<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the Fiscal Year Ended December 26, 1998
Commission File No. 0-3701
Valmont Industries, Inc.
------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 47-0351813
- --------------------------------- -------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification
of Incorporation or Organization) Number)
Valley, Nebraska 68064
---------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Phone Number, Including Area Code: (402) 359-2201
Securities Registered Pursuant to Section 12(g) of the Act:
Valmont Industries, Inc. Common Stock
-------------------------------------
$1.00 Par Value - Traded NASDAQ Stock Market (Symbol VALM)
----------------------------------------------------------
(Title of Class)
----------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve 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 ninety days. Yes X No
----- -----
At March 5, 1999 there were outstanding 24,528,973 common shares of the Company.
The aggregate market value of the voting stock held by non-affiliates of the
Company on March 5, 1999 was $198,421,000.
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. / /
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's annual report to shareholders for the fiscal year
ended December 26, 1998 (the "Annual Report") are incorporated by reference in
Parts I and II, and portions of the Company's proxy statement for its annual
meeting of shareholders to be held on April 26, 1999 (the "Proxy Statement") are
incorporated by reference in Part III.
Page 1 of 203
-----
Index to Exhibits, Page 13
----
<PAGE>
PART I
Item 1. BUSINESS.
(a) General Description of Business
Valmont Industries, Inc., a Delaware Corporation, (together with its
subsidiaries the "Company") is engaged in infrastructure and irrigation
businesses. The Infrastructure segment involves the manufacture and distribution
of engineered metal structures for the lighting, utility and wireless
communication industries. The Irrigation segment involves the manufacture and
distribution of agricultural irrigation equipment and related products and
services. The description of Valmont's businesses set forth on pages 6 through
21 of the Company's Annual Report is incorporated herein by reference.
The Company entered the Irrigation market in 1953 from its manufacturing
location in Valley, Nebraska. The Infrastructure segment began producing and
marketing engineered metal structures in the early 1960's.
Valmont has grown internally and by acquisition. Valmont has also divested
certain businesses. Valmont's business expansions during the past five years
include (i) the acquisition of Microflect Company, Inc. in 1995, a manufacturer
and installer of microwave communication structures, (ii) the 1996 acquisitions
of TelecCentre, S.A., a French manufacturer of communication towers, and of
Valmont Mastbau, KG, a German manufacturer and distributor of pole structures
for the lighting market, (iii) completion of the construction in 1997 of a new
galvanizing plant in West Point, Nebraska, (iv) the acquisition in 1997 of a 70%
interest in Valmont Services Irrigacao, Ltd., a Brazilian manufacturer of
mechanized irrigation equipment, (v) the acquisition of two galvanizing
facilities in Tualatin, Oregon and in Lindon, Utah in January of 1998, (vi) the
expansion of facilities in Siedlce, Poland during 1997 and (vii) the acquisition
of two additional galvanizing facilities in California and Oklahoma and the
purchase of Cascade Earth Sciences, Ltd., a firm providing consulting services
for environmental and wastewater management projects during 1998. Divestitures
during the past five years include the January 1997 cash sale of the stock of
Valmont Electric, Inc., a lighting ballast manufacturing business.
(b) Operating Segments
The Company's business activities are currently classified into the
following operating segments:
Infrastructure - This segment consists of the manufacture and distribution
of engineered metal structures and related products for the lighting,
utility and wireless communications industries.
Irrigation - This segment includes the manufacture and distribution of
agricultural irrigation equipment and related products and services.
In addition to these two reportable segments, the Company has several other
businesses that do not fit within the reportable segments listed above, and are
not individually more than 10% of combined net sales. These businesses include
custom coatings, steel tubing, pressure vessels, machine tool accessories and
industrial fasteners.
The amounts of revenues, operating income and total assets attributable to
each segment for each of the last three years are set forth on page 45 of the
Annual Report and incorporated herein by reference.
2
<PAGE>
(c) Narrative Description of Business
PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED.
The information called for by this item is hereby incorporated by reference
to pages 11 through 21 in the Company's Annual Report.
SUPPLIERS AND AVAILABILITY OF RAW MATERIALS.
Hot rolled steel coil and other carbon steel products are the primary raw
materials utilized in the manufacture of finished products for the Industrial
Products and Irrigation Products segments. These essential items are purchased
from steel mills and steel service centers and are readily available. It is not
likely that key raw materials would be unavailable for extended periods.
