act of
1934, and the rules and regulations of the Federal
Communication Commission ("FCC") promulgated thereunder, as
the same may be amended from time to time (the "Act"), or
would likely prevent the Corporation from making any intended
acquisition or undertaking any intended activity."
-2-
<PAGE>
RESOLVED, that Article THIRTEENTH of the Certificate
of Incorporation is hereby amended and restated in its entirety to read
as follows:
"THIRTEENTH: The Corporation reserves the right to
amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, and any other provisions
authorized by the laws of the State of Delaware at the time
in force may be added or inserted, in the manner now or
hereafter provided herein by statute, and all rights,
preferences and privileges of whatsoever nature conferred
upon stockholders, directors or any other persons whomsoever
by and pursuant to this Certificate of Incorporation in its
present form or as amended are granted subject to the rights
reserved in this Article THIRTEENTH; provided, however, that
Article SIXTH and this Article THIRTEENTH shall not be
amended without the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then outstanding shares of the
stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class."
3. This Amendment of the Certificate of Incorporation herein
certified has been duly adopted in accordance with the provisions of Sections
103 and 242 of the General Corporation Law
of the State of Delaware.
-3-
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hands this 23rd day of
January, 1997.
WHX CORPORATION
/s/ Ronald LaBow
____________________________________
By: Ronald LaBow
Title: Chairman of the Board
ATTEST:
/s/ Marvin L. Olshan
_________________________________
By: Marvin L. Olshan
Title: Secretary
-4-
COPY AS EXECUTED
TOGETHER WITH EXHIBITS
H, I, J, K, L, M-1, M-2, and O
AS SEPARATELY EXECUTED
U.S. $150,000,000
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of April 30, 1999
Among
WHEELING-PITTSBURGH STEEL CORPORATION
as Borrower
-----------
and
THE LENDERS PARTY HERETO
as Lenders
and
CITIBANK, N.A.
as Agent and as Initial Issuing Bank
------------------------------------
<PAGE>
T A B L E O F C O N T E N T S
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms .........................................................2
1.2. Computation of Time Periods............................................29
1.3. Accounting Terms.......................................................29
1.4. Certain Terms ........................................................29
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. The Revolving Credit Loans.............................................29
2.2. The Swing Loans........................................................30
2.3. Making the Loans.......................................................30
2.4. Fees...................................................................32
2.5. Reduction and Termination of the Revolving Credit Commitments..........32
2.6. Repayment..............................................................32
2.7. Prepayments............................................................32
2.8. Conversion/Continuation Option.........................................34
2.9. Interest...............................................................35
2.10. Interest Rate Determination...........................................35
2.11. Increased Costs.......................................................36
2.12. Illegality............................................................36
2.13. Capital Adequacy......................................................37
2.14. Payments and Computations.............................................37
2.15. Taxes.................................................................39
2.16. Sharing of Payments, Etc..............................................41
2.17. Letter of Credit Facility.............................................42
2.18. Settlement of Accounts................................................47
2.19. The Blocked Account...................................................48
ARTICLE III
CONDITIONS PRECEDENT
3.1. Conditions Precedent to the Effective Date.............................49
i
<PAGE>
3.2. Additional Conditions Precedent to the Effective Date...................51
3.3. Conditions Precedent to Each Loan and Letter of Credit..................53
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Corporate Existence; Compliance with Law................................54
4.2. Corporate Power; Authorization; Enforceable Obligations.................54
4.3. Taxes...................................................................56
4.4. Full Disclosure.........................................................56
4.5. Financial Matters.......................................................56
4.6. Litigation..............................................................58
4.7. Margin Regulations......................................................58
4.8. Ownership of the Borrower and Subsidiaries..............................58
4.9. ERISA...................................................................59
4.10. Liens..................................................................60
4.11. Replacement Notes......................................................60
4.12. No Burdensome Restrictions; No Defaults................................60
4.13. No Other Ventures......................................................61
4.14. Investment Company Act.................................................61
4.15. Insurance..............................................................61
4.16. Labor Matters..........................................................61
4.17. Force Majeure..........................................................62
4.18. Use of Proceeds........................................................62
4.19. Environmental Protection...............................................63
4.20. Intellectual Property..................................................64
4.21. Title..................................................................65
4.22. Year 2000..............................................................67
ARTICLE V
FINANCIAL COVENANTS
5.1. Maintenance of Senior Leverage Ratio....................................67
5.2. Maintenance of Interest Coverage Ratio..................................68
5.3. Limitation on Capital Expenditures......................................69
ii
<PAGE>
ARTICLE VI
ADDITIONAL AFFIRMATIVE COVENANTS
6.1. Compliance with Laws, Etc...............................................69
6.2. Conduct of Business.....................................................70
6.3. Payment of Taxes, Etc...................................................70
6.4. Maintenance of Insurance................................................70
6.5. Preservation of Corporate Existence, Etc................................71
6.6. Access..................................................................71
6.7. Keeping of Books........................................................71
6.8. Maintenance of Properties, Etc..........................................71
6.9. Application of Proceeds.................................................72
6.10. Financial Statements...................................................72
6.11. Reporting Requirements.................................................75
6.12. Employee Plans.........................................................78
6.13. Fiscal Year............................................................79
6.14. Borrowing Base Determination...........................................79
6.15. Environmental..........................................................79
6.16. Securitization Intercreditor Agreement.................................79
ARTICLE VII
NEGATIVE COVENANTS
7.1. Liens, Etc..............................................................80
7.2. Indebtedness............................................................82
7.3. Lease Obligations.......................................................84
7.4. Restricted Payments.....................................................85
7.5. Mergers, Stock Issuances, Sale of Assets, Etc...........................86
7.6. Investments in Other Persons............................................87
7.7. Change in Nature of Business............................................89
7.8. Material Agreements.....................................................89
7.9. Accounting Changes......................................................89
7.10. Transactions with Affiliates...........................................89
7.11. Cancellation of Indebtedness Owed to It................................90
7.12. No New Subsidiaries....................................................90
7.13. Capital Structure......................................................91
7.14. No Speculative Transactions............................................91
7.15. Margin Regulations.....................................................91
7.16. Bank Accounts .........................................................91
iii
<PAGE>
7.17. Environmental Release..................................................92
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default.......................................................92
8.2. Remedies .........................................................95
8.3. Actions in Respect of Letters of Credit.................................96
ARTICLE IX
THE AGENT
9.1. Authorization and Action................................................98
9.2. Agent's Reliance, Etc...................................................98
9.3. Citibank, Citicorp and Affiliates.......................................99
9.4. Lender Party Credit Decision............................................99
9.5. Indemnification.........................................................99
9.6. Successor Agent........................................................101
ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc......................................................102
10.2. Notices, Etc. .......................................................104
10.3. No Waiver; Remedies..................................................104
10.4. Costs; Expenses; Indemnities.........................................104
10.5. Right of Set-off.....................................................107
10.6. Binding Effect.......................................................107
10.7. Assignments and Participations.......................................108
10.8. Governing Law .......................................................111
10.9. Submission to Jurisdiction...........................................111
10.10. Section Titles......................................................111
10.11. Execution in Counterparts...........................................112
10.12. No Liability of the Issuers.........................................112
10.13. Entire Agreement....................................................112
10.14. Confidentiality.....................................................112
10.15. Waiver of Jury Trial................................................114
iv
<PAGE>
SCHEDULES
Schedule I - List of Issuers
Schedule II - Commitments
Schedule III - List of Applicable Lending Offices and Addresses for Notices
Schedule IV - Borrowing Base Advance Rates
Schedule 2.3 - List of Eligible Signatories
Schedule 3.1 - UCC Termination Statements
Schedule 4.3 - Taxes
Schedule 4.6 - Litigation
Schedule 4.8 - List of Subsidiaries
Schedule 4.9 - List of Plans
Schedule 4.10 - List of Liens
Schedule 4.13 - Joint Ventures
Schedule 4.16 - Labor
Schedule 4.19 - Environmental Protection
Schedule 4.21(a) - List of Owned Real Estate
Schedule 4.21(b) - List of Leased Real Estate
Schedule 4.21(c) - Existing Options
Schedule 7.2 - Existing Indebtedness
Schedule 7.3 - Leases
Schedule 7.4.1 - Restricted Payments
Schedule 7.4.2 - Restricted Payments
Schedule 7.6 - Existing Investments
v
<PAGE>
Schedule 7.10 - Transactions with Affiliates
Schedule 7.16 - Permitted Bank Accounts
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Letter of Credit Request
Exhibit D - Form of Notice of Conversion or Continuation
Exhibit E - Form of Assignment and Acceptance
Exhibit F - Form of Borrowing Base Certificate
Exhibit G - Form of Holdings Guaranty
Exhibit H - Form of Holdings Pledge Agreement
Exhibit I - Form of Guaranty
Exhibit J - Form of Security Agreement
Exhibit K - Form of Keepwell Agreement
Exhibit L - Form of Holdings Intercreditor Agreement
Exhibit M-1 - Opinion of Olshan Grundman Frome, Rosenzweig & Wolosky
-- Outside Counsel for the Borrower
Exhibit M-2 - Opinion of Reed Smith Shaw & McClay LLP
-- Local Counsel for the Borrower
Exhibit N - Form of Guarantor Intercompany Notes
Exhibit O - Form of Cash Collateral Account Agreement
Exhibit P - Form of Securitization Intercreditor Agreement
vi
<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 30,
1999, among Wheeling-Pittsburgh Steel Corporation, a Delaware corporation (the
"Borrower"), the financial institutions listed on the signature pages hereof
(each individually a "Lender" and collectively the "Lenders"), and Citibank,
N.A. ("Citibank"), as agent hereunder for the Lenders (in such capacity,
together with any successor appointed pursuant to Article IX, the "Agent"), and
as issuer of letters of credit (the "Initial Issuing Bank").
PRELIMINARY STATEMENTS.
1. The Borrower is a party to a Second Amended and Restated Credit
Agreement, dated as of December 28, 1995 (as amended to date, the "Original
Credit Agreement"), with the financial institutions party thereto and Citibank,
as agent.
2. Wheeling-Pittsburgh Corporation, a Delaware corporation
("Holdings"), is the direct parent of the Borrower and WHX Corporation, a
Delaware corporation ("WHX") is the direct parent of Holdings.
3. The Borrower and Holdings have requested that the Lenders, the
Issuers (as hereinafter defined) and the Agent amend and restate the Original
Credit Agreement to, among other things, increase the Commitments and extend the
Termination Date (as such terms are defined in the Original Credit Agreement).
4. The Lender Parties (as hereinafter defined) have indicated their
willingness to agree to amend and restate the Original Credit Agreement on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto agree that the Original Credit
Agreement is hereby amended and restated as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms. As used in this Agreement, the following
terms have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accounts" has the meaning specified in the Security
Agreement.
"Adjusted Net Worth" means, as to any Guarantor at the
Effective Date, the lesser of (x) the amount by which the book value of the
property of such Guarantor exceeds the total amount of liabilities on its
existing "Debt" (as such term is defined in Section 270 of the New York Debtor
Creditor Law), including, without limitation, probable contingent liabilities,
but excluding liabilities under the Guaranty, of such Guarantor at such date and
(y) the amount by which the book value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Guarantor on its Debt, excluding Debt in respect of the Guaranty, as they
become absolute and matured.
"Affiliate" means, as to any Person, any Subsidiary of such
Person and any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person and includes each
officer or director or general partner of such Person, and each Person who is
the direct or indirect beneficial owner of 15% or more of any class of voting
Stock of such Person or, with respect to the Borrower, of Holdings or WHX. For
the purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" has the meaning specified in the recital of parties to
this Agreement.
"Agent's Account" means the account of the Agent maintained by
the Agent at Citibank at its office at 399 Park Avenue, New York, New York
10043, Account No. 3682 2248, Attention: Alexandra Lozovsky.
"Agreement" means this Third Amended and Restated Credit
Agreement, together with all Exhibits and Schedules hereto, as the same may be
amended, supplemented or otherwise modified from time to time.
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<PAGE>
"Applicable Lending Office" means, with respect to each Lender
Party, its Domestic Lending Office in the case of a Base Rate Loan and its
Eurodollar Lending Office in the case of a Eurodollar Rate Loan.
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Performance Level in effect on such date as
set forth below:
<TABLE>
<CAPTION>
Applicable Margin Applicable Margin Applicable Margin for
Performance Level for Base Rate Loans for Eurodollar Letter of Credit Fees
<S> <C> <C> <C>
Rate Loans
- ------------------------------------------------------------------------------------------------------------------------------------
I 1.00% 2.00% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
II 1.125% 2.125% 1.875%
- ------------------------------------------------------------------------------------------------------------------------------------
III 1.25% 2.25% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------------
IV 1.375% 2.375% 2.125%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
provided that, for the period commencing on the Effective Date and ending on the
date of delivery of the financial statements in accordance with Section 6.10(c)
related to the Fiscal Year ending 1999, the Applicable Margin shall be as set
forth opposite Performance Level III.
"Applicable Percentage" means, as of any date, a percentage
per annum determined by reference to the Performance Level in effect on such
date as set forth below:
Applicable
Performance Level Percentage
I 0.375%
- --------------------------------------------------------------------------------
II 0.50%
- --------------------------------------------------------------------------------
III 0.50%
- --------------------------------------------------------------------------------
IV 0.50%
- --------------------------------------------------------------------------------
3
<PAGE>
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the Agent in
accordance with Section 10.7 and in substantially the form of Exhibit E.
"Available Credit" means, at any time, an amount equal to (i)
the lower of (a) the Revolving Credit Commitments outstanding at such time, and
(b) the Borrowing Base at such time minus (ii) the aggregate principal amount of
the Revolving Credit Loans and Swing Line Loans outstanding at such time and the
outstanding Letter of Credit Obligations at such time.
"Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate per annum shall be
equal at all times 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; and
(b) the sum (adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent)
of (i) 1/2 of one percent per annum, plus (ii) the rate per annum 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 any 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, without limitation, any emergency, supplemental
or other marginal reserve requirement) for Citibank in respect of liabilities
consisting of or including (among other liabilities) three-month U.S. dollar
nonpersonal 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
4
<PAGE>
(c) the sum (adjusted to the nearest one percent or, if there
is no nearest one percent, to the next higher one percent) of (i) one percent
per annum plus (ii) the Federal Funds Rate.
"Base Rate Loan" means any outstanding principal amount of the
Loans of any Lender Party that bears interest with reference to the Base Rate.
"Blocked Account" has the meaning specified in Section 2.19.
"Blocked Account Letter" means the letter agreement, dated
August 17, 1994, executed by the Borrower and the Agent and acknowledged and
agreed to by PNC Bank, National Association, as such letter agreement may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Borrowing" means each of a Revolving Credit Borrowing and a
Swing Loan Borrowing.
"Borrowing Base" means, at any time, an amount up to a
percentage of the value of various categories of Eligible Inventory at such
time, as set forth on Schedule IV hereto; provided that with respect to the
Eligible Inventory of any Guarantor, such amount shall not exceed such
Guarantor's Adjusted Net Worth at the Effective Date; provided, however, that
such advance rates may be adjusted by the Agent from time to time in its sole
discretion based upon an outside valuation; provided further, however, that such
advance rates may not be adjusted, without the consent of all of the Lenders (x)
above 67.5% for any category of Inventory set forth on Schedule IV hereto or (y)
above 52.5% for the weighted average of all categories of Inventory set forth on
Schedule IV hereto. The Agent shall provide the Borrower and the Lenders with
two Business Days' prior written notice of any such change.
"Borrowing Base Certificate" means a certificate of the
Borrower substantially in the form of Exhibit F.
"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 a Eurodollar Rate Loan, a day on which dealings are also
carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period,
the aggregate of all expenditures by such Person and its Subsidiaries, except
interest capitalized during construction, during such period for property, plant
or equipment,
5
<PAGE>
including, without limitation, renewals, improvements, replacements and
capitalized repairs, that would be reflected as additions to property, plant or
equipment on a consolidated balance sheet of such Person and its Subsidiaries
prepared in accordance with GAAP, but not including any Investments permitted
pursuant to Section 7.6. For the purpose of this definition, the purchase price
of equipment which is acquired simultaneously with the trade-in of existing
equipment owned by such Person or any of its Subsidiaries or with insurance
proceeds shall be included in Capital Expenditures only to the extent of the
gross amount of such purchase price less the amount of the credit granted by the
seller of such equipment being traded in at such time or the amount of such
proceeds, as the case may be.
"Capitalized Lease" means, as to any Person, any lease of
property by such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" means, as to any Person, the
capitalized amount of all obligations of such Person or any of its Subsidiaries
under Capitalized Leases, as determined on a consolidated basis in accordance
with GAAP.
"Cash Collateral Account Agreement" means the amended and
restated cash collateral agreement, dated as of the date hereof, executed by the
Borrower and the Agent, substantially in the form of Exhibit O, as such
agreement may be further amended, supplemented or modified from time to time.
"Cash Equivalents" means (i) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed or insured
by the United States government or any agency thereof and backed by the full
faith and credit of the United States, (ii) certificates of deposit, eurodollar
time deposits, overnight bank deposits and bankers' acceptances of any Lender
Party having maturities of one year or less from the date of acquisition, (iii)
commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings
Group or P-1 by Moody's Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments, and (iv) repurchase agreements
and reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition,
provided that (x) the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository Institutions with
Securities and Others, as adopted by the Comptroller of the Currency and (y)
such agreements are entered into with the Agent or any Lender Party.
6
<PAGE>
"Cash Interest Expense" means, for any Person for any period,
the Net Interest Expense of such Person for such period, plus (a) interest
expense capitalized for such period to the extent deducted in the determination
of such Net Interest Expense, less (b) Non-Cash Interest Expense of such Person
for such period.
"Cash Release Condition" means the occurrence of any of the
following: (i) the amount of the Available Credit exceeds $70,000,000 for a
period of five consecutive Business Days and (ii) no Default or Event of Default
has occurred and is continuing.
"Cash Release Condition Unwind" means the amount of the
Available Credit is less than or equal to $50,000,000 for a period of five
consecutive Business Days or a Default or Event of Default has occurred and is
continuing.
"Citibank" has the meaning specified in the recital of parties
to this Agreement.
"Citicorp" means Citicorp USA, Inc.
"Code" means the Internal Revenue Code of 1986 (or any
successor legislation thereto), as amended from time to time.
"Co-Generation Agreement" means that certain Energy Services
Agreement dated as of October 3, 1994 by and between Air Liquide America
Corporation (as successor to National Power Exchange Group, Inc. pursuant to the
Asset Purchase Agreement between Air Liquide America Corporation and National
Power Exchange Group, Inc. dated March 25, 1996) and the Borrower, as the same
may be amended, modified or supplemented from time to time.
"Collateral" means all "Collateral" referred to in the
Collateral Documents and all other property and interests in property and
proceeds thereof that is or is intended to be subject to a Lien in favor of the
Agent for the benefit of the Secured Parties.
"Collateral Documents" means the Holdings Pledge Agreement,
the Security Agreement, the Cash Collateral Account Agreement, the Blocked
Account Letter and any other document that creates or purports to create a Lien
in favor of the Agent for the benefit of the Secured Parties in connection with
the Loan Documents.
7
<PAGE>
"Commitment" means as to any Lender, such Lender's Revolving
Credit Commitment and "Commitments" means the aggregate Revolving Credit
Commitments of all Lenders.
"Commitment Fee" has the meaning specified in Section 2.4(a).
"Computation Date" has the meaning assigned to it in Section
2.18.
"Concentration Account" has the meaning specified in the Cash
Collateral Account Agreement.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Contaminant" means any substance regulated or forming the
basis of liability under any Environmental Law, including, without limitation,
any waste, pollutant, hazardous substance, toxic substance, hazardous waste,
special waste, petroleum or petroleum-derived substance or waste, or any
constituent of such substance or waste.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of such Person with
respect to any Indebtedness or Contractual Obligation of another Person, if the
purpose or intent of such Person in incurring the Contingent Obligation is to
provide assurance to the obligee of such Indebtedness or Contractual Obligation
that such Indebtedness or Contractual Obligation will be paid or discharged, or
that any agreement relating thereto will be complied with, or that any holder of
such Indebtedness or Contractual Obligation will be protected (in whole or in
part) against loss in respect thereof. Contingent Obligations of a Person
include, 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 an
obligation of another Person, and (b) any liability of such Person for an
obligation of another Person through any agreement (contingent or otherwise) (i)
to purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of a loan, advance, stock purchase, capital contribution or
otherwise), (ii) to maintain the solvency or any balance sheet item, level of
income or financial condition of another Person, (iii) to make take-or-pay or
similar payments, if required, regardless of non-performance by any other party
or parties to an agreement, (iv) to purchase, sell or lease (as lessor or
lessee) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such obligation or to assure the
8
<PAGE>
holder of such obligation against loss, or (v) to supply funds to or in any
other manner invest in such other Person (including, without limitation, to pay
for property or services irrespective of whether such property is received or
such services are rendered), if in the case of any agreement described under
subclause (i), (ii), (iii), (iv) or (v) of this sentence the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported, except to the extent exposure of the
contingent obligor is expressly limited to a lesser amount.
"Contractual Obligation" of any Person means any obligation,
agreement, undertaking or similar provision of any security issued by such
Person or of any agreement, undertaking, contract, lease, indenture, mortgage,
deed of trust or other instrument to which such Person is a party or by which it
or any of its property is bound or to which any of its properties is subject.
"Default" means any event which with the passing of time or
the giving of notice or both would become an Event of Default.
"DOL" means the United States Department of Labor, or any
successor thereto.
"Dollars" and the sign "$" each mean the lawful money 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 III 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
in writing to the Borrower and the Agent.
"EBITDA" means, for any Person for any period, the Net Income
(Loss) of such Person for such period taken as a single accounting period, plus
(a) the sum of the following amounts of such Person and its Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP to the
extent included in the determination of such Net Income (Loss): (i) depreciation
expense, (ii) amortization expense, (iii) Net Interest Expense, (iv) income tax
expense, (v) extraordinary losses or losses on non-current asset sales or the
write-down of non-current assets and (vi) the amount of cash dividends or
distributions paid to such Person; less (b) the sum of the following amounts of
such Person and its Subsidiaries determined on a consolidated basis in
accordance with GAAP to the extent included in the determination of such Net
Income (Loss): (i) extraordinary gains or gains on non-current asset sales or
the write-
9
<PAGE>
up of non-current assets, (ii) the Net Income (Loss) of any other Person that is
accounted for by the equity method of accounting and (iii) the Net Income (Loss)
of any other Person acquired by such Person or a Subsidiary of such Person in a
transaction accounted for as a pooling of interests for any period prior to the
date of such acquisition.
"Effective Date" means the first date that all of the
conditions contained in Article III are satisfied.
"Eligible Assignee" means (i) a Lender, (ii) any Affiliate of
a Lender, (iii) a commercial bank or finance company organized under the laws of
the United States of America, or any state thereof, and having total assets in
excess of $1,000,000,000; (iv) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such country, and having
total assets in excess of $3,000,000,000, provided that such bank is acting
though a branch or agency located in the country in which it is organized or
another country which is a member of the OECD; (v) the central bank of any
country which is a member of the OECD; and (vi) any other financial institution
approved in writing by the Borrower and the Agent as an Eligible Assignee for
purposes of this Agreement; provided that the Borrower's approval shall not be
unreasonably withheld. Without limitation on the foregoing, the Borrower may
withhold its consent of any such other financial institution if the proposed
assignment of any portion of any Lender Party's rights and obligations under
this Agreement to such other financial institution would materially increase the
amount of Taxes required to be deducted by the Borrower from or in respect of
any sum payable under the Loan Documents (determined as of the date on which
such other financial institution is proposed to become a Lender Party
hereunder).
"Eligible Inventory" means such of the Inventory of the
Borrower and the Guarantors valued at the lower of market or cost on a first in
first out basis as the Agent, in its sole discretion consistent with its
customary business practices and generally applicable criteria for comparable
secured financings, deems eligible, less all reserves as the Agent, in its sole
discretion consistent with its customary business practices and generally
applicable criteria for comparable secured financings, from time to time deems
appropriate. For the purposes of this definition, the Agent does not intend to
treat the following Inventory as eligible: (a) Inventory in transit, (b)
Inventory held by a bailee or Inventory held on leased premises where the
landlord thereof has not executed a waiver and financing statement in form and
substance satisfactory to the Agent and (c) Inventory subject to a Lien prior in
right to that of the Lien in favor of the Secured Parties or subject to any
other Lien not permitted by Section 7.1. Nothing contained in the preceding
sentence shall limit the Agent's right,
10
<PAGE>
in its sole discretion consistent with its customary business practices and
generally applicable criteria for comparable secured financings, to treat any
item of Inventory as ineligible.
"Environmental Laws" means all federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including, without limitation, any judicial or
administrative order, consent decree or judgment relating to the regulation and
protection of human health, safety, the environment or natural resources
(including, without limitation, ambient air, surface water, groundwater,
wetlands, land surface or subsurface strata, wildlife, aquatic species and
vegetation).
"Environmental Liabilities and Costs" means, as to any Person, all
liabilities, obligations, responsibilities, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including, without limitation, all fees, disbursements and expenses of counsel,
experts and consultants, and costs of investigation and feasibility studies),
fines, penalties, sanctions and interest incurred (either as an expense or other
charge or as would be included on the liabilities side of the consolidated
balance sheet of such Person and its Subsidiaries or, if the amount and the
liability is fixed, in a footnote thereto) or reserved against as a result of
any claim or demand by any other Person, whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute,
including, without limitation, any thereof arising under any Environmental Law,
Permit, order or agreement with any Governmental Authority or other Person, and
which relate to any environmental, health or safety condition, or a Release or
threatened Release, and result from the past, present or future operations of
such Person or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with any Loan Party or any of its
Subsidiaries within the meaning of Section 414 (b), (c), (m) or (o) of the Code.
11
<PAGE>
"ERISA Event" means (i) a Reportable Event with respect to a Title IV
Plan or a Multiemployer Plan; (ii) the withdrawal of any Loan Party or any of
its Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section
4063 of ERISA during a plan year in which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA; (iii) the complete or partial withdrawal
of any Loan Party or any of its Subsidiaries or any ERISA Affiliate from any
Multiemployer Plan; (iv) the filing of a notice of intent to terminate a Title
IV Plan or the treatment of a plan amendment as a termination under Section 4041
of ERISA; (v) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (vi) the failure to make required contributions
to a Qualified Plan; (vii) any other event or condition which might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Title IV Plan
or Multiemployer Plan or the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, excluding any such event or condition to the extent that the PBGC has,
prior to the date hereof, (A) waived any such termination, appointment or
imposition as a result of such event or condition and each of the Loan Parties
and their respective Subsidiaries and each of the ERISA Affiliates are in
compliance with all applicable requirements of any such waiver or (B) consented
to the occurrence of such event or the existence of such condition in
circumstances that could not reasonably be expected to result in any liability
of any Loan Party or any of its Subsidiaries or any ERISA Affiliate after the
date hereof; (viii) a prohibited transaction (as described in Section 4975 of
the Code or Section 406 of ERISA) that occurs with respect to any Plan; or (ix)
the request by any Loan Party, any of its Subsidiaries or any ERISA Affiliate
for a minimum funding waiver from the IRS with respect to any Pension Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender Party,
the office of such Lender specified as its "Eurodollar Lending Office" below its
name on Schedule III or in the Assignment and Acceptance pursuant to which it
became a Lender Party, as the case may be (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 in writing to the Borrower and the
Agent.
"Eurodollar Rate" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate of interest
determined by the Agent to be 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
<PAGE>
per annum at which deposits in Dollars are offered by the principal office of
Citibank 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 for such
Interest Period in an amount substantially equal to the Eurodollar Rate Loan of
Citicorp during such Interest Period and for a period equal to such Interest
Period by (b) a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage for such Interest Period.
"Eurodollar Rate Loan" means any outstanding principal amount of the
Loans of any Lender Party that, for an Interest Period, bears interest at a rate
determined with reference to the Eurodollar Rate.