PATENTS, LICENSES, FRANCHISES AND CONCESSIONS.
Valmont has a number of patents for its irrigation designs. The Company
also has a number of registered trademarks. Management believes the loss of any
individual patent would not have a material adverse effect on the financial
condition of the Company.
SEASONAL FACTORS IN BUSINESS.
Sales in the Company's irrigation segment can be somewhat seasonal based
upon the agricultural growing season.
CUSTOMERS.
The Company is not dependent for a material part of its business upon a
single customer, or upon very few customers, the loss of any one of which would
have a material adverse effect on the financial condition of the Company.
BACKLOG.
The backlog of orders for the principal products manufactured and marketed
was approximately $106.3 million at the end of the 1998 fiscal year and $125.6
million at the close of 1997. It is anticipated that most of the backlog of
orders will be filled during fiscal year 1999. At year end, the backlog by
segment was as follows (dollar amounts in millions):
<TABLE>
<CAPTION>
Dec. 26, Dec. 27,
1998 1997
--------- ---------
<S> <C> <C>
Infrastructure $ 70.3 86.2
Irrigation 21.1 30.7
Other 14.9 8.7
------ -----
$ 106.3 125.6
------ -----
------ -----
</TABLE>
3
<PAGE>
COMPETITIVE CONDITIONS.
In the Infrastructure segment, Valmont is a major manufacturer and supplier
of engineered metal structures to the lighting and traffic, utility and wireless
communication industries. The Irrigation segment involves the development,
manufacture and distribution of mechanized irrigation equipment and related
products for both the U.S. and international markets. The Company believes it is
the world's leading manufacturer of mechanized irrigation systems. The Company
delivers a broad line of custom engineered tubular steel products and
manufactures and distributes fasteners. In addition, the Company supplies custom
coating services. The key competitive strategy used by the Company in each
segment is one of high quality and service.
RESEARCH ACTIVITIES.
The information called for by this item is hereby incorporated by reference
to the "Research and Development" on page 43 in the Company's Annual Report.
ENVIRONMENTAL DISCLOSURE.
The Company is subject to various federal, state and local laws and
regulations pertaining to environmental protection and the discharge of
materials into the environment. Although the Company continues to incur expenses
and to make capital expenditures related to environmental protection, it does
not anticipate that future expenditures will materially impact the financial
condition of the Company.
NUMBER OF EMPLOYEES.
At December 26, 1998, the number of employees was 3,869.
GEOGRAHPIC AREAS.
Valmont's international sales activity encompasses approximately ninety
foreign countries. The information called for by this item is hereby
incorporated by reference to "Summary by Geographical Area" on page 45 in the
Annual Report.
Item 2. PROPERTIES.
The Company's primary plant and offices are located on a 352 acre site near
Valley, Nebraska, which is approximately twenty miles west of Omaha, Nebraska.
336 of the acres are owned in fee. The other 16 acres are leased on a yearly
basis from the Union Pacific Railroad Company, which serves the Company's
primary plant, and which is entitled to terminate the lease on a one-year notice
in the event that the land is required for railroad operations. The Valley,
Nebraska location is used in common as the primary facilities by Irrigation
segment and certain Infrastructure segment administrative and operating
personnel. The Infrastructure segment's other significant properties are
administrative, manufacturing and distribution facilities at Elkhart, Indiana,
Tulsa, Oklahoma and Brehnam, Texas. The Oklahoma facility has 350,000 square
feet under roof on 24 acres of land whereas the Texas facility is located on 109
acres and has eight buildings, with 318,000 square feet under
4
<PAGE>
roof. Additionally the infrastructure segment leases office and plant facilities
in Salem, Oregon under long-term leases. Overseas the Infrastructure segment has
four locations in France, and one plant in each of the following countries: the
Netherlands; Germany; Poland; and China. The Irrigation segment in addition to
its operations at Valley, Nebraska, operates a mechanized irrigation facility in
Uberaba, Brazil consisting of 135,000 square feet and a manufacturing facility
for irrigation systems in Madrid, Spain. Currently under construction is a
310,000 square feet manufacturing facility in McCook, Nebraska, that will
produce mechanized irrigation system components. The protective coatings
division operates a 50,000 square foot facility in West Point, Nebraska and
rents galvanizing facilities in Tualatin, Oregon, and Lindon, Utah; these two
sites are 68,000 square feet and 36,000 square feet, respectively. During 1998
two additional coating plants were acquired that are located in Long Beach,
California and Tulsa, Oklahoma. The Company operates other facilities as set
forth on page 8 of the Company's Annual Report, which information is
incorporated herein by reference.
Item 3. PENDING LEGAL PROCEEDINGS.
The Company is involved in a limited number of legal actions. Management
believes that the ultimate resolution of all pending litigation will not have a
material adverse effect on the Company's financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were not any matters submitted for stockholder vote during the fourth
quarter of 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company at December 26, 1998, their ages,
positions held, and the business experience of each during the past five years
are, as follows:
Mogens C. Bay, Age 50, Chairman and Chief Executive Officer of the Company
since January 1997. President and Chief Executive Officer of the Company
from August 1993 to December 1996 and Director of the Company since October
1993.
Vincent T. Corso, Age 51, Senior Vice President, Chief Operating Officer of
the Company since September of 1998. Group President and Chief Operating
Officer-Irrigation & Coatings Group from December 1996 until September of
1998. Vice President - Operations from June 1994 until December 1996.
Previously served as Vice President - Corporate Manufacturing, Emerson
Electric from 1992 to June 1994.
Thomas P. Egan, Jr., Age 50, Vice President, Corporate Counsel and
Secretary of the Company since 1984.
Terry J. McClain, Age 51, Senior Vice President and Chief Financial
Officer. Previously Vice President and Chief Financial Officer of the
Company from January 1994 until December 1996.
5
<PAGE>
E. Robert Meaney, Age 51, Senior Vice President - Valmont International
since September 1998. President and Chief Operating Officer - Valmont
International from February 1994 to September 1998.
Brian C. Stanley, Age 56, Vice President - Controller of the Company since
January 1994.
Mark E. Treinen Age 43, Vice President - Business Development since January
1994.
6
<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Item 6. SELECTED FINANCIAL DATA.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information called for by items 5, 6 and 7 is hereby incorporated by
reference to the following captioned paragraphs (at the pages indicated) in the
Company's Annual Report:
<TABLE>
<CAPTION>
Page(s) In
Annual
Item Caption in Annual Report Report
---- ------------------------ ----------
<S> <C> <C>
5 Stock Trading 48
5 Stock Market Price and Dividends Declared 46
5 Approximate Number of Shareholders 34 - 35
5&6 Selected Eleven Year Financial Data 34 - 35
7 Management's Discussion and Analysis 29 - 33
</TABLE>
7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by item 7A is hereby incorporated by reference
to the captioned paragraph, Risk Management, in the Company's Annual Report on
Page 32.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements called for by this item are hereby incorporated by
reference to the Company's Annual Report as set forth on pages 36 through 45,
together with the independent auditors' report on page 47. The supplemental
quarterly financial information is incorporated herein by reference to page 46
of the Company's Annual Report
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
7
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Item 11. EXECUTIVE COMPENSATION.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except for the information relating to the executive officers of the
Company set forth in Part I of this 10-K Report, the information called for by
items 10, 11, 12 and 13 is hereby incorporated by reference to the sections
entitled "Certain Shareholders", "Election of Directors", "Summary Compensation
Table", "Stock Option Grants in Fiscal Year 1998", "Options Exercised in Fiscal
Year 1998 and Fiscal Year End Values", "Long-Term Incentive Plans", and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy
Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1)(2) FINANCIAL STATEMENTS. See index to financial statement schedules
on page F-1.
(a)(3) EXHIBITS. See exhibit index, incorporated herein by reference.
(b) REPORTS ON FORM 8-K. The Company filed no reports on Form 8-K
during the past fiscal quarter.
8
<PAGE>
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Consolidated Financial Statement
Schedules
Consolidated Financial Statements
The following consolidated financial statements of Valmont Industries, Inc.
and subsidiaries have been incorporated by reference to pages 36 to 45 of the
Company's Annual Report to Shareholders for the year ended December 26, 1998:
Independent Auditors' Reports - Page 47 of the annual report.