"Eurodollar Rate Reserve Percentage" for any Interest Period means the
reserve 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 which includes deposits by reference to which the
Eurodollar Rate is determined) having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 8.1.
"Fabricating Joint Ventures" means, collectively, the joint ventures,
corporations or partnerships owned by Holdings, the Borrower or any Guarantor
(or a wholly owned Subsidiary of Holdings, the Borrower or any Guarantor ) which
may make acquisitions of businesses whose primary operations are fabricating,
coating or other processing of steel products.
"Fair Market Value" means (i) with respect to any asset (other than a
marketable security) at any date, the value of the consideration obtainable in a
sale of such asset at such date assuming a sale by a willing seller to a willing
purchaser dealing at arm's length and arranged in an orderly manner over a
reasonable period of time having regard to the nature and characteristics of
such asset or, if such asset shall have been the subject of a relatively
contemporaneous appraisal by an independent third party appraiser, the basic
assumptions underlying which have not materially changed since its date, as set
forth in such appraisal, and (ii) with respect to any marketable security at any
date, the closing sale price of such security on the business day (on which any
national securities exchange is open for the normal transaction of business)
next preceding such date, as appearing in any published list of any national
securities
13
<PAGE>
exchange or in the National Market List of the National Association of
Securities Dealers, Inc. or, if there is no such closing sale price of such
security, the average of the asked and bid prices for the purchase of such
security at face value quoted on such business day by a financial institution of
recognized standing which regularly deals in securities of such type.
"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 which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fiscal Month" means one calendar month.
"Fiscal Quarter" means the three month period ending on March 31, June
30, September 30 or December 31.
"Fiscal Year" means the 12 month period ending on December 31.
"Funding" means Wheeling-Pittsburgh Funding, Inc., a Delaware special
purpose corporation and wholly owned Subsidiary of the Borrower.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronounce ments of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, which are applicable to the
circumstances as of the date of determination except that, for purposes of
Article V, GAAP shall be determined on the basis of such principles in effect on
the date hereof and consistent with those used in the preparation of the audited
financial statements referred to in Section 4.5.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantor" means any of PCC or Wheeling Construction, and such other
permitted Subsidiaries of the Borrower or any other Guarantor that may become a
14
<PAGE>
party to the Guaranty in the future, as required by the Agent in accordance with
Section 7.12.
"Guarantor Intercompany Notes" means intercompany notes made by the
Guarantors in favor of the Borrower in substantially the form of Exhibit N.
"Guaranty" means the amended and restated guaranty executed by each of
the Guarantors, substantially in the form of Exhibit I, as such guaranty may be
amended, supplemented or otherwise modified from time to time.
"Holdings" has the meaning specified in the Preliminary Statements.
"Holdings Guaranty" means the amended and restated guaranty executed by
Holdings, substantially in the form of Exhibit G, as such guaranty may be
amended, supplemented or otherwise modified from time to time.
"Holdings Intercreditor Agreement" means the amended and restated
intercreditor agreement executed by WHX, Holdings, the Borrower and the Agent,
in substantially the form of Exhibit L as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Holdings IPO" means the initial public offering of Stock of Holdings
(including a sale of such Stock held by WHX pursuant to a registration statement
filed under the Securities Act of 1933).
"Holdings IPO Threshold" means that not less than 50% of the issued and
outstanding Stock of Holdings shall have been sold to Persons other than WHX and
its Affiliates pursuant to the Holdings IPO.
"Holdings Note" means those certain notes, each dated as of October 24,
1994, of the Borrower in favor of Holdings in the aggregate principal amount of
$301,974,000 (as of March 31, 1999).
"Holdings Pledge Agreement" means the amended and restated pledge
agreement executed by Holdings, substantially in the form of Exhibit H, as such
pledge agreement may be amended, supplemented or otherwise modified from time to
time.
"Indebtedness" of any Person means (i) all indebtedness of such Person
for borrowed money (including, without limitation, reimbursement and all other
obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured) or for the deferred purchase price of
property or services,
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(ii) all obligations of such Person evidenced by notes, bonds, debentures or
similar instruments, (iii) all indebtedness 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), (iv) all Capitalized Lease Obligations
of such Person, (v) all Contingent Obligations of such Person, (vi) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Stock or Stock Equivalent of such Person, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends, (vii) all
obligations of such Person under any interest rate contract, (viii) all
Indebtedness referred to in clause (i), (ii), (iii), (iv), (v), (vi) or (vii)
above secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, Accounts and general intangibles) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (ix) in the case of the Borrower, the Obligations.
"Indemnitee" has the meaning specified in Section 10.4.
"Indentures" means (a) the Replacement Indenture and (b) the Term Loan
Agreement.
"Interest Coverage Ratio" means, for each Fiscal Quarter and determined
on the basis of the four Fiscal Quarters ending on the date of determination, a
ratio of (a) EBITDA of the Loan Party Consolidated Group to (b) Cash Interest
Expense of the Loan Party Consolidated Group plus the aggregate "Discount
Amount" (under and as defined in each Supplement included in the Securitization
Documents) for such period.
"Interest Period" means (a) initially, the period commencing on the
date a Eurodollar Rate Loan is made or on the date of conversion of a Base Rate
Loan to a Eurodollar Rate Loan and ending three months thereafter and (b)
thereafter, if such Loan is continued, in whole or in part, as a Eurodollar Rate
Loan pursuant to Section 2.9, the period commencing on the last day of the
immediately preceding Interest Period therefor and ending three months
thereafter; provided, however, that:
(A) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be to
extend such
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Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day;
(B) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;
(C) the Borrower may not select any Interest Period which ends after
the Termination Date;
(D) the Borrower may not select any Interest Period in respect of Loans
having an aggregate principal amount of less than $5,000,000; and
(E) there shall be outstanding at any one time no more than seven
Interest Periods in the aggregate.
"Interest Rate Contract" means interest rate swap, cap or collar
agreements and interest rate future or option contracts and similar agreements.
"Inventory" has the meaning specified in the Security Agreement.
"Investment" has the meaning specified in Section 7.6.
"Investment Account" has the meaning specified in the Cash Collateral
Account Agreement.
"IRS" means the Internal Revenue Service, or any successor thereto.
"Issuer" means each Person listed on Schedule I.
"Keepwell Agreement" means the amended and restated agreement, executed
by each of WHX, Holdings and the Borrower, substantially in the form of Exhibit
K, as such agreement may be amended, supplemented or otherwise modified from
time to time.
"Keepwell Payments" has the meaning specified in the Keepwell
Agreement.
"L/C Cash Collateral Account" has the meaning specified in Section 8.3.
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"Leases" means, with respect to the Borrower, any Guarantor or any of
their Subsidiaries, all of those leasehold estates in real property now owned as
lessee or hereafter acquired including, without limitation, those listed on
Schedule 4.21(b), as such may be amended, supplemented or otherwise modified
from time to time to the extent permitted by this Agreement.
"Lender Party" means any Lender, any Issuer or the Swing Bank.
"Letter of Credit" means any letter of credit issued for the account of
the Borrower or any of its Subsidiaries by an Issuer pursuant to Section 2.17.
"Letter of Credit Agreement" means the agreement, dated as of August
24, 1994, among the Borrower and Citibank, as issuer, as such agreement may be
amended, supplemented or otherwise modified from time to time.
"Letter of Credit Obligations" means, at any time, all liabilities at
such time of the Borrower to all Issuers with respect to Letters of Credit,
whether or not any such liability is contingent, and includes the sum of (i) the
Reimbursement Obligations at such time and (ii) the Letter of Credit Undrawn
Amounts at such time.
"Letter of Credit Reimbursement Agreement" has the meaning specified in
Section 2.17(c).
"Letter of Credit Request" has the meaning specified in Section
2.17(d).
"Letter of Credit Undrawn Amounts" means, at any time, the aggregate
undrawn face amount of all Letters of Credit outstanding at such time.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
security interest or other similar kind of preference, priority or security
agreement or preferential arrangement, including, without limitation, any
conditional sale or other title retention agreement, the interest of a lessor
under a Capitalized Lease Obligation, any financing lease having substantially
the same economic effect as any of the foregoing, and the filing, under the UCC
or comparable law of any jurisdiction, of any financing statement naming the
owner of the asset to which such Lien relates as debtor (other than a filing
which does not evidence an outstanding secured obligation, a commitment to make
advances, incur obligations or otherwise give value).
"Loan" means a Revolving Credit Loan or a Swing Loan made by a Lender
to the Borrower pursuant to Article II.
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"Loan Documents" means, collectively, this Agreement, the Revolving
Credit Notes, the Keepwell Agreement, each Letter of Credit Reimbursement
Agreement, the Holdings Intercreditor Agreement, the Securitization
Intercreditor Agreement, the Guarantor Intercompany Notes and the Collateral
Documents.
"Loan Party" means each of the Borrower, each Guarantor, Holdings and
each Subsidiary or Affiliate of the Borrower (other than WHX) which executes and
delivers a Loan Document.
"Loan Party Consolidated Group" means each Loan Party and its
Subsidiaries.
"Majority Lenders" means, at any time, Lenders holding at least 51% of
the aggregate of the Revolving Credit Commitments at such time.
"Material Adverse Change" means a material adverse change in any of (i)
the condition (financial or otherwise), business, performance, prospects,
operations or properties of Holdings, the Borrower, the Guarantors and their
respective Subsidiaries taken as one enterprise, (ii) the legality, validity or
enforceability of any Loan Document, (iii) the perfection or priority of the
Liens granted pursuant to the Collateral Documents, other than solely by reason
of action by the Agent or the Lender Parties, (iv) the ability of the Borrower
to repay the Obligations or of any Loan Party to perform its obligations under
any Loan Document in any material respects or (v) the rights and remedies of the
Lender Parties or the Agent under the Loan Documents; provided that any such
change related to matters described in Section 4.16(a), (b), (e), (f) and (g)
shall not constitute a Material Adverse Change at any time that the Available
Credit plus the aggregate amount then on deposit in the Concentration Account,
the Investment Account and the L/C Cash Collateral Account, is equal to or
greater than $50,000,000.
"Material Adverse Effect" means an effect that has a reasonable
likelihood of resulting in or causing a material adverse change in any of (i)
the condition (financial or otherwise), business, performance, prospects,
operations or properties of Holdings, the Borrower, the Guarantor and their
respective Subsidiaries taken as one enterprise, (ii) the legality, validity or
enforceability of any Loan Document, (iii) the perfection or priority of the
Liens granted pursuant to the Collateral Documents, other than solely by reason
of action by the Agent or the Lender Parties, (iv) the ability of the Borrower
to repay the Obligations or of any Loan Party to perform its obligations under
any Loan Document in any material respects or (v) the rights and remedies of the
Lender Parties or the Agent under the Loan Documents; provided that any such
effect related to matters described in Section 4.16(a), (b), (e),
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<PAGE>
(f) and (g) shall not constitute a Material Adverse Effect at any time that the
Available Credit plus the aggregate amount then on deposit in the Concentration
Account, the Investment Account and the L/C Cash Collateral Account, is equal to
or greater than $50,000,000.
"Material Contractual Obligation" of any Person means such Person's
Contractual Obligations in respect of Indebtedness of the types described in
clauses (i) and (ii) of the definition of "Indebtedness" and each other
Contractual Obligation that is material to the business, prospects, operations
or financial condition of such Person.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, and to which the Borrower, any of its Subsidiaries or any
ERISA Affiliate is making, is obligated to make, has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Net Income (Loss)" means, for any Person for any period, the aggregate
net income (or loss) from continuing operations of such Person and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"Net Interest Expense" means, for any Person for any period, (i) gross
interest expense of such Person and its Subsidiaries for such period determined
on a consolidated basis in accordance with GAAP, less (ii) the following for
such Person and its Subsidiaries determined on a consolidated basis determined
in accordance with GAAP: the sum of (1) interest capitalized during construction
for such period, (2) interest income for such period, and (3) gains for such
period on Interest Rate Contracts (to the extent not included in interest income
above and to the extent not deducted in the calculation of such gross interest
expense), plus (iii) the following for such Person and its Subsidiaries
determined on a consolidated basis in accordance with GAAP: the sum of (1)
losses for such period on Interest Rate Contracts (to the extent not included in
gross interest expense), (2) upfront costs or fees for such period associated
with Interest Rate Contracts (to the extent not included in gross interest
expense) and (3) the aggregate "Discount Amount" (under and as defined in each
Supplement included in the Securitization Documents) for such period.
"Net Worth" of any Person means, at any date, the excess of (a) the
Total Assets of such Person at such date over (b) the Total Liabilities of such
Person at such date minus the aggregate principal amount of Parent Loans
received by such Person and outstanding at such date minus, in the case of the
Borrower, the aggregate amount of Keepwell Payments that are designated as loans
or advances made on behalf of such Person on or prior to such date.
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"Non-Cash Interest Expense" means, for any Person for any period, the
sum of the following amounts to the extent included in Net Interest Expense of
such Person for such period: (i) the amount of amortized debt discount and (ii)
charges relating to write-ups or write-downs in the book or carrying value of
existing Indebtedness.
"Notice of Borrowing" has the meaning specified in Section 2.3(a).
"Notice of Continuation or Conversion" has the meaning specified in
Section 2.8.
"Obligations" means the Loans, the Letter of Credit Obligations and,
all other advances, debts, liabilities, obligations, covenants and duties owing
by any Loan Party to the Agent, any Lender Party, any Affiliate of any of them
or any Indemnitee, of every type and description, present or future, whether or
not evidenced by any note, guaranty or other instrument, arising under this
Agreement, under any other Loan Document or under any agreement of the type
described in clause (iv) of the definition of Cash Equivalents, whether or not
for the payment of money, whether arising by reason of an extension of credit,
opening or amendment of a Letter of Credit or payment of any draft drawn
thereunder, loan, guaranty, indemnification, foreign exchange transaction,
interest rate contract, commodity contract or in any other manner, whether
direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term "Obligations" includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum chargeable to the Borrower under this Agreement
or any other Loan Document.
"Original Credit Agreement" has the meaning specified in the recitals
hereto.
"Other Taxes" has the meaning specified in Section 2.15(b).
"Parent Loans" means intercompany loans in the form of cash advances
made by WHX from time to time, since December 31, 1998, to the Borrower or any
of the Guarantors.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PCC" means Pittsburgh-Canfield Corporation, a Pennsylvania corporation
wholly owned by Holdings.
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"Pension Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, which is not an individual account plan, as defined in
Section 3(34) of ERISA, and which the Borrower or any of its Subsidiaries or, if
a Title IV Plan, any ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"Performance Level" means, as of any date, the level set forth below
then in effect, as determined in accordance with the following provisions of
this definition:
================================================================================
Performance Level Interest Coverage Ratio
I Greater than 5.00:1.00
- --------------------------------------------------------------------------------
II Less than or equal to 5.00:1.00 but
greater than 4.00:1.00
- --------------------------------------------------------------------------------
III Less than or equal to 4.00:1.00 but
greater than 2.50:1.00
- --------------------------------------------------------------------------------
IV Less than or equal to 2.50:1.00
================================================================================
For the purposes of this definition, the Performance Level shall be determined
by reference to the financial statements delivered pursuant to Sections 6.10(b)
or (c); changes in the Performance Level shall become effective on the first day
of the month next succeeding the date on which such financial statements are
delivered to the Lender Parties and shall remain in effect until the next change
to be effected pursuant to this definition.
"Permit" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.
"Permitted Liens" means Liens permitted by Section 7.1(a), (d), (e),
(q) and (r).
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other entity, or a
Governmental Authority.
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"Plan" means an employee benefit plan, as defined in Section 3(3) of
ERISA, which the Borrower or any of its Subsidiaries maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.
"Projections" means those financial projections dated March 25, 1999
covering the Fiscal Years ending in 1999, 2000, 2001, 2002 and 2003, delivered
to the Lender Parties by the Borrower.
"Qualified Plan" means an employee pension benefit plan, as defined in
Section 3(2) of ERISA, which is intended to be tax-qualified under Section
401(a) of the Code, and which the Borrower, any of its Subsidiaries or any ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Ratable Portion" or ratably means, with respect to any Lender Party,
the following: (i) in the case of principal and interest, the quotient obtained
by dividing the aggregate principal amount of all Loans held by such Lender
Party by the aggregate principal amount of all Loans held by all Lender Parties
and (ii) in all other cases, the quotient obtained by dividing the principal
amount of the Revolving Credit Commitment of such Lender by the aggregate
principal amount of all Revolving Credit Commitments of all Lenders.
"Real Estate" means all of those plots, pieces or parcels of land now
owned or hereafter acquired by the Borrower, any Guarantor or any of their
Subsidiaries (the "Land"), including, without limitation, those listed on
Schedule 4.21(a), together with the right, title and interest of the Borrower,
such Guarantor or such Subsidiary, if any, in and to the streets, the land lying
in the bed of any streets, roads or avenues, opened or proposed, in front of,
adjoining or abutting the Land to the center line thereof, the air space and
development rights pertaining to the Land and the right to use such air space
and development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging or in any way appertaining thereto,
all fixtures, all easements now or hereafter benefitting the Land and all
royalties and rights appertaining to the use and enjoyment of the Land,
including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all of the buildings and other improvements now or
hereafter erected on the Land, and any fixtures appurtenant thereto.
"Receivables Securitization" means the program pursuant to which the
Borrower sells, transfers or otherwise conveys certain of its accounts
receivables, together with the accounts receivables of the Guarantors and
certain other Affiliates of
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the Borrower from time to time, to Funding for inclusion in Funding's
receivables securitization program, as the same may be modified, amended,
replaced, renewed or otherwise substituted pursuant to a similar financing or
sale arrangement.
"Register" has the meaning specified in Section 10.7.
"Reimbursement Obligations" means all reimbursement or repayment
obligations of the Borrower to Issuers with respect to Letters of Credit
pursuant to Letter of Credit Reimbursement Agreements.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment or into or out of any
property owned by such Person, including, without limitation, the movement of
Contaminants through or in the air, soil, surface water, ground water or
property.
"Remedial Action" means all actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment, (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment, or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care.
"Replacement Indenture" means the indenture, dated as of November 26,
1997, among Holdings, the guarantors named on the signature pages thereof and
Bank One, N.A., as trustee, pursuant to which the Replacement Notes have been
issued, as the same may be amended, supplemented or modified from time to time.
"Replacement Notes" means Holding's 9 1/4% Senior Notes due 2007 issued
pursuant to the Replacement Indenture, as amended prior to the Effective Date.
"Reportable Event" means any event described in Section 4043(c) of
ERISA.
"Requirement of Law" means, as to any Person, the certificate of incor
poration and by-laws or other organizational or governing documents of such
Person, and all federal, state and local laws, rules and regulations, including,
without limitation, federal, state or local securities laws, ERISA and
Environmental Laws, and the disclosure requirements thereof and all orders,
judgments, decrees or other determinations of any Governmental Authority or
arbitrator, applicable to or binding
24
<PAGE>
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer" means, with respect to any Person, any of the
principal executive officers of such Person.
"Revolving Credit Borrowing" means a borrowing consisting of Revolving
Credit Loans made on the same day by the Lenders ratably according to their
respective Revolving Credit Commitments.
"Revolving Credit Commitment" means, as to each Lender, the commitment
of such Lender to make Revolving Credit Loans to the Borrower pursuant to
Section 2.1 in the aggregate principal amount outstanding not to exceed the
amount set forth opposite such Lender's name on Schedule II under the caption
"Revolving Credit Commitment" or, if such Lender has entered into one or more
Assignments and Acceptances, set forth in the Register maintained by the Agent
pursuant to Section 10.7 as such Lender's "Revolving Credit Commitment", as such
amount may be reduced or modified pursuant to this Agreement.
"Revolving Credit Loan" means a Loan made by a Lender to the Borrower
pursuant to Section 2.1.
"Revolving Credit Note" means a promissory note of the Borrower payable
to the order of any Lender in a principal amount equal to the amount of such
Lender's Revolving Credit Commitment as originally in effect, in substantially
the form of Exhibit A, evidencing the aggregate Indebtedness of the Borrower to
such Lender resulting from the Revolving Credit Loans made by such Lender.
"Secured Parties" means the Lender Parties and the Agent.
"Securitization Documents" means each agreement, document and
instrument entered into by the Borrower, any Guarantor or Funding in connection
with the Receivables Securitization, including without limitation, the
Receivables Purchase Agreement executed by the Borrower and Funding and the
subordinated promissory note of Funding in favor of the Borrower made in
connection therewith and the Securitization Intercreditor Agreement.
"Securitization Intercreditor Agreement" means the intercreditor
agreement executed by Citicorp USA, Inc., as Program Agent, the Borrower, PCC,
Wheeling Construction, Funding, Bank One, Columbus, N.A., as Trustee, and the
25
<PAGE>
Agent, in substantially the form of Exhibit P as such agreement may be amended,
supplemented or otherwise modified from time to time.
"Security Agreement" means the amended and restated security agreement,
dated as of the date hereof, executed by the Borrower and each Guarantor,
substantially in the form of Exhibit J, as such agreement may be further
amended, supplemented or otherwise modified from time to time.
"Senior Secured Debt" means Indebtedness secured by a Permitted Lien.
"Settlement Date" has the meaning assigned to it in Section 2.18.
"Solvent" means, with respect to any Person, that the value of the
assets of such Person (both at fair value and present fair saleable value) is,
on the date of determination, greater than the total amount of liabilities
(including, without limitation, contingent and unliquidated liabilities) of such
Person as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and does not have
unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed at the
amount which, in 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.
"Stock" means shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Equivalents" means all securities convertible into or
exchangeable for Stock and all warrants, options or other rights to purchase or
subscribe for any Stock, whether or not presently convertible, exchangeable or
exercisable.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, or other business entity of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors, managers, trustees or other
controlling persons, is, at the time, directly or indirectly, owned by such
Person and/or one or more Subsidiaries of such Person (irrespective of whether,
at the time, Stock of any other class or classes of such entity shall have or
might have voting power by reason of the happening of any contingency).
26
<PAGE>
"Swing Bank" means Citicorp or such other Lender who shall also be the
Agent or who shall agree with the Agent to act as Swing Bank.
"Swing Loan" means a Loan made by the Swing Bank to the Borrower
pursuant to Section 2.2.
"Swing Loan Borrowing" means a Borrowing consisting of a Swing Loan.
"Tangible Net Worth" of any Person means, at any date, the Net Worth of
such Person at such date, excluding (i) any noncash effects of adopting the
accounting principles described in FAS No. 87, FAS No. 88 and any subsequent FAS
promulgated by the Financial Accounting Standards Board addressing pensions,
(ii) all unamortized financing costs or unamortized debt discount and expense
and (iii) all intangibles and deferred charges other than for taxes, pensions
and cash escrow.
"Tax Affiliate" means, as to any Person, (i) any Subsidiary of such
Person, and (ii) any Affiliate of such Person with which such Person filed,
files or is eligible to file consolidated, combined or unitary tax returns.
"Tax Return" has the meaning specified in Section 4.3.
"Tax Sharing Agreement" means the agreement, dated as of April 12,
1991, between the Borrower and Holdings, as modified by the Contribution and
Assumption Agreement dated as of July 26, 1994 between WHX and Holdings and by
the Tax Sharing Agreement, dated as of July 26, 1994, between WHX and Holdings,
as such agreement may be further amended, supplemented or otherwise modified
from time to time.
"Taxes" has the meaning specified in Section 2.15(a).
"Term Loan Agreement" means the Term Loan Agreement dated as of
November 26, 1997 among Holdings, various financial institutions, DLJ Capital
Funding, Inc. and Citicorp USA, Inc., as amended by Amendment No. 1 dated as of
December 31, 1997 and as the same may be further amended, supplemented or
otherwise modified form time to time.
"Termination Date" means the earlier of (i) May 3, 2003 and (ii) the
date of termination in whole of the Revolving Credit Commitments pursuant to
Section 2.5 or 8.2.
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<PAGE>
"Title IV Plan" means a Pension Plan, other than a Multiemployer Plan,
which is covered by Title IV of ERISA.
"Total Assets" of any Person means, at any date, the total assets of
such Person and its Subsidiaries at such date, determined on a consolidated
basis in accordance with GAAP.
"Total Liabilities" of any Person means, at any date, all obligations
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a consolidated balance sheet of such Person
and its Subsidiaries at such date.
"UCC" shall have the meaning assigned to it in the Security Agreement.
"Unfunded Pension Liability" means, as to the Borrower at any time, the
aggregate amount, if any, of the sum of (i) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions in
effect under such Title IV Plan, and (ii) for a period of five years following a
transaction reasonably likely to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by the Borrower, the
Borrower's Subsidiaries and all ERISA Affiliates as a result of such
transaction.
"USWA Right of First Refusal" shall mean the right of first refusal
granted by Holdings and the Borrower pursuant to an agreement, dated as of
August 12, 1997, between Holdings, the Borrower and the United Steelworkers of
America, AFL-CIO-CLC and any agreements ancillary thereto or amendments,
renewals or modifications thereof.
"Welfare Benefit Plan" means an employee welfare benefit plan, as
defined in Section 3(1) of ERISA, which the Borrower or any of its Subsidiaries
maintains, contributes to, has contributed to within the six year period
preceding the Effective Date or has an obligation to contribute to on behalf of
their respective former or active employees (or their beneficiaries).
"Wheeling Construction" means Wheeling Construction Products, Inc., a
Delaware corporation wholly owned by Holdings.
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<PAGE>
"Wheeling-Nisshin" means Wheeling-Nisshin, Inc., a Delaware
corporation, all the outstanding Stock and Stock Equivalents of which is owned
by Holdings and Nisshin Steel Co., Ltd.
"WHX" has the meaning specified in the Preliminary Statements.
"Withdrawal Liability" means, as to the Borrower, at any time, the
aggregate amount of the liabilities of the Borrower, the Borrower's Subsidiaries
or any ERISA Affiliate pursuant to Section 4201 of ERISA, and any increase in
contributions required to be made pursuant to Section 4243 of ERISA, with
respect to all Multiemployer Plans.
1.2. Computation of Time Periods. In this Agreement, 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" and the word "through" means "to and including".
1.3. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in accordance with GAAP.
1.4. Certain Terms. (a) The words "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole, and not to
any particular Article, Section, subsection or clause in this Agreement.
References herein to an Exhibit, Schedule, Article, Section, subsection or
clause refer to the appropriate Exhibit or Schedule to, or Article, Section,
subsection or clause in this Agreement.
(b) The terms "Lender", "Issuer" and "Agent" include their respective
successors and the term "Lender" includes each assignee of such Lender who
becomes a party hereto pursuant to Section 10.7.
ARTICLE II
AMOUNTS AND TERMS OF THE LOANS
2.1. The Revolving Credit Loans. On the terms and subject to the
conditions contained in this Agreement, each Lender severally agrees to make
Revolving Credit Loans to the Borrower from time to time on any Business Day
during the period from the Effective Date until the Termination Date in an
aggregate amount not to exceed at any time outstanding such Lender's Revolving
Credit Commitment;
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provided, however, that at no time shall any Lender be obligated to make a
Revolving Credit Loan in excess of such Lender's Ratable Portion of the
Available Credit. In addition, each Lender agrees to make Revolving Credit Loans
in accordance with Section 2.18. Within the limits of each Lender's Revolving
Credit Commitment, amounts prepaid pursuant to Section 2.7(c) may be reborrowed
under this Section 2.1. The Revolving Credit Loans of each Lender shall be
evidenced by a Revolving Credit Note to the order of such Lender.
2.2. The Swing Loans. The Swing Bank, in its sole discretion, on the
terms and subject to the conditions contained in this Agreement, may make loans
(each a "Swing Loan") to the Borrower 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 $20,000,000 and (ii) in
an amount for each Swing Loan Borrowing not to exceed the Available Credit of
the Lenders at such time. The Swing Bank shall be entitled to rely on the most
recent Borrowing Base Certificate delivered to the Agent.
2.3. Making the Loans. (a) Except as provided for in Sections 2.4(a),
2.9(b), 2.17(h) and 2.18, each Revolving Credit Borrowing shall be made on
notice, given by the Borrower to the Agent (x) in the case of a Revolving Credit
Borrowing requested to refinance a Swing Loan, not later than 12:00 P.M. (New
York City time) on one Business Day prior to the date of the proposed Revolving
Credit Borrowing and (y) in the case of a Revolving Credit Borrowing requested
as a direct advance to the Borrower, not later than 11:00 A.M. (New York City
time) on the date of the proposed Revolving Credit Borrowing. Each such notice
shall be executed by an officer of the Borrower indicated on Schedule 2.3 or
such other persons as agreed to, in writing, by the Agent (a "Notice of
Borrowing"), which notice shall be in substantially the form of Exhibit B,
specifying therein (i) the date of such proposed Borrowing, (ii) the aggregate
amount of such proposed Borrowing and (iii) a statement that the proposed
Borrowing does not exceed the Available Credit. The Revolving Credit Loans shall
be made as Base Rate Loans.
(b) Each Swing Loan Borrowing shall be made on notice, given by the
Borrower to the Swing Bank not later than 12:00 P.M. (New York City time) on the
Business Day of the proposed Swing Loan Borrowing. All Swing Loans shall be made
as Base Rate Loans.
(c) The Agent shall give to each Lender prompt notice of the Agent's
receipt of a Notice of Borrowing. Each Lender shall, (x) in the case of a
Revolving Credit Borrowing requested to refinance a Swing Loan, before 12:00
P.M. (New York City time) and (y) in the case of a Revolving Credit Loan
requested as a direct advance
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to the Borrower, before 2:00 P.M. (New York City time), in each case on the date
of the proposed Borrowing, make available for the account of its Applicable
Lending Office to the Agent's Account, in immediately available funds, such
Lender's Ratable Portion of such proposed Revolving Credit Borrowing. After the
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Agent will promptly make such funds available to
the Borrower at the Agent's aforesaid address. In determining whether such
applicable conditions have been satisfied, the Agent shall be entitled to rely
on the most recent Borrowing Base Certificate received from the Borrower.
(d) Each Revolving Credit Borrowing shall be in an aggregate amount of
not less than $100,000. Each Swing Loan shall be in the amount of not less than
$100,000 unless a lower amount is permitted by the Swing Bank in its sole
discretion from time to time.
(e) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower.
(f) Unless the Agent shall have received notice from a Lender prior to
the date of any proposed Revolving Credit Borrowing that such Lender will not
make available to the Agent such Lender's Ratable Portion of such Revolving
Credit Borrowing, the Agent may assume that such Lender has made such Ratable
Portion of the proposed Revolving Credit Borrowing available to the Agent on the
date of such Borrowing in accordance with this Section 2.3 and the Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such portion available to the Agent, such Lender and the Borrower severally
agree to repay to the Agent forthwith on the next Business Day following the day
on which the Lender does not make such portion available such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to the Revolving Credit Loans comprising such Borrowing and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement. If the
Borrower shall repay to the Agent such corresponding amount, such payment shall
not relieve such Lender of any obligation it may have to the Borrower hereunder.
(g) The failure of any Lender to make the Loan 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 Loan on the date of such Borrowing, but no Lender shall be
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responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on the date of any Borrowing.
2.4. Fees. (a) The Borrower agrees to pay to the Agent for the benefit
of each Lender a commitment fee (the "Commitment Fee") on the daily unused
portion of such Lender's Revolving Credit Commitment from the date hereof until
the Termination Date at a rate per annum determined by reference to the
Applicable Percentage, payable in arrears on (i) the first day of each month
during the term of such Lender's Revolving Credit Commitment and (ii) the
Termination Date. If the Borrower fails to pay (either from the proceeds of a
Borrowing or otherwise) any Commitment Fee when due, such Commitment Fee shall
immediately constitute, without necessity of further act or evidence, a
Revolving Credit Loan to the Borrower. All Revolving Credit Loans made pursuant
to this Section 2.4 shall be made as Base Rate Loans.
(b) The Borrower has agreed to pay to Citibank additional fees, the
amount and dates of payment of which are embodied in a separate agreement by and
between the Borrower and Citibank dated April 13, 1999.
2.5. Reduction and Termination of the Revolving Credit Commitments. The
Borrower may, upon at least three Business Days' prior notice to the Agent,
terminate in whole or reduce ratably in part the unused portions of the
respective Revolving Credit Commitments of the Lenders; provided, however, that
each partial reduction shall be in the aggregate amount of not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.
2.6. Repayment. The Borrower shall repay the entire unpaid principal
amount of the Loans on the Termination Date.
2.7. Prepayments. (a) The Borrower shall have no right to prepay the
principal amount of any Revolving Credit Loan or any Swing Loan other than as
provided in this Section 2.7.
(b) The Borrower may at any time prepay the outstanding principal
amount of the Swing Loans in whole or ratably in part.
(c) (i) The Borrower may at any time prepay the outstanding principal
amount of the Loans in whole or ratably in part with the proceeds of Collateral.
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(ii) The Borrower may, upon at least one Business Day's prior notice to
the Agent stating the proposed date of the prepayment, prepay the outstanding
principal amount of the Loans in whole (together with accrued interest to the
date of such prepayment) or ratably in part. Upon the giving of such notice of
prepayment, the principal amount of the Loans specified to be prepaid shall
become due and payable on the date specified for each such prepayment.
(iii) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Credit Loans comprising part of the same
Borrowing and Swing Loans equal to the amount by which (A) (I) the sum of the
aggregate principal amount of Revolving Credit Loans, Letter of Credit
Obligations and Swing Loans then outstanding minus (II) the aggregate amount
then on deposit in the Concentration Account, the Investment Account and the L/C
Cash Collateral Account exceeds (B) the lesser of the Revolving Credit
Commitments and the Borrowing Base.
(iv) Any prepayment made pursuant to this Section 2.7(c) shall be
applied first to the Swing Loans outstanding and, if no Swing Loans are
outstanding, then, to the Revolving Credit Loans outstanding. If (A) the only
Loans outstanding are Eurodollar Rate Loans, (B) there are no Letter of Credit
Obligations immediately due and payable, (C) the application of such immediately
available funds will cause the Borrower to incur an obligation under Section
10.4 and (D) there is no Default or Event of Default then continuing, then such
prepayment shall be deposited into the Investment Account and shall be retained
therein until one of the conditions set forth in clauses (A) through (D) are no
longer met, in which case such funds shall be applied as provided in this
Section 2.7(c); provided, however, that at any time the only condition not met
is the condition specified in clause (B), then such funds shall be applied to
fund the L/C Cash Collateral Account.
(d) All immediately available funds in the Concentration Account shall
be applied on the date on which they are immediately available first to the
outstanding principal amount of the Swing Loans, next to the outstanding
principal amount of the Revolving Credit Loans, and next to the other
Obligations (other than any Letter of Credit Obligations), as more fully
described in Section 5 of the Cash Collateral Account Agreement. Thereafter, the
Borrower may direct the disposition of any funds remaining in the Concentration
Account and the Investment Account; provided that, if a Default or an Event of
Default shall have occurred and be continuing, then such funds in the
Concentration Account and the Investment Account shall be used to cash
collateralize the Letter of Credit Obligations, and thereafter, the Borrower
shall direct the disposition of such remaining funds. After the occurrence of a
Cash Release Condition and until the occurrence of a Cash Release Condition
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Unwind, the Borrower may direct the disposition of any funds in the
Concentration Account and the Investment Account.
(e) All proceeds of Collateral received by the Secured Parties after
the giving of notice to the Borrower pursuant to clause (i) or (ii) of the first
sentence of Section 8.2 shall be applied first to fund the L/C Cash Collateral
Account, and if the L/C Cash Collateral Account has been fully funded pursuant
to Section 8.3, to repay any Swing Loans then outstanding together with accrued
interest thereon, and if no Swing Loans or accrued interest are outstanding,
ratably, to repay all other Loans outstanding together with accrued interest
thereon, and if no such Loans or accrued interest are outstanding, then to repay
the Secured Parties, ratably, in respect of all other Obligations hereunder.
2.8. Conversion/Continuation Option. The Borrower may elect (i) at any
time to convert Base Rate Loans or any portion thereof to Eurodollar Rate Loans
or (ii) at the end of any Interest Period with respect thereto, to convert
Eurodollar Rate Loans or any portion thereof into Base Rate Loans, or to
continue such Eurodollar Rate Loans or any portion thereof for an additional
Interest Period; provided, however, that the aggregate of the Eurodollar Rate
Loans for each Interest Period therefor must be in the amount of $5,000,000 or
an integral multiple of $1,000,000 in excess thereof. Each conversion or
continuation shall be allocated among the Revolving Credit Loans of all Lenders
in accordance with their Ratable Portion. Each such election shall be in
substantially the form of Exhibit D hereto (a "Notice of Conversion or
Continuation") and shall be made by giving the Agent at least three Business
Days' prior written notice thereof specifying (A) the amount and type of
conversion or continuation, and (B) in the case of a conversion, the date of
conversion (which date shall be a Business Day and, if a conversion from
Eurodollar Rate Loans, shall also be the last day of the Interest Period
therefor). No conversion of any Swing Loan from a Base Rate Loan may be made.
The Agent shall promptly notify each Lender of its receipt of a Notice of
Conversion or Continuation and of the contents thereof. Notwithstanding the
foregoing, no conversion in whole or in part of Base Rate Loans to Eurodollar
Rate Loans, and no continuation in whole or in part of Eurodollar Rate Loans
upon the expiration of any Interest Period therefor, shall be permitted at any
time at which a Default or an Event of Default shall have occurred and be
continuing. If, within the time period required under the terms of this Section
2.8, the Agent does not receive a Notice of Conversion or Continuation from the
Borrower containing a permitted election to continue any Eurodollar Rate Loans
for an additional Interest Period or to convert any such Loans, or on any date
the aggregate unpaid principal amount of Eurodollar Rate Loans comprising any
Borrowing is reduced, by payment or prepayment or otherwise, to less than
$5,000,000, then, upon the expiration of the
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Interest Period therefor, such Loans will be automatically converted to Base
Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable.
2.9. Interest. (a) The Borrower shall pay interest on the unpaid
principal amount of each Loan from the date thereof until the principal amount
thereof shall be paid in full, at the following rates per annum:
(i) Base Rate Loans. For Base Rate Loans, at a rate per annum equal at
all times to the Applicable Margin plus the Base Rate in effect from time
to time, payable in arrears monthly on the first day of each month and on
the Termination Date; provided, however, that during the continuance of an
Event of Default, Base Rate Loans shall bear interest, payable on demand,
at a rate per annum equal at all times to 2% per annum above the Base Rate
in effect from time to time plus the Applicable Margin.
(ii) Eurodollar Rate Loans. For Eurodollar Rate Loans, at a rate per
annum equal at all times to the sum of the Eurodollar Rate for the
applicable Interest Period for such Eurodollar Rate Loan plus the
Applicable Margin in effect from time to time, payable in arrears on each
day during such Interest Period which occurs on the first day of a month
and on the last day of such Interest Period; provided, however, that
during the continuance of an Event of Default, all Eurodollar Rate Loans
shall bear interest, payable on demand, at a rate per annum equal at all
times to 2% above the Eurodollar Rate for such Eurodollar Rate Loan plus
the Applicable Margin.
(b) If the Borrower fails to pay any interest when due, such interest
shall immediately constitute, without necessity of further act or evidence, a
Revolving Credit Loan to the Borrower.
2.10. Interest Rate Determination. (a) The Eurodollar Rate for each
Interest Period for Eurodollar Rate Loans shall be determined by the Agent two
Business Days before the first day of such Interest Period.
(b) The Agent shall give prompt notice to the Borrower and the Lenders
of the applicable interest rate determined by the Agent for purposes of Section
2.8.
(c) If, with respect to Eurodollar Rate Loans, any Lender notifies the
Agent that the Eurodollar Rate for any Interest Period therefor will not
adequately reflect the cost to such Lender of making such Loans or funding or
maintaining its
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respective Eurodollar Rate Loans for such Interest Period, the
Agent shall forthwith so notify the Borrower and the Lenders, whereupon;
(i) each Eurodollar Rate Loan will
automatically, on the last day of the then existing Interest
Period therefor, convert into a Base Rate Loan; and
(ii) the obligations of all the Lenders to
make Eurodollar Rate Loans or to convert Base Rate Loans into
Eurodollar Rate Loans shall be suspended until the Agent shall
notify the Borrower that such Lenders have determined that the
circumstances causing such suspension no longer exist.
2.11. Increased Costs. If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation (other than any
change by way of imposition or increase of reserve requirements included in
determining the Eurodollar Rate Reserve Percentage) or (ii) 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 any increase in the
cost to any Lender Party of agreeing to make or making, funding or maintaining
any Eurodollar Rate Loans or of agreeing to issue or of issuing or maintaining
Letters of Credit, then the Borrower shall from time to time, upon demand by
such Lender Party (with a copy of such demand to the Agent), pay to the Agent
for the account of such Lender Party additional amounts sufficient to compensate
such Lender Party for such increased cost. A certificate as to the amount of
such increased cost, submitted to the Borrower and the Agent by such Lender
Party, shall be conclusive and binding for all purposes, absent manifest error.
If the Borrower so notifies the Agent within five Business Days after any Lender
Party notifies the Borrower of any increased cost pursuant to the foregoing
provisions of this Section 2.11, the Borrower may convert all Eurodollar Rate
Loans of all Lenders then outstanding into Base Rate Loans, in accordance with
Section 2.8 and, additionally, reimburse such Lender Party for such increased
cost in accordance with this Section 2.11.
2.12. Illegality. Notwithstanding any other provision of this Agree
ment, if the introduction of, or any change in, or any change 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 Eurodollar Lending Office to make Eurodollar Rate Loans or to
continue to fund or maintain Eurodollar Rate Loans, then, on notice thereof and
demand therefor by such Lender to the Borrower through the Agent, (i) the
obligation of such Lender to make or to continue Eurodollar Rate Loans and to
convert Base Rate Loans into Eurodollar Rate Loans shall terminate and (ii) the
Borrower shall forthwith prepay in full all Eurodollar Rate Loans of such Lender
then outstanding, together with interest accrued thereon,
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unless the Borrower, within five Business Days of such notice and demand,
converts all Eurodollar Rate Loans of all Lenders then outstanding into Base
Rate Loans.
2.13. Capital Adequacy. If (i) the introduction of, or any change in or
in the interpretation of, any law or regulation, (ii) the compliance with any
law or regulation, or (iii) compliance with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law), affects or would affect the amount of capital required or expected to be
maintained by any Lender Party or any corporation controlling any Lender Party
and such Lender Party reasonably determines that such amount is based upon the
existence of such Lender Party's Commitment and Loans and other commitments and
loans of this type including, without limitation, such Lender Party's
commitments in respect of Letters of Credit (or similar contingent obligations),
then, upon demand by such Lender Party (with a copy of such demand to the
Agent), the Borrower shall pay to the 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 or
Loans and such Lender Party's agreements herein with respect to the issuance or
maintenance of Letters of Credit. A certificate as to such amounts submitted to
the Borrower and the Agent by such Lender Party shall be conclusive and binding
for all purposes absent manifest error.
2.14. Payments and Computations. (a) The Borrower shall make each
payment hereunder and under the Revolving Credit Notes not later than 12:00 P.M.
(New York City time) (except for payments made pursuant to Section 2.7(e) which
shall be credited no later than when received by the Agent) on the day when due,
in Dollars, to the Agent at its address referred to in Section 10.2 in
immediately available funds without set-off or counterclaim. The Agent will, on
the Business Day of its receipt thereof, cause to be distributed like funds
relating to the payment of principal of or interest on the Loans (other than
Swing Loans) or fees with respect to any Loans (other than amounts payable
pursuant to Section 2.11, 2.12, 2.13, 2.15, or 2.17(h)) to the Lenders, in
accordance with their respective Ratable Portions, for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of
any other amount payable to any 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; provided, however, that payment of
principal of the Swing Loans pursuant to Section 2.7(e) need not be distributed
by the Agent prior to the Settlement Date referred to in Section 2.18. With
respect to the Swing Loans, the Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal of or interest on
the Swing Loans to the Swing Bank for the account of its
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Applicable Lending Office. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 10.7, from and after the effective date of such Assignment and
Acceptance, the Agent shall make all payments hereunder and under the Revolving
Credit 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. Payment received by the Agent after
12:00 P.M. (New York City time) shall be deemed to be received on the next
Business Day (except for payments made pursuant to Section 2.7(e) which shall be
credited no later than when received by the Agent). Prior to the distribution of
any funds to any Lender Party pursuant to this Section 2.14, the Agent shall use
its best efforts to notify such Lender Party of such distribution.
(b) Until the occurrence of the Cash Release Condition, all amounts on
deposit in each of the Blocked Account, the Concentration Account and the
Investment Account shall be applied by the Agent against the outstanding balance
of the Obligations in accordance with Section 2.7(d); provided, however, that in
no event shall any amount be required to be applied by the Agent against the
outstanding balance of the Obligations unless and until such amount shall have
been credited in immediately available funds to the Blocked Account, the
Concentration Account or the Investment Account.
(c) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder, to
charge from time to time against any or all of the Borrower's accounts with such
Lender Party any amount so due or to treat any amounts due hereunder as having
been paid by proceeds of a Revolving Credit Borrowing. The Borrower and the
Lender Parties hereby authorize the Swing Bank to pay directly any amount due
hereunder and to treat such payment as a Swing Loan.
(d) All computations of interest and fees shall be made by the Agent on
the basis of a year of 360 days, and the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest and fees are payable. Each determination by the Agent of an interest
rate hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(e) Whenever any payment hereunder or under the Revolving Credit Notes
shall be stated to be due on a day other than a Business Day, such payment 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 fee, as the
case may be; provided, however, that if such extension would cause payment of
interest on or
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principal of any Eurodollar Rate Loan to be made in the next calendar month,
such payment shall be made on the next preceding Business Day.
(f) Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due hereunder to any Lender Party hereunder
that the Borrower will not make such payment in full, the Agent may assume that
the Borrower has made such payment in full to the Agent on such date and the
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 the Borrower shall not have so made such
payment in full to the Agent, each such Lender Party shall repay to the 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 Agent,
at the Federal Funds Rate.
2.15. Taxes. (a) Any and all payments by the Borrower hereunder, under
the Revolving Credit Notes and under the Letter of Credit Reimbursement
Agreements shall be made, in accordance with Section 2.14, 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, (i) in the case of each Lender Party and the Agent, taxes measured by
its net income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Lender Party or the Agent (as the case may be) is organized
or any political subdivision thereof, (ii) in the case of each Lender Party,
taxes (including, but not limited to, the Branch Profits Tax under Section 884
of the Code) measured by its net income, and franchise taxes imposed on it, by
the jurisdiction of such Lender Party's Applicable Lending Office or any
political subdivision thereof and (iii) in the case of each Lender Party
organized under the laws of a jurisdiction outside the United States, United
States federal withholding tax payable with respect to payments by the Borrower
which would not have been imposed had such Lender Party, to the extent then
required thereunder, delivered to the Borrower and the Agent the forms
prescribed by Section 2.15(f) (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder to any Lender Party or the Agent, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including, without limitation, deductions applicable to
additional sums payable under this Section 2.15) such Lender Party or the Agent
(as the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxing
authority or
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other authority in accordance with applicable law, and (iv) the Borrower shall
deliver to the Agent evidence of such payment to the relevant taxation or other
authority.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction which arise from any payment made by the
Borrower hereunder or under any Letter of Credit Reimbursement Agreement or from
the execution, delivery or registration of, or otherwise with respect to, any
Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender Party and the Agent
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.15) imposed on or paid by such Lender Party or the Agent (as the case
may be) and any liability (including, without limitation, for penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date such Lender Party or
the Agent (as the case may be) makes written demand therefor. Any such demand
shall show in reasonable detail the amount payable and the calculations used to
determine, in good faith, such amount and shall provide reasonably acceptable
proof of payment of such Tax or Other Tax.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes, the Borrower will furnish to the Agent, at its address referred to in
Section 10.2, the original or a certified copy of a receipt evidencing payment
thereof. If no Taxes are payable in respect of any payment hereunder made (i) by
or on behalf of the Borrower other than by a "United States person" within the
meaning of Section 7701(a)(30) of the Code or (ii) out of funds from an account
outside the United States, the Borrower will furnish to the Agent a certificate
from each appropriate taxing authority, or an opinion of counsel acceptable to
the Agent, in either case stating that such payment is exempt from or not
subject to Taxes. For purposes of this subsection (d) and subsection (f), the
term "United States" shall have the meaning specified in Section 7701 of the
Code.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.15 shall survive the payment in full of principal and interest
hereunder and the termination of the Revolving Credit Commitments.
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(f) Each Lender Party organized under the laws of a jurisdiction
outside the United States, on or prior to the Effective Date in the case of each
Lender Party listed on the signature pages hereof, 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 if reasonably
requested by the Borrower or the Agent (unless such Lender Party is unable to do
so by reason of a change in law (including, without limitation, any statute,
treaty, ruling, determination or regulation) occurring subsequent to the
Effective Date or date of Assignment and Acceptance, as the case may be), shall
provide the Agent and the Borrower with two original IRS Forms 4224 or 1001, as
appropriate, or other applicable form, certificate or document prescribed by the
IRS, certifying that such Lender Party is exempt from or entitled to a reduced
rate of United States withholding tax with respect to all payments to be made to
such Lender Party hereunder, under any Revolving Credit Note and under any
Letter of Credit Reimbursement Agreement. If any form or document referred to in
this subsection (f) 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 or 4224 that the Lender Party
reasonably considers to be confidential, the Lender Party shall give notice
thereof to the Borrower and shall not be obligated to include in such form or
document such confidential information. Unless the Borrower and the Agent have
received forms or other documents satisfactory to them indicating that payments
hereunder, under any Revolving Credit Note or under any Letter of Credit
Reimbursement Agreement are not subject to United States withholding tax, the
Borrower or the Agent shall, in the case of payments to or for any Lender Party
organized under the laws of a jurisdiction outside the United States, (i)
withhold taxes from such payments at the applicable statutory rate, or at a rate
reduced by an applicable tax treaty (provided that the Borrower and the Agent
have received forms or other documents satisfactory to them indicating that such
reduced rate applies) and (ii) pay such Lender Party such payment net of any
taxes withheld; provided, however, that should a Lender Party become subject to
Taxes because of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender Party shall reasonably request to assist
such Lender Party to recover such Taxes.
2.16. Sharing of Payments, Etc. If any Lender Party shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans (other than Swing Loans) made by
it (other than pursuant to Section 2.7, 2.11, 2.12, 2.13, 2.14 or 2.17(h)) in
excess of its Ratable Portion of payments on account of the Loans (other than
Swing Loans) obtained by all the Lender Parties, such Lender Party shall
forthwith purchase from the other Lender Parties such participations in their
Loans (other than Swing Loans) as shall be necessary to cause such purchasing
Lender Party to share the excess payment ratably with each of
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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
Lender Party shall be rescinded and such Lender Party shall repay to the
purchasing Lender Party the purchase price to the extent 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 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. The Borrower agrees that any Lender
Party so purchasing a participation from another Lender Party pursuant to this
Section 2.16 may, to the fullest extent permitted by law, exercise all its
rights of payment (including, without limitation, the right of set-off) with
respect to such participation as fully as if such Lender Party were the direct
creditor of the Borrower in the amount of such participation.
2.17. Letter of Credit Facility. (a) On the terms and subject to the
conditions contained in this Agreement, each Issuer agrees to issue one or more
Letters of Credit at the request of the Borrower for the account of the Borrower
from time to time during the period commencing on the date hereof and ending on
the Termination Date; provided, however, that no Issuer shall issue any Letter
of Credit if:
(i) any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuer
from issuing such Letter of Credit or any Requirement of Law applicable to
such Issuer or any request or directive (whether or not having the force
of law) from any Governmental Authority with jurisdiction over such Issuer
shall prohibit, or request that such Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or
shall impose upon such Issuer with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuer is
not otherwise compensated) not in effect on the date hereof or result in
any unreimbursed loss, cost or expense which was not applicable, in effect
or known to such Issuer as of the date hereof and which such Issuer in
good faith deems material to it;
(ii) such Issuer shall have received written notice from any Lender
Party or the Borrower, on or prior to the Business Day prior to the
requested date of issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article III is not then satisfied;
(iii) the amount of the Letter of Credit requested exceeds the
Available Credit or, upon the issuance of the requested Letter of Credit,
the Letter of Credit Undrawn Amounts would exceed $25,000,000; or
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(iv) fees due in connection with a requested issuance have not been
paid.
None of the Lender Parties (other than the Issuers) shall have any obligation to
issue any Letters of Credit.
(b) In no event shall:
(i) the expiration date of any Letter of Credit be more than one year
after the date of issuance thereof, nor shall the expiration date of any
Letter of Credit fall after the date that is 60 days prior to the
Termination Date; except that any such Letter of Credit may also be on the
following terms: such Letter of Credit shall have an initial one year term
which shall be automatically extended for successive one-year terms (but
in no case may such Letter of Credit be extended such that its expiration
date falls after the date that is 60 days prior to the Termination Date);
provided, however, that such a Letter of Credit shall not be automatically
extended if either (A) the beneficiary of such Letter of Credit is sent a
notice that an Event of Default shall have occurred and be continuing at
any time prior to the date that is 30 days prior to the date of such
extension or (B) the Borrower requests in writing no later than 40 days
prior to the date of such extension that the term of such Letter of Credit
shall not be extended; or
(ii) any Issuer issue any Letter of Credit for the purpose of
supporting the issuance of any letter of credit by any other Person except
with the prior written consent of the Agent.
(c) Prior to the issuance of each Letter of Credit, and as a condition
of such issuance and of the participation of each Lender (other than the Issuer
thereof) in the Letter of Credit Obligations arising with respect thereto, the
Borrower shall have delivered to the Issuer thereof a letter of credit
reimbursement agreement, in a form satisfactory to the Issuer (as the same as
may be amended or otherwise modified, a "Letter of Credit Reimbursement
Agreement"), signed by the Borrower, and such other documents or items as may be
required pursuant to the terms thereof or otherwise reasonably required by the
Issuer. In the event of any conflict between the terms of any Letter of Credit
Reimbursement Agreement and this Agreement, the terms of this Agreement shall
govern.
(d) In connection with the issuance of each Letter of Credit, the
Borrower shall give the Issuer thereof and the Agent at least two Business Days'
prior written notice of its requested issuance of a Letter of Credit in
substantially the form of
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Exhibit C (a "Letter of Credit Request"). Such notice shall be irrevocable and
shall specify the stated amount of the Letter of Credit requested, which stated
amount shall not be less than $50,000, the date of issuance of such requested
Letter of Credit (which day shall be a Business Day), the date on which such
Letter of Credit is to expire, and the Person for whose benefit the requested
Letter of Credit is to be issued. Such notice, to be effective, must be received
by such Issuer and the Agent not later than 11:00 A.M. (New York City time) on
or prior to the last Business Day on which notice can be given under the
immediately preceding sentence. Prior to the close of business on the Business
Day following the Business Day on which the Agent first receives such notice,
the Agent shall confirm to the Issuer of the requested Letter of Credit whether
the applicable conditions in Article III are satisfied as of such date.
(e) Subject to the terms and conditions of this Section 2.17 and
provided that the applicable conditions set forth in Article III have been
satisfied, such Issuer shall, on the requested date, issue a Letter of Credit on
behalf of the Borrower in accordance with the Issuer's usual and customary
business practices.
(f) Immediately upon the issuance by an Issuer of a Letter of Credit in
accordance with the terms and conditions of this Agreement, such Issuer shall be
deemed to have sold and transferred to each Lender, and each Lender shall be
deemed irrevocably and unconditionally to have purchased and received from such
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Lender's Ratable Portion, in such Letter of Credit and the
obligations of the Borrower with respect thereto (including, without limitation,
all Letter of Credit Obligations with respect thereto) and any security therefor
and guaranty pertaining thereto and each Lender's Revolving Credit Commitment
shall be deemed used to the extent of such Lender's Ratable Portion of such
Letter of Credit Obligations.