Consolidated Balance Sheets - December 26, 1998 and December 27, 1997
Consolidated Statements of Operations - Three-Year Period Ended
December 26, 1998
Consolidated Statements of Shareholders' Equity - Three-Year Period
Ended December 26, 1998
Consolidated Statements of Cash Flows - Three-Year Period Ended
December 26, 1998
Notes to Consolidated Financial Statements - Three- Year Period Ended
December 26, 1998
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Financial Statement Schedule
Supporting Consolidated Financial Statement
SCHEDULE II - Valuation and Qualifying Accounts F-4
</TABLE>
All other schedules have been omitted as the required information is
inapplicable or the information is included in the consolidated financial
statements or related notes.
Separate financial statements of the Registrant have been omitted because
the Registrant meets the requirements which permit omission.
F-1
9
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Valmont Industries, Inc.
We have audited the consolidated financial statements of Valmont Industries,
Inc. and Subsidiaries (the Company) as of December 26, 1998 and December 27,
1997, and for each of the three years in the period ended December 26,1998, and
have issued our report thereon dated February 5, 1999; such financial statements
and report are included in your 1998 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of the Company listed in Item 14 of this Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 5, 1999
F-2
10
<PAGE>
Schedule II
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance at
beginning profit and from close
of period loss reserves* of period
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Fifty-two weeks ended December 26, 1998
Reserve deducted in balance sheet from
the asset to which it applies -
Allowance for doubtful receivables $ 2,132 1,522 233 3,421
------- ----- ----- -----
------- ----- ----- -----
Fifty-three weeks ended December 27, 1997
Reserve deducted in balance sheet from
the asset to which it applies -
Allowance for doubtful receivables $ 2,299 194 361 2,132
------- ----- ----- -----
------- ----- ----- -----
Fifty-two weeks ended December 28, 1996
Reserve deducted in balance sheet from
the asset to which it applies -
Allowance for doubtful receivables $ 2,941 796 1,438 2,299
------- ----- ----- -----
------- ----- ----- -----
</TABLE>
*The deductions from reserves are net of recoveries.
F-4
11
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Omaha, State of Nebraska, on the 24th day of March,1999.
Valmont Industries, Inc.
By: /S/Mogens C. Bay
----------------------------------
Mogens C. Bay
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Valmont
Industries, Inc. and in the capacities indicated on the dates indicated.
/S/ Mogens C. Bay 3/24/99
- -------------------------- Director, President and -----------
Mogens C. Bay Chief Executive Officer Date
(Principal Executive
Officer)
/S/ Terry J. McClain 3/24/99
- -------------------------- Vice President and -----------
Terry J. McClain Chief Financial Officer Date
(Principal Financial
Officer)
/S/ Brian C. Stanley 3/24/99
- -------------------------- Vice President - Investor ----------
Brian C. Stanley Relations & Controller Date
(Principal Accounting
Officer)
Robert B. Daugherty* John E. Jones *
Charles M. Harper* Thomas F. Madison*
Allen F. Jacobson* Walter Scott, Jr.*
Lloyd P. Johnson * Kenneth E. Stinson*
Robert G. Wallace * Charles D. Pebbler, Jr.*
Bruce Rhode*
*Mogens C. Bay, by signing his name hereto, signs the Annual Report on behalf of
each of the directors indicated on this 24th day of March, 1999. A Power of
Attorney authorizing Mogens C. Bay to sign the Annual Report of Form 10-K on
behalf of each of the indicated directors of Valmont Industries, Inc. has been
filed herein as Exhibit 24.
By /S/ Mogens C. Bay
-------------------------
Mogens C. Bay
Attorney-in-Fact
12
<PAGE>
INDEX TO EXHIBITS
This Exhibit Index relates to exhibits filed as a part of this Report.
Numbers are assigned to exhibits in accordance with Item 601 of Regulation S-K.
Page numbers relate to the pages in the sequential numbering system where the
exhibits can be found (for those exhibits which are not incorporated by
reference).
Exhibit 3(i) - The Company's Certificate of Incorporation, as amended.
This document was filed with the Company's Quarterly Report on
Form 10-Q for the quarter ended March 28, 1998 and is
incorporated herein by reference.
Exhibit 3(ii) - The Company's By-Laws, as amended. Page 15
Exhibit 4(i) - Rights Agreement dated as of December 19, 1995 between
the Company and First National Bank of Omaha as Rights Agent.
This document was filed with the Company's Current Report on
Form 8-K dated December 19, 1995 and is incorporated herein by
reference.
Exhibit 4(ii) - Certificate of Adjustment dated May 30, 1997 to Rights
Agreement dated as of December 19, 1995. This document was
filed as Exhibit 4(b) with the Company's Annual Report on Form
10-K for fiscal year ended December 27, 1997 and is
incorporated herein by reference.
Exhibit 4(iii) - The Company's Credit Agreement with The Bank of New
York dated October 7, 1997 as amended. Page 31
Exhibit 10(i) - The Company's 1988 Stock Plan and certain amendments.
This document was filed as Exhibit 10(a) with the Company's
Annual Report on Form 10-K for fiscal year ended December 27,
1997 and is incorporated herein by reference.
Exhibit 10(ii) - The Company's 1996 Stock Plan. This document was filed
as Exhibit 10(e) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 1995 and is incorporated
herein by reference.
Exhibit 10(iii) - The Valmont Executive Incentive Plan. This document
was Filed as Exhibit 10(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 and is
incorporated herein by reference.
Exhibit 10(iv) - The Amended Unfunded Deferred Compensation Plan for
Nonemployee Directors. This document was filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 28, 1998 and is incorporated herein by
reference.
13
<PAGE>
Exhibit 13 - The Company's Annual Report to Shareholders
for its fiscal year ended December 26, 1998..............Page 148
Exhibit 21 - Subsidiaries of the Company..............................Page 201
Exhibit 23 - Consent of Deloitte and Touche LLP.......................Page 202
Exhibit 24 - Power of Attorney........................................Page 203
Exhibit 27 - Financial Data Schedule..................................Page 204
Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with
respect to Valmont Industries' long-term debt are not filed with this Form 10-K.
Valmont will furnish a copy of such long-term debt agreements to the Securities
and Exchange Commission upon request.
Management contracts and compensatory plans are set forth as exhibits 10(i)
through 10(iv).
14
<PAGE>
Exhibit 3(ii)
BYLAWS
OF
VALMONT INDUSTRIES, INC.
ARTICLE I
Section 1. Annual Meeting. The annual meeting of the stockholders shall
be held on a date and at an hour determined by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting.
Section 2. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, may be called at any time by the President of this
Corporation, who shall call the same upon demand in writing being made upon such
person by a majority of the directors of the Corporation.
Section 3. Place of Meetings. The Board of Directors may designate any
place, either within or without the State of Delaware as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors.
Section 4. Notice of Meeting. Notice of a meeting of stockholders
stating the place, day and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
not less than ten nor more than sixty days before the date of the meeting by or
at the direction of the President or the Secretary to each stockholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the stockholder
at the stockholder's address as it appears on the stock transfer books of the
Corporation, with postage thereon prepaid. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the notice of meeting. Any previously scheduled meeting of
the stockholders may be postponed, and (unless the Certificate of Incorporation
otherwise provides) any special meeting of the stockholders may be cancelled, by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such meeting of stockholders.
Section 5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
purpose, the Board of Directors of the Corporation shall fix in advance a date
as the
15
<PAGE>
record date for any such determination of stockholders, such date in any
case to be not less than ten days nor more than sixty days prior to the date on
which the particular action requiring such determination of stockholders is to
be taken. If no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
Section 6. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten days prior to such meeting, shall be kept on
file at the registered office of the Corporation and shall be subject to
inspection by any stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting. The original stock transfer book shall be prima facie evidence as
to who are the stockholders entitled to examine such list or transfer books or
to vote at any meeting of stockholders.
Section 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than a majority of the
outstanding shares are represented at a meeting, the Chairman or a majority of
the shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. The stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 8. Proxies; Voting. At all meetings of stockholders, a
stockholder may vote by proxy. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.
Section 9. Voting of Shares. In each meeting of stockholders except as
otherwise provided by statute or the Certificate of Incorporation, every holder
of record of stock entitled to vote shall be entitled to one vote in person or
by proxy for each share
16
<PAGE>
of such stock standing in such holder's name on the records of the Corporation.
At all meetings of stockholders for the election of directors a plurality of the
votes cast shall be sufficient to elect the directors. All other elections and
questions shall, unless otherwise provided by the Certificate of Incorporation,
these By-Laws, the rules or regulations of NASD or any stock exchange applicable
to Valmont, as otherwise provided by law or pursuant to any regulation
applicable to Valmont or its securities, be decided by the affirmative vote of
the holders of a majority of the shares of stock of Valmont which are present in
person or by proxy and entitled to vote thereon.