(g) In determining whether to pay under any Letter of Credit, no Issuer
shall have any obligation relative to the Lenders other than to confirm that any
documents required to be delivered under such Letter of Credit appear to have
been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by any Issuer under or in connection with any Letter of Credit, if taken or
omitted in the absence of gross negligence or willful misconduct, shall not put
such Issuer under any resulting liability to any Lender, or diminish the Agent's
or any Lender's obligations hereunder to the Issuer.
(h) In the event that any Issuer makes any payment under any Letter of
Credit and the Borrower shall not have repaid such amount to such Issuer
pursuant to Section 2.17(l), such Issuer shall promptly
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notify the Agent, which shall promptly notify each Lender of such failure, and
each Lender shall promptly and unconditionally pay to the Agent for the account
of such Issuer the amount of such Lender's Ratable Portion of such payment in
Dollars and in same day funds (and upon receipt the Agent shall promptly pay the
same to the Issuer); provided, however, if the Swing Bank so elects and if a
Swing Loan can be made in such amount, the Agent shall promptly notify the Swing
Bank of such failure, and the Swing Bank shall pay to the Agent for the account
of such Issuer the amount of such payment in Dollars and in same day funds. This
Revolving Credit Loan shall be made, or the Swing Loan may be made,
notwithstanding the Borrower's failure to satisfy the conditions set forth in
Section 3.3. If the Agent so notifies such Lender prior to 11:00 A.M. (New York
City time) on any Business Day, such Lender shall make available to the Agent
for the account of such Issuer its Ratable Portion of the amount of such payment
on such Business Day in same day funds. If and to the extent such Lender shall
not have so made such Lender's Ratable Portion of the amount of such payment
available to the Agent for the account of such Issuer, such Lender agrees to
repay to the Agent for the account of such Issuer forthwith on demand such
amount together with interest thereon, for each day from such date until the
date such amount is repaid to the Agent for the account of such Issuer, at the
Federal Funds Rate. The failure of any Lender to make available to the Agent for
the account of such Issuer its Ratable Portion of any such payment shall not
relieve any other Lender of its obligation hereunder to make available to the
Agent for the account of such Issuer its Ratable Portion of any payment on the
date such payment is to be made, but no Lender shall be responsible for the
failure of any other Lender to make available to the Agent for the account of
any Issuer such other Lender's Ratable Portion of any such payment.
(i) Whenever any Issuer receives a payment of a Reimbursement
Obligation as to which the Agent has received for the account of such Issuer any
payment from a Lender pursuant to Section 2.17(h) (and such amount has been paid
to such Issuer), the Issuer shall pay to the Agent such amount so received and
the Agent shall promptly pay to each Lender which has paid such Lender's Ratable
Portion thereof, in same day funds, an amount equal to such Lender's Ratable
Portion thereof.
(j) Upon the request of any Lender, each Issuer shall furnish to such
Lender copies of any Letter of Credit Reimbursement Agreement to which such
Issuer is a party and such other documentation as may reasonably be requested by
such Lender.
(k) The obligations of the Lenders to make payments to the Agent for
the account of each Issuer with respect to Letters of Credit shall be
irrevocable and not subject to any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances (except as
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expressly provided in Section 2.17(g)), including, without limitation, any of
the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of
the Collateral Documents;
(ii) the existence of any claim, set-off, defense or other right which
the Borrower may have at any time against a beneficiary named in a Letter
of Credit, any transferee of any Letter of Credit (or any Person for whom
any such transferee may be acting), the Agent, any Lender Party or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including, without limitation, any underlying transaction between the
Borrower and the beneficiary named in any Letter of Credit);
(iii) any draft, certificate or any other document presented under the
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;
(iv) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Collateral Documents; or
(v) the occurrence of any Default or Event of Default.
(l) The Borrower agrees to pay to each Issuer the amount of all
Reimbursement Obligations owing to such Issuer under any Letter of Credit
immediately when due, irrespective of any claim, set-off, defense or other right
which the Borrower may have at any time against such Issuer or any other Person.
The Borrower agrees to reimburse each Issuer for all amounts which such Issuer
pays under such Letter of Credit no later than the time specified in such Letter
of Credit Reimbursement Agreement. If the Borrower does not pay (either from the
proceeds of a Borrowing or otherwise) any such Reimbursement Obligation when
due, such Reimbursement Obligation shall immediately constitute, without
necessity of further act or evidence, a Loan made by the relevant Issuer payable
on demand or, to the extent the Agent has received any payments from Lenders for
the account of such Issuer pursuant to Section 2.17(h), Revolving Credit Loans
made by such Lenders (which, in the case of each Lender, shall be to the extent
of such Lender's Ratable Portion of such Reimbursement Obligation) to the
Borrower, in an aggregate principal amount equal to such Reimbursement
Obligation remaining unpaid, or, to the extent the Agent has received any
payments from the Swing Bank for the account of such Issuer pursuant to Section
2.17(h), Swing Loans made by the Swing Bank, computed from the date on
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which such Reimbursement Obligation arose to the date of repayment in full
thereof at the rate of interest applicable to past due Revolving Credit Loans at
a rate based on the Base Rate during such period. If any payment made by or on
behalf of the Borrower and received by any Issuer with respect to any Letter of
Credit is rescinded or must otherwise be returned by such Issuer for any reason,
each Lender shall, upon notice by such Issuer, forthwith pay over to such Issuer
an amount equal to such Lender's Ratable Portion of the amount which must be so
returned by such Issuer or the Swing Bank may, upon notice to the Issuer,
forthwith pay over to such Issuer an amount equal to the amount which must be
returned by such Issuer.
(m) The Borrower agrees to pay the following amounts with respect to
Letters of Credit issued for it:
(i) to the Agent, for the benefit of each Lender who has purchased or
has been deemed to have purchased participations in the Letters of Credit,
with respect to each standby Letter of Credit or documentary Letter of
Credit, an administrative fee equal to a rate per annum equal at all times
to the Applicable Margin for Letter of Credit Fees multiplied by the
average daily maximum amount available from time to time to be drawn under
such Letter of Credit, payable monthly in arrears and on the termination
of such Letter of Credit, and, in each case, calculated on the basis of a
360-day year and the actual number of days elapsed; provided, however,
that, during the continuance of an Event of Default, such administrative
fee shall increase by 2% per annum and shall be payable on demand;
(ii) to each Issuer, with respect to each standby Letter of Credit or
documentary Letter of Credit issued by such Issuer, 0.375% per annum of
the average daily maximum amount available from time to time to be drawn
under such Letter of Credit, payable monthly in arrears and on the
termination of such Letter of Credit, and, in each case calculated on the
basis of a 360-day year and the actual number of days elapsed; and
(iii) to each Issuer, with respect to the issuance, amendment or
transfer of each Letter of Credit and each drawing made thereunder,
issuance, documentary, processing and other charges in accordance with
such Issuer's standard schedule for such charges in effect at the time of
issuance, amendment, transfer or drawing, as the case may be.
2.18. Settlement of Accounts. The Agent shall notify each Lender
periodically, as determined by the Agent, of the principal amount of Swing Loans
outstanding as of 1:00 P.M. (New York City time) as of such date (the
"Computation
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Date") and each Lender's Ratable Portion thereof. Each Lender shall before 1:00
P.M. (New York City time) on the next Business Day (the "Settlement Date") make
available to the Agent, in immediately available funds, the amount of its
Ratable Portion of such principal amount of Swing Loans outstanding. Upon such
payment by a Lender, such Lender shall be deemed to have made a Revolving Credit
Loan to the Borrower, notwithstanding any failure by the Borrower to satisfy the
conditions in Section 3.3. The Agent shall use such funds to repay the principal
amount of Swing Loans to the Swing Bank. All interest due on the Swing Loans
shall be payable to the Swing Bank in accordance with Sections 2.9 and 2.14.
2.19. The Blocked Account. (a) The Borrower has established and shall
maintain, pursuant to the Blocked Account Letter, an account with PNC Bank,
N.A., account number 0002881016, in the name and under the sole dominion and
control of the Agent (the "Blocked Account").
(b) As collateral security for the Obligations, the Borrower hereby
transfers, assigns and pledges to the Agent and grants to the Agent a Lien on
and security interest in, for the benefit of the Secured Parties on a first
priority basis, all of the right, title and interest of the Borrower in the
Blocked Account and all cash, deposits, Cash Equivalents and other instruments
held in the Blocked Account, as security for the Obligations. The Agent shall
possess sole dominion and control over the Blocked Account as provided in the
Blocked Account Letter. Except as provided in Section 2.7(d) and the Blocked
Account Letter, as long as any of the Obligations remain unpaid or any of the
Commitments are outstanding, the Borrower agrees that neither the Borrower nor
any Person or entity claiming by, through or under the Borrower shall have any
control over the use of, or any right to effect a withdrawal from, the Blocked
Account. All amounts in the Blocked Account shall be applied to the Obligations
by the Agent as specified in Section 2.7(d).
(c) Except for the funds held in the bank accounts otherwise permitted
by Section 7.16, the Borrower shall cause all cash, Cash Equivalents, checks,
notes, drafts or similar items of payments received by it which constitute (i)
payments from account debtors for Accounts not sold pursuant to the Receivables
Securitization, including, without limitation, all intercompany receivables and
(ii) proceeds of all other Collateral to be deposited on the date of receipt
thereof or the next Business Day following receipt thereof in the Blocked
Account.
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ARTICLE III
CONDITIONS PRECEDENT
3.1. Conditions Precedent to the Effective Date. The effectiveness of
this Agreement is subject to satisfaction of the conditions precedent that the
Agent shall have received, on or before the Effective Date, the following, each
dated as of the Effective Date unless otherwise indicated, in form and substance
satisfactory to the Agent and (except for the Revolving Credit Notes) in
sufficient copies for each Lender Party:
(a) The Revolving Credit Notes to the order of each Lender, respec
tively.
(b) Certified copies of (i) the resolutions of the Board of Directors
of each Loan Party approving each Loan Document to which it is a party, and (ii)
all documents evidencing other necessary corporate action and required
governmental and third party approvals, licenses and consents to the
transactions contemplated hereby.
(c) A copy of the articles or certificate of incorporation of each Loan
Party and of each of the Borrower's Subsidiaries which is not a Loan Party
certified as of a recent date by the Secretary of State of the state of
incorporation of such Loan Party or Subsidiary, together with certificates of
such official attesting to the good standing of each such Loan Party and
Subsidiary, and a copy of the certificate of incorporation and the By-Laws of
each Loan Party and of each of the Borrower's Subsidiaries certified as of the
Effective Date by the Secretary or an Assistant Secretary of each Loan Party or
Subsidiary.
(d) A certificate of the Secretary or an Assistant Secretary of each
Loan Party certifying the names and true signatures of each officer of such Loan
Party who have been authorized to execute and deliver any Loan Document or other
document required to be executed and delivered hereunder by or on behalf of such
Loan Party.
(e) The Holdings Guaranty, duly executed by Holdings.
(f) The Holdings Pledge Agreement, duly executed by Holdings, together
with:
(A) certificates representing the Pledged Shares referred to
therein accompanied by undated stock powers executed in blank; and
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(B) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens created
under the Holdings Pledge Agreement has been taken or will be taken in
accordance with the terms of the Loan Documents.
(g) The Guaranty, duly executed by the Guarantors.
(h) The Security Agreement, duly executed by the Borrower and each
Guarantor, together with:
(A) certificates representing the Pledged Shares referred to
therein accompanied by undated stock powers executed in blank and
instruments, if any, evidencing the Pledged Debt referred to therein
indorsed in blank, and
(B) acknowledgment copies of proper termination statements (Form
UCC-3 or a comparable form), duly filed on or before the Effective Date
under the Uniform Commercial Code of the States listed on Schedule 3.1 and
all other jurisdictions that the Agent may deem necessary or desirable in
order to terminate the Liens (other than the Liens created by the Security
Agreement) covering the Collateral described in the Security Agreement,
(C) acknowledgment copies of proper financing statements (Form
UCC-1), duly filed on or before the Effective Date under the Uniform
Commercial Code of all jurisdictions that may be necessary or that the
Agent may deem desirable in order to perfect and protect the Liens created
by the Security Agreement, covering the Collateral described in the
Security Agreement,
(D) evidence of the completion of all other recordings and
filings of or with respect to the Security Agreement that the Agent may
deem necessary or appropriate 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, if any, referred to in the
Security Agreement, together with a consent to such assignment, duly
executed by each party to such Assigned Agreements other than the Borrower
or a Guarantor,
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(G) the Blocked Account Letters referred to therein, duly
executed by PNC Bank, and
(H) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the Liens created
under the Security Agreement has been taken or will be taken in accordance
with the terms of the Loan Documents.
(i) The Keepwell Agreement, duly executed by the Borrower, WHX and
Holdings.
(j) The Holdings Intercreditor Agreement, duly executed by WHX,
Holdings and the Borrower.
(k) The Cash Collateral Account Agreement, duly executed by the
Borrower.
(l) A favorable opinion of (i) Olshan, Grundman, Frome, Rosenzweig &
Wolosky LLP, outside general counsel to Holdings, the Borrower and the
Guarantors, and Reed Smith Shaw & McClay LLP, special counsel to the Borrower in
Pennsylvania, each in substantially the form of Exhibit M-1 or M-2,
respectively, and as to such other matters as any Lender through the Agent may
reasonably request.
(m) A certificate, signed by a Responsible Officer of the Borrower,
stating that the conditions specified in Sections 3.2(a), (b) and (f) and
3.3(a)(i) have been met.
(n) A certificate of the chief financial officer of the Borrower in
form and substance satisfactory to the Lender Parties, attesting to the Solvency
of each Loan Party after giving effect to the transactions contemplated hereby.
(o) Such additional documents, information and materials as any Lender
Party, through the Agent, may reasonably request.
3.2. Additional Conditions Precedent to the Effective Date. The
effectiveness of this Agreement is subject to the further conditions precedent
that:
(a) On the Effective Date, the following statements shall be true:
(i) All necessary governmental and third party approvals required to be
obtained by any Loan Party, in connection with the transactions
contemplated
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hereby, including, without limitation, the obtaining of the Loans and
Letters of Credit, have been obtained and remain in effect, and all
applicable waiting periods have expired without any action being taken by
any competent authority which restrains, prevents, impedes, delays or
imposes materially adverse conditions upon, the consummation of the
transactions contemplated hereby;
(ii) There exists no claim, action, suit, investigation or proceeding
pending or, to the knowledge of the Borrower, threatened in any court or
before any arbitrator or Governmental Authority which relates to the
financing hereunder or those which, if adversely determined, would have a
Material Adverse Effect;
(iii) There exists no default under the Original Credit Agreement or
any loan documents executed in connection with the Original Credit
Agreement; and
(iv) There exists no default under the Indenture or the Replacement
Notes.
(b) All costs and accrued and unpaid fees (including, without
limitation, all upfront fees) and expenses (including, without limitation, the
legal fees and expenses of the Agent) required to be paid to the Lender Parties
or the Agent on or before the Effective Date, including, without limitation,
those referred to in Sections 2.4, 2.17 and 10.4, to the extent then due and
payable, shall have been paid.
(c) Nothing contained in any public disclosure made by the Borrower or
any of its Subsidiaries shall lead any Lender Party, in its sole judgment,
exercised reasonably, to determine that any Loan Party's or any of its
Subsidiaries' condition (financial or otherwise), operations, performance,
properties or prospects is different in any material and adverse respect from
that contained in public filings since December 31, 1998, except to the extent
that subsequent filings have updated, amended or supplemented such information
(and other documents delivered to the Agent prior to the date hereof) of any
Loan Party or its Subsidiaries prior to such date.
(d) No Lender Party, in its sole judgment, exercised reasonably, shall
have determined that there is any claim, action, suit, investigation, litigation
or proceeding (including, without limitation, shareholder or derivative
litigation) pending or threatened against any Loan Party in any court or before
any arbitrator or Governmental Authority which, if adversely determined, would
have a Material Adverse Effect.
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(e) Each Lender Party shall be satisfied, in its sole judgment,
exercised reasonably, with all tax aspects of the transactions contemplated
hereby, and with the corporate, capital, tax, legal and management structure of
the Loan Parties and their Subsidiaries, and shall be satisfied, in its sole
judgment exercised reasonably, with the nature and status of all Contractual
Obligations, securities, labor, tax, ERISA, employee benefit, environmental,
health and safety matters, in each case, involving or affecting any Loan Party
or any of its Subsidiaries.
(f) The Tangible Net Worth of the Borrower as of the Effective Date is
at least $13,000,000 and the Consolidated Tangible Net Worth of the Loan Party
Consolidated Group as of the Effective Date is at least $122,000,000.
3.3. Conditions Precedent to Each Loan and Letter of Credit. The
obligation of each Lender to make any Loan or of each Issuer to issue any Letter
of Credit shall be subject to the further conditions precedent that:
(a) The following statements shall be true on the date of such Loan or
issuance, before and after giving effect thereto and to the application of the
proceeds therefrom and to such issuance (and the acceptance by the Borrower of
the proceeds of such Loan or of the issuance by such Issuer of such Letter of
Credit shall constitute a representation and warranty by the Borrower that on
the date of such Loan or issuance such statements are true):
(i) The representations and warranties of the Borrower contained in
Article IV and of each Loan Party in the other Loan Documents are correct
on and as of such date as though made on and as of such date except
insofar as such representations and warranties speak only as of a prior
date or reflect transactions and events after the Effective Date permitted
by the Loan Documents; and
(ii) No Default or Event of Default has occurred and is continuing or
would result from the Loans being made or any Letter of Credit being
issued on such date.
(b) The making of the Loans or the issuance of such Letter of Credit on
such date does not violate any Requirement of Law and is not enjoined,
temporarily, preliminarily or permanently.
(c) No Revolving Credit Loans shall be made if any Swing Loans are
outstanding unless the proceeds of such Revolving Credit Loans are being used to
repay in full the Swing Loans or the Swing Bank otherwise consents.
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(d) The Agent shall have received such additional documents,
information and materials as any Lender Party, through the Agent, may reasonably
request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender Parties and the Agent to enter into this
Agreement, the Borrower represents and warrants to the Lender Parties and the
Agent that:
4.1. Corporate Existence; Compliance with Law. Each Loan Party and each
of its 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 or licensed as a foreign corporation and in good standing under
the laws of each jurisdiction in which it is required to so qualify or be
licensed, except for failures which in the aggregate would have no Material
Adverse Effect; (iii) has all requisite corporate power and authority and the
legal right to own, pledge, mortgage and operate its properties, to lease the
property it operates under lease and to conduct its business as now or currently
proposed to be conducted; (iv) is in compliance with its certificate of
incorporation and by-laws; (v) is in compliance with all other applicable
Requirements of Law, except for such non-compliances as would in the aggregate
have no Material Adverse Effect; and (vi) except as disclosed on Schedule 4.19,
has all necessary licenses, permits, consents or approvals from or by, has made
all necessary filings with, and has given all necessary notices to, each
Governmental Authority having jurisdiction, to the extent required for such
ownership, operation and conduct, except for licenses, permits, consents or
approvals which can be obtained by the taking of ministerial action to secure
the grant or transfer thereof or failures which, in the aggregate would have no
Material Adverse Effect.
4.2. Corporate Power; Authorization; Enforceable Obligations. (a) The
execution, delivery and performance by each Loan Party of the Loan Documents to
which it is a party and the consummation of the transactions related to the
financing contemplated hereby:
(i) are within such Loan Party's corporate powers;
(ii) have been duly authorized by all necessary corporate action,
including, without limitation, the consent of stockholders where required;
and
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(iii) do not (A) contravene any Loan Party's or any of its
Subsidiaries' respective certificates of incorporation or by-laws or other
comparable governing documents, (B) as to any Loan Party, violate any
other applicable Requirement of Law (including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System), or any order or decree of any Governmental Authority or
arbitrator, (C) conflict with or result in the breach of, or constitute a
default under, or result in or permit the termination or acceleration of,
any Material Contractual Obligation of any Loan Party or any of its
Subsidiaries, or (D) result in the creation or imposition of any Lien upon
any of the property of any Loan Party or any of its Subsidiaries, other
than those in favor of the Agent pursuant to the Collateral Documents.
(b) No authorization by, approval of, notice to, or filing or
registration with, any Governmental Authority or any other Person, other than
those which have been obtained or made and copies of which in the case of those
involving a Governmental Authority have been delivered to the Agent, is required
for (i) the due execution, delivery, recordation, filing or performance by any
Loan Party of this Agreement, the Revolving Credit Notes or any other Loan
Document to which it is or is to be a party, or for the consummation of the
transactions contemplated hereby, (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 by the Collateral Documents (including, as of
the Effective Date, the first priority nature thereof (subject to Permitted
Liens)) or (iv) the exercise by the 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. On any date after the Effective Date, no
authorization by, approval of, notice to, or filing or registration with, any
Governmental Authority or any other Person, other than those which have been
obtained or made and copies of which in the case of those involving a
Governmental Authority have been delivered to the Agent, is required for the
perfection or maintenance of the Liens created by the Collateral Documents
(including the first priority thereof (subject to Permitted Liens)).
(c) This Agreement has been and each of the other Loan Documents will
have been upon delivery thereof pursuant to Section 3.1, duly executed and
delivered by each Loan Party party thereto. This Agreement is, and each other
Loan Document will be when delivered hereunder, the legal, valid and binding
obligation of each Loan Party party thereto, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and to general
principles of equity regardless of whether enforcement is sought in a proceeding
in equity or at law.
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4.3. Taxes. All federal, and all material state, local and foreign tax
returns, reports and statements (collectively, the "Tax Returns") required to be
filed by any Loan Party or any of their Tax Affiliates have been filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all taxes, charges and other impositions due and
payable have been timely paid prior to the date on which any fine, penalty,
interest, late charge or loss may be added thereto for non-payment thereof,
except where contested in good faith and by appropriate proceedings if adequate
reserves therefor have been established on the books of such Loan Party or such
Tax Affiliate in accordance with GAAP and all such non-payments, in the
aggregate, if adversely determined would have no Material Adverse Effect. Proper
and accurate amounts have been withheld by each Loan Party and each of their Tax
Affiliates from their respective employees for all periods in material
compliance with the tax, social security and unemployment withholding provisions
of applicable federal, state, local and foreign law and such withholdings have
been timely paid to the respective Governmental Authorities. No Loan Party or
any of their Tax Affiliates has (i) except as set forth on Schedule 4.3,
executed or filed with the IRS or any other Governmental Authority any agreement
or other document (which agreement or other document is presently in effect)
extending, or having the effect of extending, the period for assessment or
collection of any charges, or agreed or been requested to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise which will result in any material aggregate tax liability for the
three taxable years beginning with the year of adjustment; or (ii) except as set
forth on Schedule 4.3, any obligation under any written or oral tax sharing
agreement other than the Tax Sharing Agreement.
4.4. Full Disclosure. No written statement prepared or furnished by or
on behalf of any Loan Party or any of its Affiliates in connection with any of
the Loan Documents or the consummation of the transactions contemplated thereby,
and no financial statement delivered pursuant hereto or thereto, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading, if, in either
case, such fact is material to an understanding of the financial condition,
business, properties or prospects of any Loan Party or any of its Affiliates or
the ability of such Persons to fulfill its obligations under any Loan Document
to which it is a party.
4.5. Financial Matters. (a) (i) The Consolidated balance sheet of WHX
and its Consolidated Subsidiaries as at December 31, 1998, and the related
Consolidated statements of income, retained earnings and cash flow of WHX and
its Subsidiaries for the fiscal year then ended and (ii) the Consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at December
31, 1998, and the related Consolidated statements of income, retained earnings
and cash flow of the Borrower
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and its Subsidiaries for the fiscal year then ended, in each case certified by
PricewaterhouseCoopers, LLP, and the Consolidated balance sheet of the Loan
Party Consolidated Group as at February 28, 1999, and the related Consolidated
statements of income, retained earnings and cash flow of the Loan Party
Consolidated Group for the two months then ended, duly certified by the chief
financial officer of Holdings, copies of which have been furnished to each
Lender Party, fairly present, subject, in the case of said balance sheets as at
February 28, 1999, and said statements of income and cash flow for the two
months then ended, to year-end audit adjustments, the Consolidated financial
condition of such Person and its Subsidiaries as at such dates and the
Consolidated results of the operations of such Person and its Subsidiaries for
the period ended on such date, all in conformity with GAAP.
(b) Since December 31, 1998 and through the Effective Date, there has
been no Material Adverse Change and there have been no events or developments
that in the aggregate have had a Material Adverse Effect.
(c) None of the Loan Parties or any of its Subsidiaries had at December
31, 1998 any material obligation, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment that is required by
GAAP to be included in a balance sheet which is not reflected in the balance
sheet referred to in subsection (a) above or in the notes thereto (other than in
connection with the Receivables Securitization).
(d) As of the Effective Date, each Loan Party is, and each Loan Party
and its Subsidiaries are, on a consolidated basis, Solvent.
(e) The unaudited pro forma consolidated balance sheet of the Borrower
and its Consolidated Subsidiaries, a copy of which has been delivered to each
Lender Party, has been prepared as of January 1, 1999 and reflects as of such
date, on a pro forma basis, the projected Consolidated financial condition of
the Borrower and its Subsidiaries. Such pro forma financial statements
(including any related schedules and notes) have been prepared in accordance
with GAAP on the basis of the statements and assumptions set forth in the
respective notes thereto. The Projections and assumptions expressed therein were
reasonably based on the information available to the Borrower at the time so
furnished and on the Effective Date, including, without limitation, the World
Steel Dynamics Outlook Monitor Report for February 1999, titled Global Pricing
Forecast. The Lender Parties hereby acknowledge as reasonable the economic
forecast contained in such Industry Review and the Loan Party Consolidated
Group's reliance thereon and that such Projections are subject to significant
uncertainties and contingencies, many of which are beyond the Borrower's
control, and that no assurance can be given that the Projections will be
realized.
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4.6. Litigation. Except as set forth in Schedule 4.6, there are no
pending or, to the knowledge of the Borrower, threatened actions, investigations
or proceedings affecting any Loan Party or any of its Subsidiaries before any
Governmental Authority or arbitrator which, in the aggregate, would have a
Material Adverse Effect. The performance of any action by any Loan Party
required or contemplated by any of the Loan Documents is not restrained or
enjoined (either temporarily, preliminarily or permanently), and no material
adverse condition has been imposed by any Governmental Authority or arbitrator
upon any of the foregoing transactions.
4.7. Margin Regulations. No Loan Party is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Borrowing 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 in contravention of Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
4.8. Ownership of the Borrower and Subsidiaries. (a) Set forth on
Schedule 4.8 hereto as may be supplemented from time to time pursuant to Section
6.11(n), is a complete and accurate list showing, as to the Borrower and each
Guarantor, the jurisdiction of its incorporation, the number of shares of each
class of Stock authorized, the number outstanding on the date hereof and the
ownership of the outstanding shares of each class. No authorized but unissued
shares, no treasury shares and, to the best knowledge of the Borrower and each
Guarantor, no other outstanding shares of capital stock of the Borrower or such
Guarantor are subject to any option, warrant, right of conversion or purchase or
any similar right. There are no agreements or understandings with respect to the
voting, sale or transfer of any shares of capital stock of the Borrower or any
Guarantor or, to the best knowledge of the Borrower or such Guarantor, any
agreement restricting the transfer or hypothecation of any such shares, except,
in the case of the Borrower, for the USWA Right of First Refusal and, in the
case of PCC and Wheeling Construction, under the Holdings Pledge Agreement.