Section 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent or proxy as the
Bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by such person, either in person or by proxy, without a transfer of
such shares into such person's name. Shares standing in the name of a trustee
may be voted by such person, either in person or by proxy, but no trustee shall
be entitled to vote shares held without a transfer of such shares into such
trustee's name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into such receiver's name if
authority so to do be contained in an appropriate order of the court by which
such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until such shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time. Nothing herein shall be construed as limiting the right of
Valmont to vote stock, including but not limited to its own stock, held by it in
a fiduciary capacity.
Section 11. Notice of Stockholder Business. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting (a) by or at the direction of the Board of Directors or (b)
by any stockholder of Valmont who was a stockholder of record at the time of
giving of notice provided for in Section 4, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section
11. For business to be properly brought before an annual meeting by a
stockholder, a stockholder must have given timely notice thereof in writing to
the Secretary of Valmont and
17
<PAGE>
such business must otherwise be a proper matter for stockholder action. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of Valmont, not less than 90 nor more than 120
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event the date of the annual meeting is advanced
by more than 30 days, or delayed by more than 60 days, from such anniversary
date, notice by the stockholder to be timely must be so delivered or mailed and
received not earlier than the 120th day prior to such annual meeting and not
later than the close of business on the later of the 90th day prior to such
annual meeting or the tenth day following the date on which public announcement
of the date of such meeting is first made. In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period (or extend any time period) for the giving of a stockholder's
notice as described above. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a description of the business desired to be brought before the
annual meeting, the text of the proposal or business (including the text of any
resolutions proposed for consideration and in the event that such business
includes a proposal to amend the By-Laws of Valmont, the language of the
proposed amendment), and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on Valmont's books, of the
stockholder proposing such business, and the name and address of the beneficial
owner, if any, on whose behalf the proposal is made, (c) the class and number of
shares of Valmont which are owned of record and beneficially by the stockholder
and the beneficial owner, if any, (d) any material interest of the stockholder
and beneficial owner, if any, in such business, (e) a representation that the
stockholder is a holder of record of stock of Valmont entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to propose
such business and (f) a representation whether the stockholder or the beneficial
owner, if any, intends or is part of a group which intends to (i) deliver a
proxy statement and/or form of proxy to holders of at least the percentage of
Valmont's outstanding capital stock required to approve or adopt the proposal
and/or (ii) otherwise solicit proxies from stockholders in support of such
proposal. Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Section 11. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 11, and if the Chairman should so determine, shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Section 12. Notice of Director Nominees at an Annual Meeting. Only
persons who are nominated with the procedures set forth in these Bylaws shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of Valmont may be made at an annual meeting of stockholders
(a) by or
18
<PAGE>
at the direction of the Board of Directors or (b) by any stockholder of Valmont
who was a stockholder of record at the time of giving of notice provided for in
Section 4, who is entitled to vote at the annual meeting and who complies with
the notice procedures set forth in this Section 12. Such nominations, other than
those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of Valmont. To be timely,
a stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of Valmont not less than 90 nor more than 120 days
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event the date of the annual meeting is advanced by more
than 30 days, or delayed by more than 60 days, from such anniversary date,
notice by the stockholder to be timely must be so delivered or mailed and
received not earlier than the 120th day prior to such annual meeting and not
later than the close of business on the later of the 90th day prior to such
annual meeting or the tenth day following the date on which public announcement
of the date of such meeting is first made. In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period (or extend any time period) for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including such person's written
consent to be named as a nominee and to serving as the director if elected), and
(b) as to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination is made, (i) the name and address, as they appear on
Valmont's books, of such stockholder and the name and address of the beneficial
owner, if any, (ii) the class and number of shares of Valmont which are owned of
record and beneficially by such stockholder and the beneficial owner, if any,
(iii) a representation that the stockholder is a holder of record of stock of
Valmont entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to propose such nomination, and (iv) a representation
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends to (a) deliver a proxy statement and/or form of proxy to
holders of at least the percentage of Valmont's outstanding capital stock
required to elect the nominee and/or (b) otherwise solicit proxies from
stockholders in support of such nomination. At the request of the Board of
Directors any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of Valmont that information required to
be set forth in a stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a director of Valmont
unless nominated in accordance with the procedures set forth in the Bylaws. The
Chairman of the meeting shall, if the facts warrant, determine and declare to
the meeting that a nomination was not made in accordance with the procedures
prescribed by the Bylaws, and if
19
<PAGE>
the Chairman should so determine, shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 13. Notice of Director Nominees at a Special Meeting. Only such
business shall be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to Valmont's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
Valmont's notice of meeting (a) by or at the direction of the Board of Directors
or (b) provided that the Board of Directors has determined that directors shall
be elected at such meeting, by any stockholder of Valmont who is a stockholder
of record at the time of giving of notice provided for in Section 4, who shall
be entitled to vote at the special meeting and who complies with the notice
procedures set forth in Section 12. In the event Valmont calls a special meeting
of stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in Valmont's notice of
meeting, if the stockholder's notice required by Section 12 shall be delivered
to the Secretary at the principal executive offices of Valmont not earlier than
the close of business on the 120th day prior to such special meeting and not
later than the close of business on the later of the 90th day prior to such
special meeting or the 10th day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of an adjournment or postponement of a special meeting
commence a new time period (or extend any time period) for the giving of a
stockholder's notice as described above.