(b) Set forth on Schedule 4.8 hereto, as may be supplemented from time
to time pursuant to Section 6.11(n), is a complete and accurate list showing all
direct and indirect Subsidiaries of the Borrower and, as to each such
Subsidiary, the jurisdiction of its incorporation, the number of shares of each
class of Stock authorized, the number outstanding on the date hereof and the
percentage of the outstanding shares of each such class owned (directly or
indirectly) by the Borrower. No Stock of any Subsidiary of the Borrower is
subject to any outstanding option, warrant, right of conversion or purchase or
any similar right. All of the outstanding Stock of each such
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Subsidiary has been validly issued, is fully paid and non-assessable and is
owned by the Borrower, free and clear of all Liens other than the Liens granted
to the Agent pursuant to the Security Agreement. Neither the Borrower nor any
such Subsidiary is a party to, or has knowledge of, any agreement restricting
the transfer or hypothecation of any Stock of any such Subsidiary. The Borrower
does not own or hold, directly or indirectly, any capital stock or equity
security of, or any equity interest in, any Person other than such Subsidiaries.
4.9. ERISA. (a) Schedule 4.9 separately identifies, as of the Effective
Date, all Plans, all Qualified Plans, all Title IV Plans, all Multiemployer
Plans, all unfunded Pension Plans and all Welfare Benefit Plans that provide
retiree benefits.
(b) Except as set forth on Schedule 4.9, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the Code, and the trusts
created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the Code, and to the best knowledge of the
Borrower, nothing has occurred which would cause the loss of such qualification
or tax-exempt status.
(c) Except as set forth on Schedule 4.9, each Plan is in compliance in
all material respects with applicable provisions of ERISA and the Code,
including, without limitation, the filing of reports required under the Code or
ERISA which are true and correct in all material respects as of the date filed,
and, with respect to each Plan (other than a Qualified Plan), all required
contributions and benefits have been paid in accordance with the provisions of
each such Plan.
(d) No Loan Party or any of its Subsidiaries or any ERISA Affiliate,
with respect to any Qualified Plan, has failed to make any contribution or pay
any amount due as required by Section 412 of the Code or Section 302 of ERISA or
the terms of any such Qualified Plan.
(e) Except as set forth on Schedule 4.9, there has been no, nor is
there reasonably expected to occur any, ERISA Event or event described in
Section 4068 of ERISA with respect to any Title IV Plan.
(f) Except as set forth on Schedule 4.9, there are no pending or, to
the knowledge of the Borrower, threatened claims, actions or lawsuits (other
than claims for benefits in the normal course), asserted or instituted against
(i) any Plan or its assets, (ii) any fiduciary with respect to any Plan or (iii)
any Loan Party, any of its Subsidiaries or any ERISA Affiliate with respect to
any Plan.
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(g) Except as set forth on Schedule 4.9, none of the Borrower, any of
its Subsidiaries or any ERISA Affiliate has incurred, or has any reasonable
likelihood of incurring, any Withdrawal Liability under Section 4201 of ERISA as
a result of a complete or partial withdrawal from a Multiemployer Plan (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in any such liability).
(h) Except as set forth on Schedule 4.9, within the last five years
none of any Loan Party, any of its Subsidiaries or any ERISA Affiliate has
engaged in a transaction which resulted in a Title IV Plan with Unfunded Pension
Liabilities being transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of any such entity.
4.10. Liens. There are no Liens of any nature whatsoever on any
properties of any Loan Party or any of their Subsidiaries other than those
permitted by Section 7.1 and as described on Schedule 4.10. The Liens granted by
the Loan Parties to the Agent pursuant to the Collateral Documents are fully
perfected first priority Liens in and to the Collateral (subject to Permitted
Liens).
4.11. Replacement Notes. Neither the Replacement Indenture nor the Term
Loan Agreement has been amended or modified since its effective date and no
provision therein has been waived and no event has occurred or condition exists
under the Replacement Notes, the effect of such event or condition is to
accelerate or permit the acceleration of, the maturity of the Replacement Notes.
4.12. No Burdensome Restrictions; No Defaults. (a) No Loan Party or any
of its Subsidiaries (i) is a party to any Contractual Obligation which would
have a Material Adverse Effect or the performance of which by any thereof,
either uncondi tionally or upon the happening of an event, will result in the
creation of a Lien (other than a Lien permitted by Section 7.1) on the property
or assets of any thereof, (ii) is subject to a charter or corporate restriction
that would have a Material Adverse Effect, or (iii) is, to the knowledge of the
Borrower, in default (except a non-payment default on any of the Replacement
Notes, the effect of which is not to accelerate or permit the acceleration of
the maturity of any of the Replacement Notes) under or with respect to any
Contractual Obligation other than those defaults which in the aggregate would
have no Material Adverse Effect.
(b) No Event of Default has occurred and is continuing.
(c) No Requirement of Law has a Material Adverse Effect.
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(d) Except as provided in the Indentures, none of the Loan Parties'
Subsidiaries is subject to any restriction or limitation on its ability to
declare or make any dividend payment or other distribution on account of any
shares of any class of its Stock or on its ability to purchase, redeem, or
otherwise acquire for value or make any payment in respect of any such shares or
any shareholder rights.
4.13. No Other Ventures. Except as listed on Schedule 4.13, as may be
supplemented from time to time pursuant to Section 6.11(n), or otherwise
permitted under Section 7.6, no Loan Party or any of its Subsidiaries is engaged
in any joint venture or partnership with any other Person.
4.14. Investment Company Act. The Borrower is not 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. The making of the Loans and the issuance of the
Letters of Credit by the Lender Parties, the application of the proceeds and
repayment thereof by the Borrower and the consummation of the transactions
contemplated by the Loan Documents on the part of any Loan Party will not
violate any provision of such Act or any rule, regulation or order issued by the
Securities and Exchange Commission thereunder.
4.15. Insurance. As of the Effective Date, all policies of insurance of
any kind or nature owned by or issued to any Loan Party or any of its
Subsidiaries, including, without limitation, policies of life, fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, workers' compensation, employee health and welfare, title and property
insurance, are in full force and effect and are of a nature and provide such
coverage as is sufficient and as is customarily carried by companies of the size
and character of the Borrower and its Subsidiaries.
4.16. Labor Matters. (a) Except as set forth on Schedule 4.16, there
are no strikes, work stoppages, slowdowns or lockouts pending, or reasonably
likely to occur in the immediate future, against or involving any Loan Party or
any of its Subsidiaries, other than those which in the aggregate would have no
Material Adverse Effect.
(b) Except as set forth on Schedule 4.16, there are no arbitrations or
grievances pending against or involving any Loan Party or any of its
Subsidiaries, nor, to the best knowledge of the Loan Parties and their
Subsidiaries, are there any arbitrations or grievances threatened involving any
Loan Party or any of its Subsidiaries, other than those which in the aggregate
would have no Material Adverse Effect.
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(c) Except as set forth on Schedule 4.16, as of the Effective Date, no
Loan Party or any of its Subsidiaries are parties to, or have any obligations
under, any collective bargaining agreement.
(d) Except as set forth on Schedule 4.16, as of the Effective Date,
there are no representation proceedings pending or, to the best knowledge of the
Borrower, threatened with the National Labor Relations Board, and no labor
organization or group of employees of any Loan Party or any of its Subsidiaries
have made a pending demand for recognition.
(e) There are no unfair labor practice charges, grievances or
complaints pending or in process or, to the best knowledge of the Borrower,
threatened by or on behalf of any employee or group of employees of any Loan
Party or any of its Subsidiaries other than those which in the aggregate would
have no Material Adverse Effect.
(f) Except as set forth on Schedule 4.16, there are no complaints or
charges against any Loan Party or any of its Subsidiaries pending or, to the
best knowledge of the Borrower, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment by any Loan Party or any of its
Subsidiaries of any individual, other than those which in the aggregate would
have no Material Adverse Effect.
(g) Each Loan Party and each of its Subsidiaries are in compliance with
all laws, and all orders of any court, governmental agency or arbitrator,
relating to the employment of labor, including all such laws relating to wages,
hours, collective bargaining, discrimination, civil rights, and the payment of
withholding and/or social security and similar taxes, other than such
non-compliances as in the aggregate would have no Material Adverse Effect.
4.17. Force Majeure. Neither the business nor the properties of any
Loan Party or any of its Subsidiaries is currently suffering from the effects of
any fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of
God or of the public enemy or other casualty (whether or not covered by
insurance) other than those which in the aggregate would have no Material
Adverse Effect.
4.18. Use of Proceeds. The proceeds of the Loans and the Letters of
Credit are being used solely (i) to refinance Indebtedness outstanding under the
Original Credit Agreement, (ii) for the payment of related transaction costs,
fees and expenses and (iii) for general working capital purposes and other
general corporate
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purposes of the Loan Parties, including, without limitation,
Investments permitted under Section 7.6.
4.19. Environmental Protection. Except as disclosed on Schedule 4.19:
(a) The operations of each Loan Party and each of its Subsidiaries or
tenants comply with all Environmental Laws, other than such non-compliance as in
the aggregate would have no Material Adverse Effect;
(b) Each Loan Party and each of its Subsidiaries have obtained all
environmental, health and safety Permits necessary for their operations other
than those failures which in the aggregate would have no Material Adverse
Effect, and all such Permits are in good standing, except where such failure
would have no Material Adverse Effect, and each Loan Party and each of its
Subsidiaries are in compliance with the terms and conditions of such Permits
other than for such non-compliance which in the aggregate would have no Material
Adverse Effect;
(c) Neither any Loan Party nor any of its Subsidiaries have any
currently or previously owned or leased property or operations subject to any
threatened or outstanding order from or agreement with any Governmental
Authority or other Person or subject to any judicial or docketed administrative
proceeding respecting (i) Environmental Laws, (ii) Remedial Action or (iii)
Environmental Liabilities and Costs, other than those which in the aggregate
would have no Material Adverse Effect;
(d) As of the Effective Date, no Loan Party and none of their
Subsidiaries is a treatment, storage or disposal facility requiring a permit
under the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq.,
the regulations thereunder or any state analog and, as of the Effective Date,
each Loan Party and each of its Subsidiaries is in compliance with all
applicable financial responsibility requirements of all Environmental Laws,
including, without limitation, those contained in 40 C.F.R., parts 264, 265 and
280, subparts H, and any state equivalents, other than those that in the
aggregate would have no Material Adverse Effect;
(e) No Loan Party and none of their Subsidiaries has filed or failed to
file any notice required under any applicable Environmental Law reporting a
Release other than those which in the aggregate would have no Material Adverse
Effect;
(f) There are not now nor have there been in the past any events,
conditions or circumstances associated with or arising from currently owned or
leased properties or current operations of any Loan Party or any of its
Subsidiaries or, to the best of the Borrower's knowledge, tenants or, to the
best of the Borrower's knowledge,
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any events, conditions or circumstances associated with or arising from any
previously owned or leased properties or the previous operations of any Loan
Party or any of its Subsidiaries or, to the best of the Borrower's knowledge,
tenants, which may give rise to any Environmental Liabilities and Costs other
than those in the aggregate that would have no Material Adverse Effect;
(g) As of the Effective Date, no Environmental Lien and no unrecorded
Environmental Lien has attached to any property of any Loan Party or any of its
Subsidiaries and, as of any date after the Effective Date, no Environmental Lien
and no unrecorded Environmental Lien has attached to any property of any Loan
Party or any of its Subsidiaries other than those that in the aggregate would
have no Material Adverse Effect; and
(h) With respect to any property owned, leased or operated by any Loan
Party or any of its Subsidiaries: (i) there are no underground storage tanks or
surface impoundments, (ii) except to the extent that the presence thereof, in
the aggregate, would not have a Material Adverse Effect, there is not any
asbestos- containing material in friable form or any airborne asbestos
containing material in excess of amounts proscribed by Environmental Laws, or
(iii) there is not any polychlorinated biphenyls ("PCBs") other than those used,
maintained or disposed of in compliance with all applicable Environmental Laws
or the removal of which would have a Material Adverse Effect.
4.20. Intellectual Property. The Loan Parties and their Subsidiaries
own or license or otherwise have the right to use all material licenses,
permits, patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, copyright applications, franchises,
authorizations and other intellectual property rights that are necessary for the
operation of their respective businesses, without infringement upon or conflict
with the rights of any other Person with respect thereto, including, without
limitation, all trade names, except where such failure would have no Material
Adverse Effect. To the best knowledge of the Borrower, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by any Loan Party or any of
its Subsidiaries infringes upon or conflicts with any rights owned by any other
Person, and no claim or litigation regarding any of the foregoing is pending or
threatened, other than those which in the aggregate would have no Material
Adverse Effect. No patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code relating thereto is pending or,
to the knowledge of the Borrower, proposed, other than those the consequences of
which, in the aggregate would have no Material Adverse Effect.
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4.21. Title. (a) The Loan Parties and their Subsidiaries own fee simple
absolute title to all of the Real Estate described in Schedule 4.21(a), and
marketable title to, or valid leasehold interests pursuant to the Leases in, all
other properties and assets purported to be owned by any Loan Party or any of
their Subsidiaries, including, without limitation, valid leasehold interests
pursuant to the Leases and all property reflected in the balance sheet referred
to in Section 4.5(a), except for such failures which in the aggregate would have
no Material Adverse Effect. None of such properties and assets, including,
without limitation, the Real Estate and the Leases, is subject to any Lien,
except Liens permitted hereunder. The Loan Parties and their Subsidiaries have
received all deeds, assignments, waivers, consents, non-disturbance and
recognition or similar agreements, bills of sale and other documents, and have
duly effected all recordings, filings and other actions necessary to establish,
protect and perfect such Loan Parties and its Subsidiaries' right, title and
interest in and to all such property except for such failures which would in the
aggregate have no Material Adverse Effect.
(b) All real property leased, with an annual base rent of at least
$100,000, at the date of this Agreement by any Loan Party or any of its
Subsidiaries is listed on Schedule 4.21(b), setting forth information regarding
the commencement date, termination date, renewal options and purchase options
(if any) and annual base rents as specified therein. Each of such leases is
valid and enforceable in accordance with its terms and is in full force and
effect other than those leases which if not valid and enforceable, would in the
aggregate have no Material Adverse Effect. None of any Loan Party or any of its
Subsidiaries or, to the knowledge of the Borrower, any other party to any such
lease is in default of its obligations thereunder or has delivered or received
any notice of default under any such lease and no event has occurred which, with
the giving of notice, the passage of time or both, would constitute a default
under any such lease, except, in either case, for defaults the consequence of
which in the aggregate would have no Material Adverse Effect.
(c) Except as listed on Schedule 4.21(c), neither any Loan Party nor
any of its Subsidiaries owns or holds, or is obligated under or a party to, any
option, right of first refusal or other contractual right to purchase, acquire,
sell, assign or dispose of any real property owned or leased by such Loan Party
or any of its Subsidiaries.
(d) All components of all improvements included within the real
property owned or leased by any Loan Party or any of its Subsidiaries
(collectively, "Improvements"), including, without limitation, the roofs and
structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facilities
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included therein, are in good working order and repair other than such failures
the consequences of which in the aggregate would have no Material Adverse
Effect. All water, gas, electrical, steam, compressed air, telecommunication,
sanitary and storm sewage lines and systems and other similar systems serving
the real property owned or leased by any Loan Party or any of its Subsidiaries
are installed and operating and are sufficient to enable the real property owned
or leased by such Loan Party and its Subsidiaries to continue to be used and
operated in the manner currently being used and operated other than such
failures which in the aggregate would have no Material Adverse Effect, and
neither any Loan Party nor any of its Subsidiaries has any knowledge of any fact
or condition that could result in the termination or material impairment of the
furnishing thereof, other than such failures which in the aggregate would have
no Material Adverse Effect. No Improvement or portion thereof is dependent for
its access, operation or utility on any land, building or other Improvement not
included in the real property owned or leased by any Loan Party or any of its
Subsidiaries except where the consequences of such in the aggregate would have
no Material Adverse Effect.
(e) All Permits required to have been issued or appropriate to enable
all real property owned or leased by any Loan Party or any of its Subsidiaries
to be lawfully occupied and used for all of the purposes for which they are
currently occupied and used, have been lawfully issued and are in full force and
effect, other than such failures the consequences of which in the aggregate
would have no Material Adverse Effect.
(f) Neither any Loan Party nor any of its Subsidiaries has received any
notice, nor has any knowledge, of any pending, threatened or contemplated
condemnation proceeding affecting any real property owned or leased by such Loan
Party or any of its Subsidiaries or any part thereof, or any proposed
termination or impairment of any parking at any such owned or leased real
property or of any sale or other disposition of any real property owned or
leased by such Loan Party or any of its Subsidiaries or any part thereof in lieu
of condemnation, except for notices affecting real property which in the
aggregate, if lost, would have no Material Adverse Effect.
(g) No portion of any real property owned or leased by any Loan Party
or any of its Subsidiaries has suffered any material damage by fire or other
casualty loss which has not heretofore been completely replaced, repaired and
restored to its original condition, except to the extent that the failure to
replace, repair or restore such real property would in the aggregate have no
Material Adverse Effect.
4.22. Year 2000. The Borrower has (a) initiated a review and assessment
of all areas within its and each of its Subsidiaries' business and operations
(including those
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materially affected by suppliers, vendors and customers) that could be
materially adversely affected by the risk that computer applications used by the
Borrower 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 (the "Year 2000 Problem"), (b) used its reasonable
efforts to develop a plan and timetable for addressing the Year 2000 Problem on
a timely basis and (c) to date, implemented in all material respects that plan
in accordance with such timetable. Based on the foregoing, the Borrower believes
that all computer applications that are material to its or any of 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 ("Year 2000 Compliant"), except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
ARTICLE V
FINANCIAL COVENANTS
As long as any of the Obligations or the Revolving Credit Commitments
remain outstanding, unless the Majority Lenders otherwise consent in writing:
5.1. Maintenance of Senior Leverage Ratio. The Loan Party Consolidated
Group shall maintain as of the last day of each Fiscal Quarter a ratio of Senior
Secured Debt, as of such last day, to EBITDA, determined on the basis of the
four Fiscal Quarters ending on such day, of not more than the ratio set forth
below for such period:
For the Period Ending Maximum Senior Leverage Ratio
--------------------- -----------------------------
June 30, 1999 4.75:1.00
September 30, 1999 4.75:1.00
December 31, 1999 4.75:1.00
March 31, 2000 4.00:1.00
June 30, 2000 3.50:1.00
September 30, 2000 3.00:1.00
December 31, 2000 3.00:1.00
March 31, 2001 2.75:1.00
June 30, 2001 2.75:1.00
September 30, 2001 2.50:1.00
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December 31, 2001 2.50:1.00
March 31, 2002 2.25:1.00
June 30, 2002 2.25:1.00
September 30, 2002 2.15:1.00
December 31, 2002 2.15:1.00
March 31, 2003 2.15:1.00
and thereafter
5.2. Maintenance of Interest Coverage Ratio. The Loan Party
Consolidated Group shall maintain as of the last day of each Fiscal Quarter an
Interest Coverage Ratio for such period not less than the ratio set forth below:
For the Fiscal Minimum Ratio
Quarter Ending Required
June 30, 1999 0.90:1.00
September 30, 1999 0.90:1.00
December 31, 1999 0.90:1.00
March 31, 2000 1.25:1.00
June 30, 2000 1.50:1.00
September 30, 2000 1.70:1.00
December 31, 2000 1.85:1.00
March 31, 2001 2.00:1.00
June 30, 2001 2.15:1.00
September 30, 2001 2.25:1.00
December 31, 2001 2.25:1.00
March 31, 2002 2.25:1.00
June 30, 2002 2.25:1.00
September 30, 2002 2.25:1.00
December 31, 2002 2.25:1.00
March 31, 2003 2.25:1.00
and thereafter
5.3. Limitation on Capital Expenditures. The Loan Party Consolidated
Group shall not make, or permit any of their Subsidiaries to make, Capital
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Expenditures for the period from January 1, 1999 through the last day of each
Fiscal Year set forth below in excess of the amount set forth opposite such
date:
Maximum Amount of
For the Fiscal Year Ending Capital Expenditures
-------------------------- --------------------
December 31, 1999 $120,000,000
December 31, 2000 $110,000,000
December 31, 2001 $110,000,000
December 31, 2002 $130,000,000
December 31, 2003 $120,000,000
and thereafter
provided, however, that if, at the end of any Fiscal Year set forth above, the
amount specified above for such Fiscal Year exceeds the amount of Capital
Expenditures made by the Borrower and its Subsidiaries during such Fiscal Year
(the amount of such excess being the "Excess Amount"), the Borrower and its
Subsidiaries shall be entitled to make additional Capital Expenditures in the
succeeding Fiscal Year in an amount (such amount being referred to herein as the
"Carryover Amount") equal to the lesser of (i) the Excess Amount and (ii) 50% of
the amount specified above for such prior Fiscal Year. The first amount of
Capital Expenditures spent in any such succeeding Fiscal Year shall be deemed to
be the Carryover Amount.
ARTICLE VI
ADDITIONAL AFFIRMATIVE COVENANTS
As long as any of the Obligations or the Revolving Credit Commitments
remain outstanding, unless the Majority Lenders otherwise consent in writing:
6.1. Compliance with Laws, Etc. The Loan Parties shall comply, and
shall cause each of their Subsidiaries to comply, with all Requirements of Law,
Contractual Obligations, commitments, instruments, licenses, permits and
franchises, including, without limitation, all Permits, other than such
non-compliances the consequences of which in the aggregate would have no
Material Adverse Effect.
6.2. Conduct of Business. The Loan Parties shall (a) conduct, and shall
cause each of their Subsidiaries to conduct, its business in a regular manner
consistent with sound business practice in such Loan Party's or such
Subsidiary's industry; (b) use, and cause each of their Subsidiaries to use, its
reasonable efforts, in the
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ordinary course and consistent with past practice, to preserve its business and
the goodwill and business of the customers, advertisers, suppliers and others
having business relations with any Loan Party or any of their Subsidiaries; (c)
preserve, and cause each of their Subsidiaries to preserve, all registered
patents, trademarks, trade names, copyrights and service marks necessary for the
conduct of its business; and (d) perform and observe, and cause each of their
Subsidiaries to perform and observe, all the terms, covenants and conditions
required to be performed and observed by it under its Contractual Obligations
(including, without limitation, to pay all rent and other charges payable under
any lease and to pay all other payables and obligations as they become due), and
do, and cause their Subsidiaries to do, all things necessary to preserve and to
keep unimpaired its rights under such Contractual Obligations, other than, in
the case of (a) through (d), such failures the consequences of which in the
aggregate would have no Material Adverse Effect.
6.3. Payment of Taxes, Etc. The Loan Parties shall pay and discharge,
and shall cause each of their Subsidiaries to pay and discharge, before the same
shall become delinquent, all lawful governmental claims, taxes, assessments and
charges or levies against it or any of its Subsidiaries or for which its or any
of its Subsidiaries assets may be subject, except where contested in good faith,
by proper proceedings, if adequate reserves therefor have been established on
the books of such Loan Party or such Subsidiary in conformity with GAAP and
where the consequence of all such non- payments in the aggregate would have no
Material Adverse Effect. To the extent such claims, taxes, assessments, charges
or levies are computed on a consolidated, combined or unitary basis, any
payments by any Loan Party and its Subsidiaries shall not exceed their allocable
share thereof.
6.4. Maintenance of Insurance. The Loan Parties shall maintain, and
shall cause each of their 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 Loan Party or
such Subsidiary operates and as otherwise satisfactory to the Agent, in its sole
judgment exercised reasonably, and, in any event, all insurance required by any
Collateral Document. All insurance required by any Collateral Document shall
name the Agent as additional insured or loss payee, as the Agent shall
determine. Each Loan Party will furnish to the Agent (together with copies for
each Lender) from time to time such information as may be reasonably requested
by the Agent as to such insurance.
6.5. Preservation of Corporate Existence, Etc. Each Loan Party shall
preserve and maintain, and shall cause each of their Subsidiaries to preserve
and maintain, its corporate existence and, except for failures which in the
aggregate would
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have no Material Adverse Effect, all rights (charter and statutory) and
franchises, except as permitted by Section 7.5.
6.6. Access. Each Loan Party shall, at any reasonable time and from
time to time, upon reasonable prior notice, (i) permit the Agent, any agents and
any representatives thereof, to (A) examine and make copies of and abstracts
from the records and books of account of such Loan Party and each of its
Subsidiaries, (B) visit the properties of such Loan Party and each of its
Subsidiaries and (C) communicate directly with such Loan Party's independent
certified public accountants, and (ii) permit the Agent, any agents and any
representatives thereof, to discuss the affairs, finances and accounts of such
Loan Party each of its Subsidiaries with any of their respective officers or
directors. Each Loan Party hereby authorizes its independent certified public
accountants to disclose to the Agent, any agents and any representatives
thereof, which authorization shall be confirmed at the request of the Agent, any
and all financial statements and other information of any kind, including,
without limitation, to furnish copies of any management letter, or the substance
of any oral information that such accountants may have with respect to the
business, financial condition, results of operations or other affairs of such
Loan Party or any of its Subsidiaries, except that such accountants shall not be
obligated to disclose to the Agent or any agents and any representatives thereof
its work papers or other confidential information, in each case relating to
either (1) any preliminary reports or studies conducted by such accountants
unrelated to any information previously disclosed to the Agent, any agents or
any representatives thereof, (2) information provided by the attorneys of any
Loan Party with respect to litigation matters if such information is
confidential by reason of the applicable attorney work product doctrine or (3)
any reports or communications concerning the negotiations of the collective
bargaining agreements with any Loan Party's unions at any time prior to the
execution of such agreements.
6.7. Keeping of Books. Each Loan Party shall keep, and shall 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 Loan Party and each such Subsidiary in conformity with GAAP
and applicable law, rules and regulations.
6.8. Maintenance of Properties, Etc. Each Loan Party shall maintain and
preserve, and shall cause each of its Subsidiaries to maintain and preserve, (i)
all of its properties which are useful or necessary in the conduct of its
business in good working order and condition, and (ii) all rights, permits,
licenses, approvals and privileges (including, without limitation, all Permits)
which are used or useful or necessary in the conduct of its business, other than
those which the failure to maintain and preserve would in the aggregate have no
Material Adverse Effect.
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6.9. Application of Proceeds. The Borrower and the Guarantors shall use
the entire amount of the proceeds of the Loans as provided in Section 4.18.
6.10. Financial Statements. The Loan Parties shall furnish to the
Lender Parties:
(a) as soon as available and in any event within 30 days after the end
of each month, the Consolidated balance sheet without footnotes of the Loan
Party Consolidated Group and the balance sheet without footnotes of the Borrower
as of the end of such month and the Consolidated statements of income and cash
flow of the Loan Party Consolidated Group and the statement of income and cash
flow of the Borrower for the period commencing at the end of the previous Fiscal
Year and ending with the end of such month, certified by the chief financial
officer of Holdings as fairly presenting the financial condition and results of
operations of the Loan Party Consolidated Group and the Borrower, respectively,
at such date and for such period subject to normal year end audit adjustments,
together with (A) a certificate of said officer stating that no Default or Event
of Default has occurred and is continuing or, if a Default or an Event of
Default has occurred and is continuing, a statement as to the nature thereof and
the action which the Borrower proposes to take with respect thereto, (B) a
schedule in form satisfactory to the Agent of the computations used by the
Borrower in determining compliance with all financial covenants contained
herein, and (C) a written discussion and analysis by the management of the
Borrower of the financial statements furnished in respect of such month;
(b) (i) prior to the occurrence of the Holdings IPO Threshold, as soon
as available and in any event within 45 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, the Consolidated balance sheets of
WHX and its Subsidiaries and the consolidating balance sheets of the Loan Party
Consolidated Group as of the end of such quarter and the Consolidated statements
of income, retained earnings and cash flow of WHX and its Subsidiaries and the
consolidating statements of income, retained earnings and cash flow of the Loan
Party Consolidated Group for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter, certified by the
chief financial officer of Holdings as fairly presenting the financial condition
and results of operations of WHX and its Subsidiaries and of the Loan Party
Consolidated Group, respectively, at such date and for such period subject to
normal year end audit adjustments, together with (A) a certificate of said
officer stating that no Default or Event of Default has occurred and is
continuing or, if a Default or an Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which the
Borrower proposes to take with respect thereto, (B) a schedule in form
satisfactory to the Agent of the computations used by the Borrower in
determining compliance with all financial covenants contained herein,
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and (C) a written discussion and analysis by the management of the Borrower of
the financial statements furnished in respect of such Fiscal Quarter;
(ii) after the occurrence of the Holdings IPO Threshold, as soon as
available and in any event within 45 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, Consolidated and consolidating
balance sheets of the Loan Party Consolidated Group as of the end of such
quarter and Consolidated and consolidating statements of income, retained
earnings and cash flow of the Loan Party Consolidated Group for the period
commencing at the end of the previous Fiscal Year and ending with the end of
such Fiscal Quarter, certified by the chief financial officer of Holdings as
fairly presenting the financial condition and results of operations of the Loan
Party Consolidated Group at such date and for such period subject to normal year
end audit adjustments, together with (A) a certificate of said officer stating
that no Default or Event of Default has occurred and is continuing or, if a
Default or an Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action which the Borrower proposes to take with
respect thereto, (B) a schedule in form satisfactory to the Agent of the
computations used by the Borrower in determining compliance with all financial
covenants contained herein, and (C) a written discussion and analysis by the
management of the Borrower of the financial statements furnished in respect of
such Fiscal Quarter;
(c) (i) prior to the occurrence of the Holdings IPO Threshold, as soon
as available and in any event within 90 days after the end of each Fiscal Year,
the Consolidated balance sheet of WHX and its Subsidiaries and the consolidating
balance sheets of the Loan Party Consolidated Group as of the end of such year
and the Consolidated statements of income, retained earnings and cash flow of
WHX and its Subsidiaries and the consolidating statements of income, retained
earnings and cash flow of the Loan Party Consolidated Group for the period
commencing at the end of the previous Fiscal Year and ending with the end of
such Fiscal Year, certified in the case of such Consolidated financial
statements without qualification as to the scope of the audit by
PricewaterhouseCoopers, LLP, any other "Big Five" accounting firm or other
independent public accountants acceptable to the Majority Lenders, together with
(A) a certificate of such accounting firm stating that in the course of the
regular audit of the business of WHX and its Subsidiaries, which audit was
conducted by such accounting firm in accordance with generally accepted auditing
standards, such accounting firm obtained no knowledge that a Default or Event of
Default has occurred and is continuing, or, if in the opinion of such accounting
firm, a Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof, (B) a schedule in form satisfactory to the Agent of
the computations used by such accountants in determining, as of the end of such
Fiscal Year, the Borrower's compliance with all financial covenants contained
herein, and (C) a written discussion and analysis by the
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management of the Borrower of the financial statements furnished in respect of
such Fiscal Year;
(ii) after the occurrence of the Holdings IPO Threshold, as soon as
available and in any event within 90 days after the end of each Fiscal Year,
Consolidated and consolidating balance sheets of the Loan Party Consolidated
Group as of the end of such year and Consolidated and consolidating statements
of income, retained earnings and cash flow of the Loan Party Consolidated Group
for the period commencing at the end of the previous Fiscal Year and ending with
the end of such Fiscal Year, certified in the case of such Consolidated
financial statements without qualification as to the scope of the audit by
PricewaterhouseCoopers, LLP, any other "Big Five" accounting firm or other
independent public accountants acceptable to the Majority Lenders, together with
(A) a certificate of such accounting firm stating that in the course of the
regular audit of the business of the Loan Party Consolidated Group, which audit
was conducted by such accounting firm in accordance with generally accepted
auditing standards, such accounting firm obtained no knowledge that a Default or
Event of Default has occurred and is continuing, or, if in the opinion of such
accounting firm, a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof, (B) a schedule in form satisfactory to the
Agent of the computations used by such accountants in determining, as of the end
of such Fiscal Year, the Borrower's compliance with all financial covenants
contained herein, and (C) a written discussion and analysis by the management of
the Borrower of the financial statements furnished in respect of such Fiscal
Year;
(d) not later than the date on which the Loan Parties shall deliver to
the Lender Parties the financial statements referred to in Section 6.10(c) for
any Fiscal Year, a letter from the Loan Parties' independent public accountants
in form and substance satisfactory to the Agent;
(e) promptly after the same are received by the Loan Parties, a copy of
each management letter provided to the Loan Party Consolidated Group by its
independent certified public accountants which refers in whole or in part to any
material inadequacy, defect, problem, qualification or other lack of fully
satisfactory accounting controls utilized by the Loan Party Consolidated Group;
and
(f) monthly, or more frequently as the Agent may require in its sole
discretion, a Borrowing Base Certificate executed by an officer of Holdings
listed on Schedule 2.3 or by such other Person as otherwise agreed to by the
Agent, in writing, as of the end of the preceding month.
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6.11. Reporting Requirements. The Loan Parties shall furnish to the
Lender Parties:
(a) as soon as available and in any event no later than 30 days after
the end of each Fiscal Year, an annual budget (subject to finalization by the
Borrower) of the Loan Party Consolidated Group for the current Fiscal Year,
displaying on a monthly and quarterly basis anticipated balance sheets,
forecasted revenues, net income and cash flow, all on a consolidated basis, and
EBITDA and sales on a consolidating basis;
(b) as soon as available and in any event no later than 30 days after
the end of each Fiscal Year, a forecast (subject to finalization by the
Borrower) of annual sales, EBITDA, Capital Expenditures, working capital
requirements and projected cash flow results of the Loan Party Consolidated
Group on a Consolidated and consolidating basis through the Fiscal Year ending
in 2003;
(c) as soon as available and in any event within 45 days after the end
of each Fiscal Quarter, revisions or updates to the reports delivered pursuant
to (a) and (b) above;
(d) promptly and in any event within three Business Days after any Loan
Party, any of their Subsidiaries or any ERISA Affiliate knows or has reason to
know that any ERISA Event has occurred or is threatened, a written statement of
the chief financial officer or other appropriate officer of the Borrower
describing such ERISA Event or waiver request and the action, if any, which the
Borrower, the Guarantors, their Subsidiaries and ERISA Affiliates propose to
take with respect thereto and a copy of any notice filed with the PBGC or the
IRS pertaining thereto;
(e) promptly and in any event within three days after receipt thereof,
a copy of any adverse notice, determination letter, ruling or opinion any Loan
Party, any of their Subsidiaries or any ERISA Affiliate receives from the PBGC,
DOL or IRS with respect to any Qualified Plan and, at the request of any Lender,
a copy of any favorable notice, determination letter, ruling or opinion with
respect thereto from any Governmental Authority;
(f) promptly after the commencement thereof, notice of all actions,
suits and proceedings before any domestic or foreign Governmental Authority or
arbitrator, affecting any Loan Party or any of their Subsidiaries, except those
which, individually or in the aggregate, if adversely determined, would have no
Material Adverse Effect;
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(g) promptly and in any event within three Business Days after any Loan
Party becomes aware of the existence of (i) any Default or Event of Default,
(ii) any material breach or material non-performance of, or any default under,
any Contractual Obligation which is material to the business, prospects,
operations or financial condition of the Loan Party Consolidated Group, (iii)
any breach or non-performance of, or any default under, any Lease of property
where Inventory is located or any other material Lease, or (iv) any Material
Adverse Effect or any Material Adverse Change, or any development or other
information, including, without limitation, any development or information of a
type described in Section 4.16, which has any reasonable likelihood of resulting
in a Material Adverse Change, telephonic or telegraphic notice in reasonable
detail specifying the nature of the Event of Default, Default, development or
information, including, without limitation, the anticipated effect thereof,
which notice shall be promptly confirmed in writing within five days;
(h) promptly after the sending or filing thereof, copies of all
notices, certificates or reports delivered by Holdings pursuant to the
Indentures or to the holders of the Replacement Notes;
(i) promptly after the sending or filing thereof, copies of all reports
which Holdings sends to its security holders generally, and copies of all
reports and registration statements which WHX, Holdings or any of its
Subsidiaries files with the Securities and Exchange Commission, any national
securities exchange or the National Association of Securities Dealers, Inc.;
(j) upon the request of any Lender Party, through the Agent, copies of
all federal, state and local tax returns and reports filed by any Loan Party or
any of their Subsidiaries (including consolidated, combined or unitary returns
filed with any of the Borrower's Tax Affiliates) and governmental audit reports
issued to the Borrower, any Guarantor or any of their Tax Affiliates in respect
of taxes measured by income of any Loan Party or any of their Subsidiaries
(excluding sales, use and like taxes);
(k) promptly upon, and in any event within 30 days of any Loan Party or
any of their Subsidiaries learning of any of the following, written notice of:
(i) the receipt by any Loan Party or any of their Subsidiaries of
written notice of or a claim to the effect that any Loan Party or any of
their Subsidiaries is or may be liable to any Person as a result of a
Release or threatened Release which could reasonably be expected to
subject the Loan Parties and their Subsidiaries to Environmental
Liabilities and Costs of $5,000,000 or more;
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(ii) the receipt by any Loan Party or any of their Subsidiaries of
notification that any real or personal property of any Loan Party or any
of their Subsidiaries is subject to any Environmental Lien;
(iii) the receipt by any Loan Party or any of their Subsidiaries of any
notice of violation of, or knowledge by any Loan Party or any of their
Subsidiaries that there exists a condition which might reasonably result
in a violation by any Loan Party or any of their Subsidiaries of, any
Requirement of Law involving environmental, health or safety matters,
except for violations, the consequences of which in the aggregate would
have no reasonable likelihood of subjecting the Loan Parties and their
Subsidiaries to Environmental Liabilities and Costs of $5,000,000 or more;
(iv) the commencement of any judicial or administrative proceeding or
investigation alleging a violation of any Requirement of Law involving
environmental, health or safety matters other than those the consequence
of which in the aggregate would have no reasonable likelihood of
subjecting the Loan Parties and their Subsidiaries to Environmental
Liabilities and Costs of $5,000,000 or more;
(v) any proposed acquisition of stock, assets or real estate, or any
proposed leasing of property, or any other similar action by any Loan
Party or any of their Subsidiaries, other than those the consequences of
which in the aggregate have no reasonable likelihood of subjecting the
Loan Parties and their Subsidiaries to Environmental Liabilities and Costs
of $5,000,000 or more;
(vi) any proposed action taken by any Loan Party or any of their
Subsidiaries to commence, recommence or cease manufacturing, industrial or
other operations, other than those the consequences of which in the
aggregate have no reasonable likelihood of requiring any Loan Party or any
of their Subsidiaries to obtain additional environmental, health or safety
Permits that require the expenditure of $5,000,000 or more or becoming
subject to additional Environmental Liabilities and Costs of $5,000,000 or
more; and
(vii) any of the items referred to in (i) through (vi) above regardless
of the amount of Environmental Liabilities and Costs to the extent not
already reported pursuant to this Section 6.11(k), if the aggregate
Environmental Liabilities and Costs for such items would exceed
$10,000,000 in any Fiscal Year;
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(l) upon written request by any Lender Party through the Agent, a
report providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice or report
required pursuant to this Section 6.11 and any other environmental, health or
safety compliance obligation, remedial obligation or liability, other than those
which in the aggregate have no reasonable likelihood of subjecting the Loan
Parties and their Subsidiaries to Environmental Liabilities and Costs of
$5,000,000 or more;
(m) promptly upon any Loan Party or any of their Subsidiaries being
refused insurance for which it applied or had any policy of insurance terminated
(other than at its request), all information relating to such refusal or
termination;
(n) promptly and in any event within 45 days of the end of each Fiscal
Year, amendments and supplements to Schedules 4.8 and 4.13 hereto and Schedule
II to the Security Agreement to the extent required to ensure that such
Schedules are accurate and complete in all material respects as to the subject
matter thereof as of such date;
(o) promptly after the Borrower discovers or determines that any
computer application (including those of its suppliers, vendors and customers)
that is material to its or any of its Subsidiaries' business and operations will
not be Year 2000 Compliant (as defined in Section 4.22), except to the extent
that such failure could not reasonably be expected to have a Material Adverse
Effect, notice of such failure, and
(p) such other information respecting the business, properties,
condition, financial or otherwise, or operations of any Loan Party or any of
their Subsidiaries as any Lender Party through the Agent may from time to time
reasonably request.
6.12. Employee Plans. With respect to other than a Multiemployer Plan,
for each Qualified Plan hereafter adopted or maintained by any Loan Party, any
of their Subsidiaries or any ERISA Affiliate, such Loan Party shall (i) seek,
and cause such of their Subsidiaries and ERISA Affiliates to seek, and receive
determination letters from the IRS to the effect that such Qualified Plan is
qualified within the meaning of Section 401(a) of the Code; and (ii) from and
after the adoption of any such Qualified Plan, cause such plan to be qualified
within the meaning of Section 401(a) of the Code and to be administered in all
material respects in accordance with the requirements of ERISA and Section
401(a) of the Code.
6.13. Fiscal Year. Each Loan Party shall maintain as its Fiscal Year
the twelve month period ending on December 31 of each year.
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6.14. Borrowing Base Determination. The Borrower and each Guarantor
shall conduct, or shall cause to be conducted, at its expense, and upon request
of the Agent, and present to the Agent for approval, such appraisals,
investigations or reviews as the Agent shall reasonably request for the purpose
of determining the Borrowing Base, all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested. The Borrower and each Guarantor shall furnish to the Agent any
information which the Agent may reasonably request regarding the determination
and calculation of the Borrowing Base including, without limitation, correct and
complete copies of any invoices, underlying agreements, instruments or other
documents and the identity of all obligors.
6.15. Environmental. Upon receipt of any notification or otherwise
obtaining knowledge of any Release or Environmental Liabilities and Costs in con
nection with any property or operations of any Loan Party or any of their
Subsidiaries, the Borrower shall, at its cost, conduct, or pay for consultants
to conduct, appropriate (as reasonably determined by the Borrower) tests or
assessments, if any, at such time and in such manner as Borrower shall
reasonably determine, of environmental conditions at such operations or
properties including, without limitation, investigation and testing of
subsurface conditions, and shall take such remedial, investigational or other
action as any Governmental Authority lawfully requires or, if there is no such
Governmental Authority requirement, as is appropriate and consistent with good
business practice (as reasonably determined by the Borrower).
6.16. Securitization Intercreditor Agreement. The Borrower shall
deliver to the Agent, not later than June 30, 1999, the Securitization
Intercreditor Agreement, duly executed by each of the parties thereto (other
than the Agent) and in substantially the form of Exhibit P hereto.
ARTICLE VII
NEGATIVE COVENANTS
As long as any of the Obligations or Revolving Credit Commitments
remain outstanding, without the written consent of the Majority Lenders (or the
Agent, as provided in this Article VII):
7.1. Liens, Etc. No Loan Party shall create or suffer to exist, or
permit any of its Subsidiaries to create or suffer to exist, any Lien upon or
with respect to any of its or such Subsidiary's properties, whether now owned or
hereafter acquired, or
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assign, or permit any of its Subsidiaries to assign, any right to receive
income, except for the following (each of which will be given independent
effect); provided, however, no such Liens permitted by this Section 7.1 (other
than as described in clauses (a), (e), (g), (h) and (p) shall be Liens on any
property constituting Collateral:
(a) Liens created pursuant to the Loan Documents;
(b) Capitalized Lease Obligations, purchase money Liens or purchase
money security interests upon or in any property of, or owned, acquired or held
by such Loan Party or any Subsidiary of such Loan Party or any Person acquired
by such Loan Party or any of their Subsidiaries in accordance with Section 7.5,
in the ordinary course of business to secure the purchase price of such property
and Liens existing on such property at the time of its direct or indirect
acquisition by such Loan Party or such Subsidiary (other than any such Lien
created in contemplation of anticipation of such acquisition); provided,
however, that (i) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to acquire, finance, refinance or refund,
the cost (including, without limitation, the cost of construction) of the
property subject thereto, (ii) the principal amount of the Indebtedness secured
by such Lien does not exceed 100% of such cost, (iii) any such Lien on property
owned by any Person that is acquired by a Loan Party is on terms that are
commercially reasonable, (iv) such Lien does not extend to or cover any property
other than such item of property and any improvements on such item and (v) the
incurrence of such Indebtedness is permitted by Section 7.2(g);
(c) Liens on the Collateral (as defined in each of the Indentures)
securing the guaranty, if any, by any Loan Party under the Replacement Notes;
(d) Liens created pursuant to the Letter of Credit Agreement;
(e) Liens, if any, on Accounts and proceeds thereof of Funding, the
Borrower and the Guarantors in connection with the Receivables Securitization;
(f) Any Lien securing the renewal, extension, refinancing or refunding
of any Indebtedness or other obligation secured by any Lien permitted by
subsections (b), (c), (d), (e), (l), (m) or (n) of this Section 7.1 without any
increase in the amount secured thereby or in the assets subject to such Lien;
(g) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar Persons incurred by
the Borrower, any Guarantor or any of their Subsidiaries in the ordinary course
of business which secure its obligations to such Person; provided, however, that
the Borrower,
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such Guarantor or such Subsidiary (i) is not in default with respect to such
payment obligation to such Person or (ii) is in good faith and by appropriate
proceedings diligently contesting such obligation and adequate provision is made
for the payment thereof and the consequences of all such liens in the aggregate
would have no Material Adverse Effect;
(h) Liens (excluding Environmental Liens) securing taxes, assessments
or governmental charges or levies; provided, however, that (i) none of the
Borrower, any Guarantor or any of their Subsidiaries is in default in respect of
any payment obligation with respect thereto and adequate provision is made for
the payment thereof or (ii) the Borrower, such Guarantor or such Subsidiary is
in good faith and by appropriate proceedings diligently contesting such
obligation, adequate provision is made for the payment thereof and the
consequence of all such failures in the aggregate would have no Material Adverse
Effect;
(i) Liens incurred or pledges and deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance,
old-age pensions and other social security or welfare benefits;
(j) Liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory obligations, surety
and appeal bonds and other obligations of like nature, incurred as an incident
to and in the ordinary course of business, and judgment liens; provided,
however, that all such Liens in the aggregate (i) would have in the aggregate no
Material Adverse Effect and (ii) do not secure directly or indirectly judgments
in excess of $5,000,000;
(k) Zoning restrictions, easements, licenses, reservations,
restrictions on the use of real property or minor irregularities incident
thereto which do not in the aggregate materially detract from the value or use
of the property or assets of the Borrower, the Guarantors and their Subsidiaries
taken as a whole;
(l) Liens existing on the date of this Agreement and disclosed on
Schedule 4.10;
(m) Liens on fixtures in connection with existing mortgages on real
property or mortgages on real property permitted hereunder;
(n) Liens on property (not constituting Collateral) of the Borrower or
any Guarantor to secure certain accumulated post-employment benefit and related
obligations of the Borrower or any Guarantor for current and future retirees
represented by the United Steelworkers of America;
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(o) Liens securing non-recourse project financing Indebtedness incurred
by any member of the Loan Party Consolidated Group or against any property of
any member of the Loan Party Consolidated Group solely for the purpose of
financing the acquisition, construction or improvement of property acquired,
owned, held, controlled or used by, or contributed to a joint venture by, any
Loan Party or any of their respective Subsidiaries, including, without
limitation, in connection with the development of the Borrower's Steubenville
South Oxygen plant; provided, however, such Indebtedness shall be on competitive
terms and conditions and in any event no less favorable than those available to
companies similar to such Loan Party; and provided further that such
Indebtedness shall not exceed $25,000,000 in the aggregate at any time;
(p) Liens incurred in connection with transactions of the type
described in clause (iv) of the definition of Cash Equivalents;
(q) Liens on property securing Indebtedness of the type described in
Section 7.2(j)(ii), provided that such Liens were not created in contemplation
of any such merger, consolidation or acquisition and do not extend to any
current assets of such Person or to any assets other than those of the Person so
merged into or consolidated with the Borrower or such Subsidiary or acquired by
the Borrower or such Subsidiary, provided, further, that the aggregate principal
amount of the Indebtedness secured by such Liens permitted by this clause (q)
shall not exceed the amount permitted under Section 7.2(j)(ii) at any time
outstanding; and
(r) other Liens to the extent not included in (a) through (o) above
provided that the aggregate principal amount of the Indebtedness secured by such
Liens permitted by this clause (q) shall not exceed the amount permitted under
Section 7.2(j)(iii) at any time outstanding.
7.2. Indebtedness. No Loan Party shall create or suffer to exist, or
permit any of its Subsidiaries to create or suffer to exist, any Indebtedness
except (each of which will be given independent effect):
(a) the Obligations;
(b) Indebtedness with respect to Contingent Obligations incurred in
connection with transactions permitted under this Agreement;
(c) 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 ordi-
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nary course of business consistent with the past practice of such Loan Party and
its Subsidiaries;
(d) Indebtedness of such Loan Party or any of its Subsidiaries
outstanding on the Effective Date and reflected on Schedule 7.2;
(e) Indebtedness owing to such Loan Party by any of their respective
Subsidiaries;
(f) Indebtedness arising under any surety, payment or performance bond
reimbursement obligation entered into in the ordinary course of such Loan
Party's business and consistent with the past practice of such Loan Party;
(g) Indebtedness of any Loan Party or any of their Subsidiaries under
Capitalized Lease Obligations and Indebtedness secured by Liens permitted by
Section 7.1(b), provided, however, that the sum of (i) the aggregate principal
amount of Capitalized Lease Obligations incurred under this clause (g) by the
Loan Parties and their Subsidiaries (and not pursuant to clause 7.1(b) above)
and (ii) the aggregate principal amount of Indebtedness incurred pursuant to
clause 7.1(b) above by the Loan Parties and their Subsidiaries, shall not exceed
$50,000,000 at any one time outstanding;
(h) Indebtedness (i) evidenced by the Holdings Note, (ii) under the
Keepwell Payments made to the Borrower by WHX and/or Holdings pursuant to the
Keepwell Agreement and (iii) under Parent Loans;
(i) Indebtedness arising under any appeal bond reimbursement obligation
entered into with respect to any judgment;
(j) Indebtedness (i) secured by Liens permitted under Section 7.1(o),
(ii) of a Person existing at the time such Person is merged into or consolidated
with the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of
the Borrower, provided that Indebtedness was not created in contemplation of
such merger, consolidation or acquisition, not to exceed in the aggregate
$10,000,000 in any Fiscal Year plus, for each Fiscal Year after Fiscal Year
1999, an amount equal to the excess of (x) the amount of such Indebtedness
permitted to be incurred during the immediately preceding Fiscal Year over (y)
the amount of such Indebtedness actually incurred during such preceding Fiscal
Year, but, in any case, not to exceed $30,000,000 in the aggregate at any time
and (iii) not otherwise permitted by this Section 7.2 not to exceed in the
aggregate $50,000,000 at any time outstanding;
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(k) Indebtedness of the Borrower arising under the Letter of Credit
Agreement;
(l) Indebtedness constituting a renewal, extension, refinancing or
refunding of Indebtedness described in Sections 7.2(d), (g), (j) and (n), (i)
for a principal amount not in excess of the principal amount of such
Indebtedness and (ii) in the case of Indebtedness described in Sections 7.2(d),
(g), (j) and (n), on other terms and conditions as or more favorable to the
Borrower, any Guarantor and their Subsidiaries than the terms of the
Indebtedness being renewed, extended or refunded;
(m) Indebtedness incurred in connection with transactions described in
clause (iv) of Cash Equivalents; and
(n) Indebtedness of Holdings arising under the Replacement Notes and
the guaranty by any Loan Party of the Replacement Notes or any renewal,
extension, refinancing or refunding thereof for a principal amount not in excess
of the Replacement Notes outstanding at such time and on other terms and
conditions as or more favorable to Holdings, the Borrower and its Subsidiaries .
7.3. Lease Obligations. (a) Except for existing or proposed leases
listed on Schedule 7.3 or as permitted by Section 7.5(c), no Loan Party shall
create or suffer to exist, or permit any of its Subsidiaries to create or suffer
to exist, any obligations as lessee for the rental or hire of real or personal
property in connection with any sale and leaseback transaction or for the rental
or hire of real or personal property of any kind under other leases or
agreements to lease having an original term of one year or more which would
cause the direct or contingent liabilities of the Loan Parties and their
Subsidiaries, on a consolidated basis, in respect of all such obligations (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) to
exceed $15,000,000 payable in any period of 12 consecutive months.
(b) Except for any lease or agreement authorized or permitted pursuant
to Section 7.3(a), no Loan Party shall, or permit any of its Subsidiaries to,
become or remain liable as lessee or guarantor or other surety with respect to
any lease, whether an operating lease or a Capitalized Lease, of any property
(whether real or personal or mixed), whether now owned or hereafter acquired,
which (i) such Loan Party or any of its respective Subsidiaries has sold or
transferred or is to sell or transfer to any other Person, or (ii) such Loan
Party or any of its respective Subsidiaries intends to use for substantially the
same purposes as any other property which has been or is to be sold or
transferred by that entity to any other Person in connection with such lease.
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7.4. Restricted Payments. No Loan Party shall (a) declare or make, and
shall not permit any of its Subsidiaries to declare or make, any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account or in respect of any of its Stock or Stock Equivalents
except (i) dividends paid to a Loan Party or any wholly owned Subsidiary of a
Loan Party by any Loan Party or any of its Subsidiaries, (ii) payments to WHX in
an aggregate amount not to exceed the amount set forth on Schedule 7.4.1, (iii)
payments to WHX in an aggregate amount not to exceed the aggregate amount of
capital contributions made to any Loan Party subsequent to the date of this
Agreement and (iv) any payments made to WHX pursuant to the Tax Sharing
Agreement; provided, that with respect to any payments made pursuant to clauses
(a)(ii), (iii) or (iv) above (A) no Default or Event of Default shall have
occurred and be continuing or would result from such payment and (B) such
payment shall not result in a condition that would require Keepwell Payments, or
(b) except as set forth in Schedule 7.4.2, purchase, redeem, prepay, defease or
otherwise acquire for value or make any payment (other than required payments)
on account or in respect of (or permit any of its Subsidiaries to do so) any
principal amount of Indebtedness for borrowed money, including, without
limitation, interest, now or hereafter outstanding, except (i) the Loans, (ii)
payments made by a Loan Party or its Subsidiary to any other Loan Party on
account of any Indebtedness owing to a Loan Party by such other Loan Party or
Subsidiary, (iii) in connection with Indebtedness being refinanced in accordance
with Section 7.2(l), (iv) payments made to repay the Holdings Note and not
otherwise prohibited by the Holdings Intercreditor Agreement, and loans or
advances made prior to the date of this Agreement as set forth on Schedule
7.4.1, (v) on account of any loans or advances in the form of Keepwell Payments
made to a Loan Party pursuant to the Keepwell Agreement or other loans or
advances (other than Parent Loans) made by WHX to any Loan Party subsequent to
the date of this Agreement, (vi) with the consent of the Agent, payments made by
a Loan Party to repay Parent Loans and (vii) any repayments of any "Series" that
has a variable "Invested Amount" (under and as defined in the Securitization
Documents); provided, that with respect to any repayments, repurchases or
redemptions made (x) pursuant to clauses (b)(iv) (other than with respect to the
Holdings Note), (v), (vi) or (vii) above (A) no Default or Event of Default
shall have occurred and be continuing or would result from such payment, (B)
such repayment, repurchase or redemption shall not result in a condition that
would require Keepwell Payments and (C) in the event of a repayment of any
Keepwell Payments, such repayment may only be made after the end of a period of
three months commencing on the last day of the calendar month in which the
immediately preceding Keepwell Payment was made and only so long as no Parent
Loans are outstanding or (y) pursuant to clause (b)(iv) above with respect to
the Holdings Note, no Default or Event of Default shall have occurred and be
continuing or would result from such payment.
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7.5. Mergers, Stock Issuances, Sale of Assets, Etc. (a) No Loan Party
shall, or permit any of its Subsidiaries to (i) merge, consolidate with or into,
any Person, (ii) acquire all or substantially all of the Stock or Stock
Equivalents of any Person or acquire all or substantially all of the assets of
any Person or (iii) enter into any joint venture or transaction with any Person;
provided that (x) any direct or indirect Subsidiary of the Borrower may merge or
consolidate with or into, the Borrower or any other Subsidiary of the Borrower
and (y) the Borrower or any Guarantor may enter into any joint venture or
transaction permitted by Section 7.6(b), (c), (f) or (g).
(b) No Loan Party shall (i) issue or transfer, or permit any of its
Subsidiaries to issue or transfer, any Stock or Stock Equivalents other than any
such issuance or transfer (A) by a Subsidiary of the Borrower to the Borrower or
a wholly owned Subsidiary of the Borrower or (B) by a direct wholly owned
Subsidiary of a Guarantor to such Guarantor or (C) in connection with
transactions permitted by Section 7.5(a), 7.5(c) (other than with respect to a
Loan Party) or 7.6(f), or (ii) sell, convey, transfer, lease or otherwise
dispose of, or from and after the Effective Date permit any of its Subsidiaries
to sell, convey, transfer, lease or otherwise dispose of, any Stock or Stock
Equivalents of any of such Loan Party's Subsidiaries unless, in any such case,
both there is transferred all of the Stock and Stock Equivalents of such
Subsidiary owned by such Loan Party and their Subsidiaries and such issuance,
sale, conveyance, transfer, lease or disposition would be permitted by Section
7.5(c).
(c) No Loan Party shall, or permit any of its Subsidiaries to, sell,
convey, transfer, lease or otherwise dispose of any of its assets or any
interest therein to any Person or permit or suffer any other Person to acquire
any interest in any of assets of such Loan Party or any such Subsidiary, except
(i) the sale or disposition of inventory in the ordinary course of business or
assets which have become obsolete, (ii) leases of personal property by the
Borrower or any wholly owned Subsidiary of the Borrower to the Borrower or to
any wholly owned Subsidiary of the Borrower, (iii) the lease or sublease of real
property not constituting a sale and leaseback, to the extent not otherwise
prohibited by this Agreement, (iv) any such sale, conveyance, transfer, lease or
other disposition to the Borrower, (v) as long as no Default or Event of Default
is continuing or would result therefrom, any such sale of any assets (other than
assets constituting Collateral) for the Fair Market Value thereof and, in the
case of any such sales that are not related to trade-ins for replacements of
existing assets, in an aggregate amount not to exceed $20,000,000 in any Fiscal
Year, plus, for each Fiscal Year, an amount equal to 50% of the excess of such
amount over the Fair Market Value of such assets actually sold in the
immediately preceding Fiscal Year, payable in cash or in notes upon such sale;
provided, that such notes shall not exceed 50% of the aggregate consideration
per Fiscal Year; and provided further that no such sale shall include
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assets which are necessary to the continuing operations of any Loan Party and
its Subsidiaries, (vi) sales of accounts receivable of the Borrower and the
Guarantors permitted by Section 7.5(d), (vii) so long as no Default or Event of
Default is continuing or would result therefrom, sale and leaseback transactions
involving property having a Fair Market Value at the time of such sale and
leaseback transaction in an aggregate amount not to exceed $15,000,000 in any
Fiscal Year, (viii) sales of assets incurred in connection with transactions of
the type described in clause (iv) of the definition of Cash Equivalents and (ix)
transfers of assets permitted under Section 7.6(f).
(d) No Loan Party shall sell or otherwise dispose of, or factor at
maturity or collection, or permit any of its Subsidiaries to sell or otherwise
dispose of, or factor at maturity or collection, any of their respective
accounts receivables, except that the Borrower, the Guarantors and their
Subsidiaries may sell, transfer, pledge or otherwise convey accounts receivables
in connection with the Receivables Securitization; provided, however, that no
Loan Party or any of their Subsidiaries shall sell, transfer, pledge or
otherwise convey accounts receivables at any time an event occurs under any
Securitization Document which results in either the termination of, or relieves
the Borrower of, its obligation to do so.
7.6. Investments in Other Persons. No Loan Party shall, directly or
indirectly, make or maintain, or permit any of its Subsidiaries to make or
maintain, any loan or advance to any Person or own, purchase or otherwise
acquire, or permit any of its Subsidiaries to own, purchase or otherwise
acquire, any Stock, Stock Equivalents, other equity interest, obligations or
other securities of, or any assets constituting the purchase of a business or
line of business, or make or maintain, or permit any of its Subsidiaries to make
or maintain, any capital contribution to, or otherwise invest in, any Person
(any such transaction being an "Investment"), except:
(a) Investments in accounts, contract rights and chattel paper (each as
defined in the UCC), notes receivable and similar items arising or acquired in
the ordinary course of business consistent with the past practice of the
Borrower, such Guarantor and their Subsidiaries;
(b) Investments made after the Effective Date in wholly-owned
Subsidiaries in existence as of the Effective Date; provided, however, that no
Default or Event of Default has occurred and is continuing or would result
therefrom and the aggregate amount of Investments in such Subsidiary do not
exceed (i) with respect to Funding, the amount necessary from time to time to
consummate the transactions contemplated by the Receivables Securitization,
including any repayments of any
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"Series" that has a variable "Invested Amount" (under and as defined in the
Securitization Documents) and (ii) with respect to all other Subsidiaries,
$6,000,000;
(c) Investments in Subsidiaries of such Loan Party permitted by Section
7.12; provided that no Default or Event of Default has occurred and is
continuing or would result therefrom and the aggregate amount of such
Investments shall not exceed $10,000,000 in any Fiscal Year plus, for each
Fiscal Year after Fiscal Year 1999, an amount equal to the excess of (x) the
amount of such Investments permitted to be incurred during the immediately
preceding Fiscal Year over (y) the amount of such Investments actually incurred
during such preceding Fiscal Year, but, in any case, not to exceed $30,000,000
in the aggregate at any time;
(d) loans or advances to employees of the Borrower, such Guarantor or
any of their Subsidiaries, which loans and advances shall not in the aggregate
exceed $2,000,000 outstanding at any time; provided, however, that such loans or
advances in respect of relocation expenses shall not in the aggregate exceed
$1,000,000;
(e) Investments in Cash Equivalents;
(f) Investments in (i) the Fabricating Joint Ventures, (ii) the Co-
Generation Agreement, (iii) cold-rolling joint ventures and (iv) other joint
ventures as set forth on Schedule 7.6; provided that no Default or Event of
Default has occurred and is continuing or would result therefrom and the amount
of such Investments permitted pursuant to this clause (f) made from and after
the Effective Date shall not exceed in the aggregate at any time the sum of (A)
$30,000,000 and (B) all cash loans, contributions and advances, other than
Keepwell Payments, made after the Effective Date by WHX to the Loan Party
Consolidated Group;
(g) Investments in joint ventures or other entities not otherwise
described in clause (f) above; provided that no Default or Event of Default has
occurred and is continuing or would result therefrom and the amount of such
Investment shall not exceed $3,000,000 in the aggregate at any time;
(h) Investments existing on the date hereof and set forth on Schedule
7.6; and
(i) advances by the Borrower to the Guarantors under the Guarantor
Intercompany Notes.
7.7. Change in Nature of Business. No Loan Party shall, directly or
indirectly, make, or permit any of its Subsidiaries to make, any material change
in the
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nature or conduct of its business as carried on at the date hereof, except as
otherwise expressly permitted herein or to the extent necessary or appropriate
to adapt to changes or anticipated changes in the business environment or
otherwise deemed appropriate by management for the manufacturing and sale of
steel and steel-related products.
7.8. Material Agreements. No Loan Party shall, or permit any of its
Subsidiaries to, alter, amend, modify, rescind, terminate or waive any of their
respective rights under, or fail to comply in all respects with all of their
respective Contractual Obligations; provided, however, that, with respect to any
Contractual Obligations (other than the Loan Documents, the Replacement Notes,
the Securitization Documents and the Tax Sharing Agreement), the Borrower, the
Guarantors and their Subsidiaries may do so if the consequences thereof in the
aggregate have no Material Adverse Effect and, with respect to any Contractual
Obligations under the Replacement Notes, the Securitization Documents and the
Tax Sharing Agreement, the Borrower, the Guarantors and their Subsidiaries may
do so with the Agent's consent if the effect of such action is not adverse to
the Loan Parties and the Lender Parties; and provided further that in the event
of any breach or event of default by a Person other than the Borrower, any
Guarantor or any of their Subsidiaries, the Borrower shall promptly notify the
Agent of any such breach or event of default and take all such action as may be
reasonably necessary in order to endeavor to cause such breach or event of
default to be cured unless the failure to do so would have no Material Adverse
Effect.
7.9. Accounting Changes. No Loan Party shall make, or permit any of its
Subsidiaries to make, any change in accounting treatment and reporting practices
or tax reporting treatment, except as required by GAAP or law, rule or
regulation and disclosed to the Lender Parties and the Agent.
7.10. Transactions with Affiliates. No Loan Party shall, or permit any
of its Subsidiaries to, except as otherwise expressly permitted herein, do any
of the following: (i) make any Investment in an Affiliate of such Loan Party not
a wholly owned Subsidiary of such Loan Party; (ii) transfer, sell, lease, assign
or otherwise dispose of any asset to any Affiliate of such Loan Party not a
wholly owned Subsidiary of such Loan Party; (iii) merge into or consolidate with
or purchase or acquire assets from any Affiliate of such Loan Party other than a
wholly owned Subsidiary of such Loan Party; (iv) repay any Indebtedness to any
Affiliate of such Loan Party; or (v) enter into any other transaction directly
or indirectly with or for the benefit of any Affiliate of such Loan Party not a
wholly owned Subsidiary of such Loan Party (including, without limitation,
guaranties and assumptions of obligations of any such Affiliate) except for (A)
transactions in the ordinary course of business on a basis no less favorable to
such Loan Party or such Subsidiary as would be obtained in a comparable arm's
length transaction with a Person not an Affiliate,
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(B) reasonable salaries and other employee compensation, including, without
limitation, any profit sharing and other established bonus or deferred
compensation plans, to officers or directors of such Loan Party or any of its
Subsidiaries commensurate with current compensation levels; provided, however
that such Loan Party may pay salaries or other employee compensation at levels
commensurate with industry practice to new employees who are not Affiliates of
the such Loan Party immediately prior to the date of hire, (C) any transaction
required or otherwise permitted by this Agreement, (D) fees paid to WHX by the
Borrower not in excess of $5,000,000 per Fiscal Year to pay management fees, the
proceeds of which are then used by WHX solely to (1) pay management fees
pursuant to the management agreement between WHX and WPN Corp. in effect on the
Effective Date and (2) pay bonuses to management of the Borrower; provided,
however, that no such loans, advances or management fees may be paid if there
has occurred and is continuing a Default or Event of Default, or a Default or an
Event of Default would occur as a result of the payment of such management fee,
(E) those transactions listed on Schedule 7.10, (F) transactions with Ohio
Coatings Company, Wheeling-Nisshin and Dong Yang previously disclosed in writing
to the Agent and the Lender Parties on a basis no less favorable to the Borrower
or such Subsidiary as would be obtained in a comparable arm's-length transaction
with a Person not an Affiliate, (G) payments under the Tax Sharing Agreement,
(H) advances of cash by the Borrower to the Guarantors under the Guarantor
Intercompany Notes or (I) other transactions with Affiliates to the extent not
included in (A) through (H) provided that the amounts payable by the Borrower
and the Guarantors in connection with such transactions shall not in the
aggregate exceed $2,000,000 per Fiscal Year.
7.11. Cancellation of Indebtedness Owed to It. No Loan Party shall
cancel, or permit any of its Subsidiaries to cancel, any claim or Indebtedness
owed to it except for adequate consideration and in the ordinary course of
business, except to the extent that such cancellation occurs in connection with
the consummation of a plan of reorganization or liquidation of the obligor under
such Indebtedness and such cancellation would not have a Material Adverse
Effect.
7.12. No New Subsidiaries. No Loan Party shall, or permit any of its
Subsidiaries to, incorporate or otherwise organize any Subsidiary which was not
in existence on the Effective Date (a "New Subsidiary") without the prior
written consent of the Majority Lenders except as otherwise permitted pursuant
to Sections 7.5 and 7.6; provided that only the prior written consent of the
Agent shall be necessary in connection with any New Subsidiary of the Borrower
or any Guarantor if such New Subsidiary's Net Worth is not in excess of
$1,000,000; provided further that (a) in any case, the Stock of any such New
Subsidiary is pledged to the Agent for the benefit of the Secured Parties
pursuant to a pledge agreement in form and substance satisfactory
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to the Agent and (b) in the case of any New Subsidiary having a Net Worth of
$500,000 or more, such New Subsidiary shall execute and deliver to the Agent,
within 15 days of its formation or determination of such Net Worth, as
applicable, a Guaranty Supplement (as defined in the Guaranty) and a Security
Agreement Supplement (as defined in the Security Agreement) and such other
documents as the Agent shall reasonably request.
7.13. Capital Structure. Except as otherwise permitted hereunder, no
Loan Party shall make, or permit any of its Subsidiaries to make, any change in
its capital structure (including, without limitation, in the terms of its
outstanding Stock) or amend its certificate of incorporation or by-laws, other
than those changes which, in the aggregate, would have no Material Adverse
Effect.
7.14. No Speculative Transactions. No Loan Party shall, or permit any
of its Subsidiaries to, engage in any speculative transaction or, except for the
sole purpose of hedging in the normal course of business and consistent with
industry practices, engage in any transaction involving commodity options or
futures contracts.
7.15. Margin Regulations. The Loan Parties shall not use the proceeds
of any Loans to purchase or carry any margin stock.
7.16. Bank Accounts. None of the Borrower or any Guarantor shall
maintain any bank account other than those provided in Section 2.19, the
Concentration Account, the Investment Account, the collateral accounts required
to be maintained by the Borrower pursuant to the Letter of Credit Agreement,
those listed on Schedule 7.16 for the purposes listed thereon and other
operational accounts with the prior written consent of the Agent; provided that
the Borrower may open one or more bank accounts to facilitate the performance of
its servicing obligations in connection with the Receivables Securitization.
Notwithstanding the foregoing, the Borrower and the Guarantors shall be entitled
to open new accounts (i) in replacement of those identified on Schedule 7.16
having the same purposes and (ii) for specified purposes including employee
payroll, trustee and escrow accounts and if approved by the Agent, for new
Subsidiaries, so long as the Agent receives prior written notification of each
such new account and a blocked account letter, in form and substance
satisfactory to the Agent.
7.17. Environmental Release. No Loan Party shall, or permit any of its
Subsidiaries to, or allow any lessee or other Person to, effect or suffer to
occur, from and after the Effective Date, any Release in respect of, or dispose
of, from and after the Effective Date, any Contaminant which creates liability
under or is in violation of any Environmental Law if the consequence of all such
Releases and disposals in the aggregate would result in a Material Adverse
Effect.
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ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. Each of the following events shall be an Event
of Default:
(a) The Borrower shall fail to pay any principal of any Loan
(including, without limitation, mandatory prepayments of principal) or any fee
due any Lender Party or the Agent, other amount due hereunder or under the other
Loan Documents or other of the Obligations when the same becomes due and payable
(except for interest on any Loan) or the Borrower shall fail to pay interest on
any Loan within three days after the same becomes due and payable; or
(b) Any representation or warranty made or deemed made by any Loan
Party in any Loan Document or by any Loan Party (or any of its officers) in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made or deemed made; or
(c) Any Loan Party shall fail to perform or observe (i) any term,
covenant or agreement contained in Articles V, VI or VII, in any Collateral
Document or in the Keepwell Agreement or (ii) any other term, covenant or
agreement contained in this Agreement or in any other Loan Document if such
failure under this clause (ii) shall remain unremedied for ten Business Days
after the earlier of the date on which (A) a Responsible Officer of any Loan
Party becomes aware of such failure or (B) written notice thereof shall have
been given to the Borrower by the Agent or any Lender Party; or
(d) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Indebtedness for borrowed money of
such Loan Party or Subsidiary that is outstanding in a principal amount of at
least $1,000,000 (excluding Indebtedness evidenced by the Revolving Credit
Notes), when the same becomes due and payable after, in the case of all such
Indebtedness, any applicable period of grace (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 Indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof; or
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(e) 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 as 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 proceedings instituted against any Loan Party or any of its
Subsidiaries (but not instituted by it), either such proceedings shall remain
undismissed or unstayed for a period of 30 days or any of the actions sought in
such proceedings 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 (e); or
(f) Any final judgment or order for the payment of money in excess of
$1,000,000 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 judgment or order, or (ii) there shall be any period of 10 consecutive
days following entry of such judgment or order (or, in the event that the terms
of such judgment or order do not require immediate payment, following the date
or dates on which such payment is to be made) during which such judgment or
order shall not have been paid, compromised or otherwise satisfied and a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; provided, however, that such final judgment
or order shall not be deemed an Event of Default if (x) such final judgment or
order is less than $1,000,000, (y) such final judgment or order is fully covered
by insurance carried by any Loan Party and (z) such non-payment, non-compromise
or non-satisfaction is solely the result of the insurance company's tardiness in
payment; or
(g) an ERISA Event shall occur which, in the reasonable determination
of the Majority Lenders, has a reasonable possibility of a liability, deficiency
or waiver request of the Borrower or any ERISA Affiliate, whether or not
assessed, exceeding $5,000,000; or
(h) Any material provision of any Collateral Document, the Keepwell
Agreement prior to the release thereof in accordance with its terms or the
Holdings Intercreditor Agreement after delivery thereof shall for any reason
cease to be valid and binding on any Loan Party thereto, or any such Loan Party
shall so state in writing; or
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(i) At any time prior to the consummation of the Holdings IPO, WHX
shall fail to own of record and beneficially all of the outstanding Stock and
Stock Equivalents of Holdings (other than non-voting, non-participating
perpetual preferred Stock that satisfies the requirements of Section 1504(a)(4)
of the Code), free and clear of all Liens; or
(j) Holdings shall fail to own of record and beneficially all of the
outstanding Stock and Stock Equivalents of each of the Borrower, PCC and
Wheeling Construction (except as otherwise permitted by Section 7.5(a) and other
than non-voting, non-participating perpetual preferred Stock that satisfies the
requirements of Section 1504(a)(4) of the Code), free and clear of all Liens
except those Liens created under the Collateral Documents; or
(k) At any time on or after the Holdings IPO, (i) a majority of the
members of the Board of Directors of Holdings shall be replaced over a two-year
period, from the directors who constituted the Board of Directors at the
Effective Date, and such replacement shall not have been approved by the Board
of Directors of Holdings as constituted at the Effective Date (or its
replacements approved by the Board of Directors of Holdings); or (ii) a Person
or group of Persons acting in concert as partnership or other group (other than
WHX) 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 under the Securities and Exchange Act of 1934,
as amended) of securities of Holdings representing 20% or more of the combined
voting power of the then outstanding securities of Holdings ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors, provided, however, ownership by institutional or
other investors, whose disclosed investment intent does not include any of
matters (b) through (j) (except to the extent (j) incorporates (a)) of Item 4 of
Schedule 13D (as required by Rule 13d-1 under the Securities Exchange Act of
1934, as amended), shall not be prohibited hereunder and shall not be an Event
of Default; or
(l) at any time prior to the occurrence of Holdings IPO Threshold, a
Person or group of Persons acting in concert as a partnership or other group
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 under the Securities and Exchange Act of 1934,
as amended) of securities of WHX representing 20% 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, provided, however, ownership by institutional or other
investors whose disclosed investment intent does not include any of matters (b)
through (j) (except to the extent (j) incorporates (a)) of Item 4 of Schedule
13D (as required by Rule 13d-1 under the Securities Exchange Act of
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1934, as amended), shall not be prohibited hereunder and shall not be an Event
of Default; or
(m) There shall occur a Material Adverse Change or an event which would
have a Material Adverse Effect; or
(n) A "termination event" (other than an "early amortization event")
(as such terms are defined in the Securitization Documents) shall occur and be
continuing and shall not have been rescinded in accordance with the terms of the
Securitization Documents; or
(o) Holdings or the Borrower shall, or shall permit any of the
Borrower's Subsidiaries to, (i) alter, rescind, terminate, amend, supplement,
waive or otherwise modify any provision of or permit any breach or default or
other event to exist under the Replacement Notes or the Holdings Note, or take
or fail to take any action thereunder, unless any of the foregoing would not in
the aggregate have a Material Adverse Effect; or (ii) amend, modify or change,
or consent or agree to any amendment, modification or change to, any of the
terms relating to the payment or prepayment of principal of, or premium or
interest on, any Replacement Note or the Holdings Note (other than any such
amendment, modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon).
8.2. Remedies. If there shall occur and be continuing an Event of
Default, the Agent (i) shall at the request, or may with the consent, of the
Majority Lenders, by notice to the Borrower, terminate the obligation of each
Lender to make Loans and of each Issuer to issue Letters of Credit, whereupon
the same shall forthwith terminate, and (ii) shall at the request, or may with
the consent, of the Majority Lenders, by notice to the Borrower, declare the
Loans, all interest thereon and all other Obligations payable under this
Agreement to be forthwith due and payable, whereupon the Revolving Credit Notes,
all such interest and all such Obligations 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 the Borrower; provided, however, that
upon the occurrence of the Event of Default specified in subparagraph (e) above,
(A) the obligation of each Lender to make Loans and of each Issuer to issue
Letters of Credit shall automatically be terminated and (B) the Revolving Credit
Notes, all such interest and all such Obligations 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 the Borrower. In addition to
the remedies set forth above, the Agent may, or at the request of the Majority
Lenders shall, after the giving of notice as provided in clause (ii) above,
exercise any remedies provided for by the
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Collateral Documents in accordance with the terms thereof or any other remedies
provided by applicable law.
8.3. Actions in Respect of Letters of Credit. (a) If any Event of
Default shall have occurred and be continuing, the Agent may, from time to time,
irrespective of whether it is taking any of the actions described in Section 8.2
or otherwise, make demand upon the Borrower to, and forthwith upon such demand
the Borrower will, pay to the Agent on behalf of the Lender Parties in same day
funds at the Agent's office, for deposit in a special cash collateral account
(Account #40688567) maintained in the name of the Agent on behalf of the Secured
Parties at Citibank (the "L/C Cash Collateral Account"), an amount equal to all
outstanding Letter of Credit Obligations. In the Agent's discretion, the L/C
Cash Collateral Account may be an interest or a non-interest bearing account.
(b) The Borrower hereby pledges, and grants to the Agent a Lien on and
security interest in, all of its right, title and interest in and to the L/C
Cash Collateral Account, all funds held in the L/C Cash Collateral Account from
time to time and all proceeds thereof, as security for the payment of all
amounts due and to become due from the Borrower to the Secured Parties under the
Loan Documents.
(c) The Agent shall, from time to time after funds are deposited in the
L/C Cash Collateral Account, apply funds then held in the L/C Cash Collateral
Account to the Issuer for the payment of any Reimbursement Obligations owing to
it and then in such order as the Agent shall determine, as shall have become or
shall become due and payable by the Borrower to the Secured Parties in respect
of the Obligations.
(d) Neither the Borrower nor any Person claiming on behalf of or
through the Borrower shall have any right to withdraw any of the funds held in
the L/C Cash Collateral Account.
(e) The Borrower agrees that it will not (i) sell or otherwise dispose
of any interest in the L/C Cash Collateral Account or any funds held therein or
(ii) create or permit to exist any Lien upon or with respect to the L/C Cash
Collateral Account or any funds held therein, except as provided in or
contemplated by this Agreement.
(f) The Agent may also exercise, in its sole discretion, in respect of
the L/C Cash Collateral Account, in addition to the other rights and remedies
provided for herein or otherwise available to it, all the rights and remedies of
a secured party upon default under the UCC in effect in the State of New York at
that time, and the
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Agent may, without notice except as specified below, sell the L/C Cash
Collateral Account or any part thereof in one or more parcels at public or
private sale, at any of the Agent's offices or elsewhere, for cash, or credit or
for future delivery, and upon such other terms as the Agent may deem
commercially reasonable. The Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to the Borrower of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Agent shall not be obligated
to make any sale of the L/C Cash Collateral Account, regardless of notice of
sale having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
(g) Any cash held in the L/C Cash Collateral Account, and all cash
proceeds received by the Agent in respect of any sale of, collection from or
other realization upon all or any part of the L/C Cash Collateral Account, may,
in the discretion of the Agent, then or at any time thereafter be applied (after
the expiration of all outstanding Letters of Credit and the payment of any
amounts payable pursuant to Sections 8.3(c) and 10.4) in whole or in part by the
Agent against all or any part of the Obligations now or hereafter existing under
any of the Loan Documents in such order as the Agent shall elect. Any surplus of
such cash or cash proceeds held by the Agent and remaining after the
indefeasible cash payment in full of all of the Obligations shall be paid over
to the Borrower or to whomsoever may be lawfully entitled to receive such
surplus.
ARTICLE IX
THE AGENT
9.1. Authorization and Action. Each Lender Party (in its capacities as
a Lender, the Swing Bank and an Issuer, as applicable) hereby appoints and
authorizes the 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 the 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 this Agreement and the other Loan Documents
(including, without limitation, enforcement or collection of the Revolving
Credit Notes), the Agent shall not 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 Majority Lenders or, solely in the circumstances requiring
action by
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all of the Lenders in accordance with the first proviso to Section 10.1(a), all
of the Lenders, and such instructions shall be binding upon all Lender Parties
and all holders of Revolving Credit Notes; provided, however, that the Agent
shall not be required to take any action which the Agent in good faith believes
exposes it to personal liability or is contrary to this Agreement or applicable
law. The Agent agrees to give to each Lender Party prompt notice of each notice
given to it by any Loan Party pursuant to the terms of this Agreement or the
other Loan Documents.
9.2. Agent's Reliance, Etc. None of the Agent or any of its Affiliates
or any of the respective directors, officers, agents or employees of the Agent
or any such Affiliate shall be liable for any action taken or omitted to be
taken by it or them under or in connection with this Agreement or the other Loan
Documents, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent (i) may treat
the payee of any Revolving Credit Note as the holder thereof until such Note has
been assigned in accordance with Section 10.7; (ii) may rely on the Register to
the extent set forth in Section 10.7(c), (iii) may consult with legal counsel
(including, without limitation, counsel to the Borrower or any other Loan
Party), independent public accountants and other experts selected by it and
shall not be 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; (iv)
makes no warranty or representation to any Lender Party and shall not be
responsible to any Lender Party for any statement, warranty or representation
(whether written or oral) made in or in connection with this Agreement or any of
the other Loan Documents; (v) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of this Agreement or any of the other Loan Documents on the part of the Borrower
or any other Loan Party or to inspect the property (including, without
limitation, the books and records) of the Borrower or any other Loan Party; (vi)
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, of this Agreement or
any of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto; and (vii) shall incur no liability under or in
respect of this Agreement or any of the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopy, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
9.3. Citibank, Citicorp and Affiliates. With respect to its Revolving
Credit Commitment, the Loans (including, without limitation, the Revolving
Credit Loans and Swing Loans) made by it, any each Revolving Credit Note and any
Letters of Credit issued by it, Citicorp shall have the same rights and powers
under this
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Agreement as any other Lender Party and may exercise the same as though it were
not an Affiliate of the Agent; and the term "Lender Party" or "Lender Parties"
shall, unless otherwise expressly indicated, include Citicorp in its individual
capacity. Citibank 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, the Borrower or any other
Loan Party or any of their respective Subsidiaries and any Person who may do
business with or own securities of the Borrower or any other Loan Party or any
of their respective Subsidiaries, all as if Citibank were not the Agent and
without any duty to account therefor to the Lender Parties.
9.4. Lender Party Credit Decision. Each Lender Party acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
Party and based on the financial statements referred to in Article IV 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 the
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 and other Loan Documents.
9.5. Indemnification. (a) The Lender Parties severally agree to
indemnify the Agent, its Affiliates and their respective directors, officers,
employees, agents and advisors (to the extent not reimbursed by the Borrower or
other Loan Parties), 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 and disbursements
(including, without limitation, fees and disbursements of legal counsel) of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against, the Agent in any way relating to or arising out of this Agreement or
any of the other Loan Documents or any action taken or omitted by the Agent
under this Agreement or any of the other Loan Documents including, without
limitation, the preparation of reports with respect to the Collateral; 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 the Agent's (or any of its
agent's) gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender Party agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including, without
limitation, fees and disbursements of legal counsel) incurred by the Agent in
connection with the preparation, execution, delivery, administration (including,
without limitation, field examinations of Collateral), modification, amendment
or enforcement (whether through negotiations, legal proceed-
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ings or otherwise) of, or legal advice in respect of its rights or
responsibilities under, this Agreement or any of the other Loan Documents, to
the extent that the Agent is not reimbursed for such expenses by the Borrower or
another Loan Party except to the extent such expenses result from the Agent's
(or any of its agent's) gross negligence or willful misconduct. For purposes of
this Section 9.5, the Lender Parties' respective ratable shares of any amount
shall be determined, at any time, according to the sum of (a) the aggregate
principal amount of the Loans outstanding at such time and owing to the
respective Lender Parties, (b) their respective Ratable Portions of the
aggregate Letter of Credit Obligations outstanding at such time plus (c) their
respective Ratable Portions of the Available Credit at such time. The failure of
any Lender Party to reimburse the Agent promptly upon demand for its ratable
share of any amount required to be paid by the Lender Party to the Agent as
provided herein shall not relieve any other Lender Party of its obligation
hereunder to reimburse the Agent for its ratable share of such amount, but no
Lender Party shall be responsible for the failure of any other Lender Party to
reimburse the Agent 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 9.5(a) shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under the other Loan Documents.
(b) Each Lender Party severally agrees to indemnify each Issuer (to the
extent not promptly reimbursed by the Borrower) 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 Issuer in any way relating to or
arising out of the Loan Documents or any action taken or omitted by such Issuer
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 Issuer's (or any of its agent's) gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender Party agrees to
reimburse such Issuer promptly upon demand for its ratable share of any costs
and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 10.4, to the extent that such Issuer is
not promptly reimbursed for such costs and expenses by the Borrower except to
the extent such expenses result form such Issuer's (or any of its agent's) gross
negligence or willful misconduct. For purposes of this Section 9.5(b), the
Lender Parties' respective ratable shares of any amount shall be determined, at
any time, according to the sum of (a) the aggregate principal amount of the
Loans outstanding at such time and owing to the respective Lender Parties, (b)
their respective Ratable Portions of the aggregate Letter of Credit Obligations
outstanding at such time plus (c) their respective Ratable
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Portions of the Available Credit at such time. The failure of any Lender Party
to reimburse such Issuer promptly upon demand for its ratable share of any
amount required to be paid by the Lender Parties to such Issuer as provided
herein shall not relieve any other Lender Party of its obligation hereunder to
reimburse such Issuer for its ratable share of such amount, but no Lender Party
shall be responsible for the failure of any other Lender Party to reimburse such
Issuer 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
9.5(b) shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under the other Loan Documents.
9.6. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lender Parties and the Borrower. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor
Agent; provided, that if no Default or Event of Default shall have occurred and
be continuing, such successor Agent shall be reasonably satisfactory to the
Borrower, which shall be (a) a commercial bank organized under the laws of the
United States of America or any State thereof and having total assets of at
least $1,000,000,000 and a combined capital and surplus of at least $50,000,000
or (b) a Lender as of the Effective Date. If no successor Agent shall have been
so appointed by the Majority Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation or the
removal of the retiring Agent at the request of all of the Lenders (other than
the Agent and its Affiliates), then the retiring Agent may, on behalf of the
Lender Parties, appoint a successor Agent approved, as long as no Default or
Event of Default has occurred and is continuing, by the Borrower, such approval
not be unreasonably withheld or delayed, which successor shall be (a) a
commercial bank organized under the laws of the United States of America or of
any State thereof and having total assets of at least $1,000,000,000 and a
combined capital and surplus of at least $50,000,000 or (b) a Lender as of the
Effective Date. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable, or as the Majority 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 thereupon succeed to and become
vested with all the rights, powers, discretions, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article IX shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
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ARTICLE X
MISCELLANEOUS
10.1. Amendments, Etc. (a) No amendment or waiver of any provision of
this Agreement or any other Loan Document (including, without limitation, the
waiver of any Default or Event of Default) nor consent to any departure by the
Borrower or any other 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 Borrower and the Majority Lenders,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall, unless in writing and signed by all the
Lenders do any of the following at any time: (i) waive any of the conditions
specified in Sections 3.1 or 3.2 except as otherwise provided therein; (ii)
increase, or extend the expiration date of, the Revolving Credit Commitments of
the Lenders or subject the Lenders to any additional obligations; (iii) reduce
(A) the amount of any payment of any principal of, or interest on, the Loans due
under this Agreement, (B) the stated rate of any interest payable hereunder or
(C) the amount of any fees or other amounts payable hereunder; (iv) postpone any
date fixed for any payment of principal of, or interest on, the Loans or any
fees or other amounts payable hereunder; (v) change the percentage of the
Revolving Credit Commitments, the aggregate unpaid principal amount of the Loans
or the Letter of Credit Obligations, or the number of Lenders which shall be
required for the Lenders or any of them to take any action hereunder; (vi)
release any of the Collateral except that, so long as no Default or Event of
Default has occurred and is continuing or would result therefrom, (A) as shall
otherwise be provided in the Collateral Documents and Section 7.5(d) and (B) in
any Fiscal Year, Collateral having an aggregate Fair Market Value not in excess
of $25,000,000 shall require only the consent of the Agent; (vii) amend this
Section 10.1; (viii) amend the definition of Majority Lenders; (ix) terminate
the Keepwell Agreement (except pursuant to its terms), the Holdings Guaranty,
the Guaranty or any other keepwell agreement or guaranty delivered pursuant to
the Loan Documents; or (x) increase the advance rates above those set forth on
Schedule IV hereto for Eligible Inventory except as otherwise permitted in
accordance with this Agreement; provided further that no amendment, waiver or
consent shall, unless in writing and signed by the Swing Bank or each Issuer, as
the case may be, in addition to the Lenders required above to take such action,
affect the rights or obligations of the Swing Bank or of the Issuers, as the
case may be, under this Agreement, and provided further that no amendment,
waiver or consent shall, unless in writing and signed by the Agent in addition
to the Lenders required above to
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take such action, affect the rights or duties of the Agent under this Agreement
or the other Loan Documents.
(b) Each Lender Party grants (x) to the Agent the right to purchase all
(but not less than all) of such Lender Party's Commitments and Loans 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 Loans owed to such Lender Party (together with all accrued and
unpaid interest and fees owed to such Lender), and (y) to the Borrower the right
to cause an assignment of all (but not less than all) of such Lender Party's
Commitments and Loans owing to it and the Notes held by it and all of its rights
and obligations hereunder and under the other Loan Documents, which right may be
exercised by the Agent or the Borrower, as the case may be, if such Lender Party
refuses to execute any amendment, waiver or consent which requires the written
consent of all the Lenders and to which the Agent and the Borrower have agreed.
Each Lender Party agrees that if the Agent or the Borrower, 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 10.7. Any purchase of such Lender Party's Commitments and Loans
owing to it and the Notes held by it must (i) occur within 30 Business Days from
the date that such Lender Party refuses to execute any amendment, waiver or
consent which requires the written consent of all the Lenders and to which the
Agent and the Borrower have agreed and (ii) include an amount payable to such
Lender Party which is sufficient to compensate such Lender Party for any loss,
expense, or liability as a result of any purchase of such Lender Party's
Commitments and Loans owing to it and the Notes held by it under this Section
10.1(b) which arises out of, or is in connection with, any funds acquired by
such Lender Party to make, continue, or maintain any portion of the principal
amount of any Loan as, or to convert any portion of the principal amount of any
Loan into, a Eurodollar Rate Loan.
10.2. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing (including, without limitation, telegraphic,
telex, telecopy or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered by hand, if to the Borrower, at its address at
1134 Market Street, Wheeling, West Virginia 26003, Attention: Chief Financial
Officer with copy to WHX or WPN Corp. at 110 East 59th Street, New York, New
York 10022, Attention: Mr. Stewart Tabin; if to any Lender, at its Domestic
Lending Office specified opposite its name on Schedule III hereto; and if to the
Agent, at its address at 399 Park Avenue, 6th Floor, Zone 4, New York, New York
10043, Attention: Keith R. Karako; or, as to the Borrower or the 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 Borrower and the Agent.
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All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective when deposited in the mails,
delivered to the telegraph company, confirmed by telex answerback, telecopied
with confirmation of receipt, delivered to the cable company or delivered by
hand to the addressee or its agent, respectively, except that notices and
communications to the Agent pursuant to Article II or IX shall not be effective
until received by the Agent.
Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Revolving Credit Notes or of
any Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
10.3. No Waiver; Remedies. No failure on the part of any Lender Party
or the Agent to exercise, and no delay in exercising, any right hereunder or
under any Revolving Credit 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.
10.4. Costs; Expenses; Indemnities. (a) The Borrower agrees to pay on
demand (i) the reasonable costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, each of the other Loan Documents and each of the other documents
to be delivered hereunder and thereunder, 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 out-of-pocket
expenses of counsel to the Agent with respect thereto and with respect to
advising the Agent as to its rights and responsibilities or the perfection,
protection or preservation of rights or interests under this Agreement and the
other 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 Event of Default or any events or circumstances that may give rise
thereto 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, (ii) the per
diem cost of any audit or collateral evaluation (of not more than $1000 per day)
of the Agent and (iii) the reasonable costs and expenses of the Lender Parties
(including, without limitation, reasonable counsel fees and expenses) in
connection with the enforcement (whether through negotiation, legal proceedings
or otherwise) of this Agreement, the other Loan Documents and the other
documents to be delivered hereunder or thereunder.
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(b) The Borrower agrees to indemnify and hold harmless the Agent, each
Lender Party and their respective Affiliates, and the directors, officers,
employ ees, agents, attorneys, consultants and advisors of or to any of the
foregoing (including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
Article III) (each of the foregoing being an "Indemnitee") from and against any
and all claims, damages, liabilities, obligations, losses, penalties, actions,
judgments, suits, costs, disbursements and expenses of any kind or nature
(including, without limitation, reasonable fees and disbursements of counsel to
any such Indemnitee) which may be imposed on, incurred by or asserted against
any such Indemnitee in connection with or arising out of any investigation,
litigation or proceeding, whether or not any such Indemnitee is a party thereto,
whether direct, indirect or consequential and whether based on any federal,
state or local law or other statutory regulation, securities or commercial law
or regulation, or under common law or in equity, or on contract, tort or
otherwise, in any manner relating to or arising out of this Agreement, any other
Loan Document, any Obligation, any Letter of Credit or any act, event or
transaction related or attendant to any thereof or in connection with any
investigation by any Governmental Authority of any potential matter covered
hereby or thereby (collectively, the "Indemnified Matters"), including, without
limitation, (i) all Environmental Liabilities and Costs arising from or
connected with the past, present or future operations of the Borrower or any of
its Subsidiaries, or damage to real or personal property or natural resources or
harm or injury alleged to have resulted from any Release; (ii) any costs or
liabilities incurred in connection with the investigation, removal, cleanup
and/or remediation of any Contaminant present or arising out of the operations
of any facility of the Borrower or any of its Subsidiaries; (iii) any costs or
liabilities incurred in connection with any Environmental Lien; (iv) any costs
or liabilities incurred in connection with any other matter affecting any
facility pursuant to Environmental Laws, including, without limitation, CERCLA
and applicable state property transfer laws, including, without limitation,
whether, with respect to any of the foregoing, such Indemnitee is a mortgagee
pursuant to any leasehold mortgage, a mortgagee in possession, the successor in
interest to the Borrower or any of its Subsidiaries, or the owner, lessee or
operator of any facility of the Borrower or any of its Subsidiaries by virtue of
foreclosure, except, with respect to any of the foregoing referred to in clauses
(i), (ii), (iii) and (iv), to the extent attributable solely to acts of the
Agent or such Indemnitee or any agent on behalf of the Agent or such Lender
following (x) foreclosure by the Agent or any Indemnitee, or (y) the Agent or
any Lender having become the successor in interest to the Borrower or any of its
Subsidiaries; (v) the management of the Loans and Letters of Credit, or (vi) the
use or intended use of the proceeds of the Loans or Letters of Credit; provided,
however, that the Borrower shall not have any obligation under this Section
10.4(b) to an Indemnitee with respect to any Indemnified Matter caused by or
resulting from the gross negligence or willful misconduct of that Indemnitee.
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(c) If any Lender receives any payment of principal of, or is subject
to a conversion of, any Eurodollar Rate Loan, other than on the last day of an
Interest Period relating to such Loan, as a result of any payment or conversion
made by the Borrower (other than a payment made to the Agent pursuant to Section
2.3(f)) or acceleration of the maturity of the Revolving Credit Notes pursuant
to Section 8.2 or for any other reason or a conversion of a Eurodollar Rate Loan
does not occur by reason of the fourth sentence of Section 2.8, the Borrower
shall, upon demand by such Lender (with a copy of such demand to the Agent), pay
to the Agent for the account of such Lender all amounts required to compensate
such Lender for any additional losses, costs or expenses which it may reasonably
have incurred or in the future incur as a result of such payment or conversion,
including, without limitation, any actual out-of-pocket loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund or maintain such Loan.
(d) The Agent and each Lender agree that in the event that any such
investigation, litigation or proceeding set forth in subparagraph (b) above is
asserted or threatened in writing or instituted against it or any other
Indemnitee, or any remedial, removal or response action is requested of it or
any of its officers, directors, agents and employees, for which any Indemnitee
may desire indemnity or defense hereunder, such Indemnitee shall promptly notify
the Borrower in writing.
(e) The Borrower, at the request of any Indemnitee, shall have the
obligation to defend against such investigation, litigation or proceeding or
requested remedial, removal or response action, and the Borrower, in any event,
may control the defense thereof with legal counsel of the Borrower's choice. In
the event that such Indemnitee requests the Borrower to defend against such
investigation, litigation or proceeding or requested remedial, removal or
response action, the Borrower shall promptly do so and such Indemnitee shall
have the right to have legal counsel of its choice participate in such defense
at such Indemnitee's expense. If, without the Borrower's prior written consent
which consent shall not be unreasonably withheld, an Indemnitee shall settle any
such investigation, litigation, proceeding or other action, such Indemnitee
shall be deemed to have waived its rights to indemnity and defense hereunder.
(f) The obligations of the Borrower under this Section 10.4 and under
Sections 2.10 and 2.12 shall survive the repayment of the Loans and the
termination of the Revolving Credit Commitments.
10.5. Right of Set-off. Upon the occurrence and during the continuance
of any Event of Default, each Lender Party and each of its respective Affiliates
is hereby authorized at any time and from time to time, to the fullest extent
permitted by
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law, to set off and 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 Lender Party or such Affiliate to or for the credit or the
account of the Borrower against any and all of the Obligations now or hereafter
existing irrespective of whether or not such Lender Party shall have made any
demand under this Agreement, any Revolving Credit Note or any Reimbursement
Agreement or any other Loan Document and although such Obligations may be
unmatured. Each Lender Party agrees promptly to notify the Borrower after any
such set-off and application made by such Lender Party or its Affiliate;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender Party and
its respective Affiliates under this Section are in addition to the other rights
and remedies (including, without limitation, other rights of set-off) which such
Lender Party and its respective Affiliates may have.
10.6. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Lender Party that such Lender Party has executed it
and thereafter shall be binding upon and inure to the benefit of the Borrower,
the Agent and each Lender Party and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lender Parties.
10.7. Assignments and Participations. (a) Each Lender may sell, trans
fer, negotiate or assign to one or more other Lenders or Eligible Assignees all
or a portion of its Revolving Credit Commitments, commitment to issue Letters of
Credit and the Loans and Letter of Credit Obligations owing to it and Revolving
Credit Notes held by it and a commensurate portion of its rights and obligations
hereunder and under the other Loan Documents; provided, however, that (i) if
such an assignment is of Revolving Credit Loans and Revolving Credit
Commitments, each such assignment shall be of a constant, and not a varying,
percentage of the assigning Lender's rights and obligations under this Agreement
with respect to Revolving Credit Loans, Letters of Credit and Revolving Credit
Commitments, (ii) the aggregate amount of the Revolving Credit Commitments,
Letters of Credit, Letter of Credit Obligations and Loans 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, in the case of an assignment to a Lender Party, or $15,000,000, in
the case of an assignment to a Person that is not a Lender Party, or, in each
case, an integral multiple of $1,000,000 in excess thereof, unless such
assignment is of the Lender's entire Revolving Credit Commitment, and (iii) each
assignee hereunder shall be an Eligible Assignee. The parties to each assignment
shall execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and
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Acceptance, together with a fee of $3,500 and the Revolving Credit Note (or an
affidavit of loss and indemnity with respect to such Revolving Credit Note,
satisfactory to the Agent) subject to such assignment. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in such Assignment and Acceptance, (A) the assignee thereunder shall become a
party hereto and, to the extent that rights and obligations under the Loan
Documents have been assigned to such assignee pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender, and if such Lender was
an Issuer, of an Issuer hereunder and thereunder with respect to Letters of
Credit issued after such effective date, and (B) the assignor thereunder shall,
to the extent that rights and obligations under this Agreement have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(except for those rights which survive the payment in full of principal and
interest hereunder) and be released from its obligations under the Loan
Documents (and, in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's or Issuer's rights and obligations
under the Loan Documents, such Lender or Issuer shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties 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 this
Agreement or any other Loan Document or any instrument or other document
furnished pursuant hereto or thereto 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, this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or 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 this
Agreement or any other Loan Document or of any other instrument or document fur
nished pursuant hereto or thereto; (iii) such assignee confirms that it has
received a copy of this Agreement and each of the other Loan Documents together
with a copy of any of the financial statements referred to in Section 4.5 of
this Agreement 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 the 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
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Assignee; (vi) such assignee appoints and authorizes the 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 the 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 which by the terms
of this Agreement are required to be performed by it as a Lender and, if
appropriate, an Issuer.
(c) The Agent shall maintain at its address referred to in Section 10.2
a 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 Revolving Credit Commitments of, Letter of Credit Obligations owing to,
and principal amount of the Loans owing 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 Loan Parties, the Agent and the
Lender Parties may treat each Person whose name is recorded in the Register as a
Lender Party for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower, the Agent or any Lender Party at any reasonable
time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee representing that it is an Eligible
Assignee, together with the Revolving Credit Note subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed, (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
Within five Business Days after its receipt of such notice, the Borrower, at its
own expense, shall execute and deliver to the Agent, in exchange for such
surrendered Revolving Credit Note, a new Revolving Credit Note to the order of
such Eligible Assignee in an amount equal to the Revolving Credit Commitment
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender Party has retained a Revolving Credit Commitment hereunder, a new
Revolving Credit Note to the order of the assigning Lender Party in an amount
equal to the Revolving Credit Commitment retained by it hereunder. Such new
Revolving Credit Note shall be dated the same date as the surrendered Revolving
Credit Note and be in substantially the form of Exhibit A hereto.
(e) Each Lender Party may sell participations to one or more banks or
other Persons in or to all or a portion of its rights and obligations under the
Loan Documents (including, without limitation, all or a portion of its Revolving
Credit Commitment, the Letter of Credit Obligations owing to it and the Loans
owing to it and the Revolving Credit Note held by it). The terms of such
participation shall not, in
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any event, require the participant's consent to any amendment, waiver or other
modification of any provision of any Loan Document, the consent to any departure
by any Loan Party therefrom, or to the exercising or refraining from the
exercise of any powers or rights which such Lender Party may have under or in
respect of the Loan Documents (including, without limitation, the right to
enforce the obligations of the Loan Parties), except if any such amendment,
waiver or other modification or consent would (i) reduce the amount, or postpone
any date fixed for, any amount (whether of principal, interest or fees) payable
to such participant under the Loan Documents to which such participant would
otherwise be entitled under such participation or (ii) result in the release of
any of the Collateral, except (A) as shall otherwise be provided in the
Collateral Documents and (B) Collateral having an aggregate Fair Market Value
not in excess of $25,000,000 in any Fiscal Year. In the event of the sale of any
participation by any Lender Party, (i) such Lender Party's obligations under the
Loan Documents (including, without limitation, its Revolving Credit Commitment)
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 such Revolving Credit Note and
Obligations for all purposes of this Agreement, (iv) such Lender Party shall
disclose to the Agent the identity of each bank or other entity purchasing a
participation and the principal amount of such participation within five
Business Days after the sale and purchase of such participation, and (v) the
Borrower, the Agent and the other Lender Parties shall continue to deal solely
and directly with such Lender in connection with such Lender Party's rights and
obligations under this Agreement.
(f) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Loans 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.
10.8. Governing Law. This Agreement and the Revolving Credit Notes and
the rights and obligations of the parties hereto and thereto shall be governed
by, and construed in accordance with, the law of the State of New York.
10.9. Submission to Jurisdiction. (a) Any legal action or proceeding
with respect to this Agreement or the Revolving Credit Notes or any document
related thereto may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. The parties hereto hereby irrevocably waive any
objection, including, without limitation, any
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objection to the laying of venue or based on the grounds of forum non
conveniens, which any of them may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(b) The Borrower irrevocably consents to the service of process of any
of the aforesaid courts in any such action or proceeding by the mailing of a
copy thereof by registered or certified mail, postage prepaid, to the Borrower
at its address provided herein.
(c) Nothing contained in this Section 10.9 shall affect the right of
the Agent or any Lender Party or any holder of a Revolving Credit Note to serve
process in any other manner permitted by law or commence legal proceedings or
otherwise proceed against the Borrower in any other jurisdiction.
10.10. Section Titles. The Section titles contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement among the parties hereto.
10.11. 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.
10.12. No Liability of the Issuers. The Borrower 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 Issuer 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 Issuer 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 under any
Letter of Credit, except that the Borrower shall have a claim against such
Issuer, and such Issuer shall be liable to the Borrower, to the extent of any
direct, but not consequential, damages suffered by the Borrower that the
Borrower prove were caused by (i) such Issuer's willful misconduct or gross
negligence in determining whether documents presented under any Letter of Credit
comply with the terms of the Letter of Credit or (ii) such Issuer's willful
failure to make lawful payment under a Letter of Credit after the presentation
to it of a draft and certificates strictly
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complying with the terms and conditions of the Letter of Credit. In furtherance
and not in limitation of the foregoing, such Issuer 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.
10.13. Entire Agreement. This Agreement, together with all of the other
Loan Documents and all certificates and documents delivered hereunder or
thereunder, and the fee letter by and between the Borrower and each of the
Lender Parties embody the entire agreement of the parties and supersedes all
prior agreements and understandings relating to the subject matter hereof.
10.14. Confidentiality. Each Lender Party and the Agent agree to keep
information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with such Lender Party's or the Agent's, as the case
may be, customary practices and agrees that it will only use such information in
connection with the transactions contemplated by this Agreement and not disclose
any of such information other than (i) to such Lender Party's or the Agent's, as
the case may be, Affiliates, employees, representatives and agents who are or
are expected to be involved in the evaluation of such information in connection
with the transactions contemplated by this Agreement and who are advised of the
confidential nature of such information, (ii) to the extent such information
presently is or hereafter becomes available to such Lender Party or the Agent,
as the case may be, on a non-confidential basis from a source other than the
Borrower, (iii) to the extent disclosure is required by law, regulation or
judicial order (which requirement or order shall be promptly notified to the
Borrower) or requested or required by bank regulators or auditors, or (iv) to
assignees or participants or potential assignees or participants who agree to be
bound by the provisions of this Section.
112
<PAGE>
10.15. Waiver of Jury Trial. Each of the Borrower, the Agent 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 Loans or the
actions of the Agent or any Lender Party in the negotiation, administration,
performance or enforcement thereof.
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.
BORROWER
--------
WHEELING-PITTSBURGH STEEL
CORPORATION
By: /s/ Paul Mooney
-------------------------------
Name: Paul Mooney
Title: Executive Vice President and Chief
Financial Officer
AGENT
-----
CITIBANK, N.A.,
as Agent
By: /s/ Illegible
-------------------------------
Name:
Title:
113
<PAGE>
LENDERS
-------
CITICORP USA, INC.
By: /s/ Illegible
-------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By: /s/ Jennifer Arrigian
-------------------------------
Name: Jennifer Arrigian
Title: Assistant Vice President
BANK OF AMERICA NT&SA
By: /s/ Walter T. Shellman
-------------------------------
Name: Walter T. Shellman
Title: Vice President
NATIONAL CITY COMMERCIAL
FINANCE, INC.
By: /s/ John P. Dunn
-------------------------------
Name: John P. Dunn
Title: Vice President
<PAGE>
HELLER FINANCIAL, INC.
By: /s/ John Buff
-------------------------------
Name: John Buff
Title: Senior Vice President
AMERICAN NATIONAL BANK AND TRUST
COMPANY, A BANK ONE COMPANY
By: /s/ Donna H. Evans
-------------------------------
Name: Donna H. Evans
Title: Vice President
ISSUER (AND NOT LENDER)
-----------------------
CITIBANK, N.A.
By: /s/ Illegible
-------------------------------
Name:
Title:
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
<PAGE>
HANDY & HARMAN SUBSIDIARIES
- ---------------------------
CAMDEL METALS CORPORATION, a Delaware corporation
CONTINENTAL INDUSTRIES, INC. a Oklahoma corporation
ele CORPORATION, a California corporation
HANDY & HARMAN OF CANADA, LIMITED, a Province of Ontario Canada corporation
HANDY & HARMAN ELECTRONIC MATERIALS CORPORATION, a Florida corporation
HANDY & HARMAN (EUROPE) LIMITED, a corporation organized under the laws of
England and Wales
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 corporation organized under the laws of
England and Wales
INDIANA TUBE CORPORATION, a Delaware corporation
INDIANA TUBE DANMARK A/S a corporation of Kolding, Denmark
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 corporation organized under the laws of
England and Wales
SUMCO INC., an Indiana corporation
WILLING B WIRE CORPORATION, a Delaware corporation
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements listed below of WHX Corporation of our reports dated February 10,
2000 and February 18, 2000, relating to the financial statements, which appear
in this Form 10-K.
On Form S-3
- -----------
File No. 33-54831
File No. 33-63845
On Form S-8
- -----------
File No. 33-5480
File No. 33-56281
File No. 333-64217
File No. 333-36985
/s/ PriceWaterhouse Coopers LLP
PriceWaterhouse Coopers LLP
Pittsburgh, Pennsylvania
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the WHX
Corporation Consolidated Financial Statements as of December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10,775
<SECURITIES> 659,356
<RECEIVABLES> 143,397
<ALLOWANCES> (2,306)
<INVENTORY> 441,869
<CURRENT-ASSETS> 1,267,713
<PP&E> 1,363,560
<DEPRECIATION> 547,059
<TOTAL-ASSETS> 2,673,566
<CURRENT-LIABILITIES> 973,437
<BONDS> 847,720
<COMMON> 141
0
589
<OTHER-SE> 376,741
<TOTAL-LIABILITY-AND-EQUITY> 2,673,566
<SALES> 1,716,800
<TOTAL-REVENUES> 1,716,800
<CGS> 1,430,389
<TOTAL-COSTS> 1,677,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,851
<INCOME-PRETAX> (22,264)
<INCOME-TAX> (6,430)
<INCOME-CONTINUING> (15,834)
<DISCONTINUED> 0
<EXTRAORDINARY> 896
<CHANGES> 0
<NET-INCOME> (14,938)
<EPS-BASIC> (2.24)
<EPS-DILUTED> (2.24)
</TABLE>