Section 14. Inspectors of Elections. The Board of Directors by
resolution shall appoint one or more inspectors, which inspector or inspectors
may include individuals who serve Valmont in other capacities, including,
without limitation, as officers, employees, agents or representatives, to act at
the meetings of stockholders and make a written report thereof. One or more
persons may be designated as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate has been appointed to act or is able
to act at a meeting of stockholders, the Chairman of the meeting shall appoint
one or more inspectors to act at the meeting. Each inspector, before discharging
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by law.
Section 15. Conduct of Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as
20
<PAGE>
adopted by the Board of Directors, the Chairman of any meeting of stockholders
shall have the right and authority to convene and to adjourn the meeting, to
prescribe such rules, regulations and procedures and to do all such acts, as in
the judgment of such Chairman, are appropriate for the proper conduct of the
meeting. Unless and to the extent determined by the Board of Directors or the
Chairman of the meeting, meetings of stockholders shall not be required to be
held in accordance with the rules of parliamentary procedure.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors. In addition to the powers and
authorities by these By-Laws expressly conferred upon them, the Board of
Directors may exercise all such powers of Valmont and do all such lawful acts
and things as are not by statute or by the Certificate of Incorporation or by
these By-Laws required to be exercised or done by the stockholders.
Section 2. Number, Tenure and Qualifications. The number of directors
of the Corporation shall be fixed by resolution of the Board of Directors, and
may be altered from time to time by a majority vote of the members of the Board
of Directors present at any regular or special meeting of the Board. The
directors shall be divided into three classes: Class I, Class II and Class III,
each such class, as nearly as possible, to have the same the number of
directors. At each annual election of directors by the stockholders of Valmont,
the directors chosen to succeed those whose terms are then expired shall be
identified as being of the same class as the directors they succeed and shall be
elected by the stockholders of Valmont for a term expiring at the third
succeeding annual election of directors, or thereafter when their respective
successors in each case are elected by the stockholders and qualify.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held on the same date as the annual meeting of stockholders.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Delaware, for the holding of additional regular
meetings.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President or a majority of the board
of directors. The person or persons authorized to call the special meetings of
the Board of Directors may fix any place, either within or without the State of
Delaware, as the place for holding any special meeting of the Board of Directors
called by them.
Section 5. Notice. Notice of any special meeting shall be given at
least two days in advance thereof. Notices of meetings of
21
<PAGE>
the Board of Directors may be given by mail or may (and, if three or fewer days
notice is given, shall) be given by telegram, telephone, personal delivery,
telecopier or other means of electronic transmission. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram such
notice shall be deemed to be delivered when transmitted. Any director may waive
notice of any meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. Quorum. A majority of the number of directors fixed in
accordance with Section 2 of this Article II shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at a meeting, a majority of the directors present
may adjourn the meeting from time to time without further notice.
Section 7. Manner of Acting. Except as otherwise required by applicable
law, the act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if a written consent thereto is signed by all members
of the board and such written consent is filed with the minutes of the
proceedings of the Board. A consent in lieu of meeting may be made either by one
consent signed by all the directors or by individual consents signed by each
director. The directors may also meet by means of conference telephone or
similar communications equipment as provided by Delaware law.
Section 8. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by the
affirmative vote of the majority of the remaining directors though less than a
quorum of the Board of Directors. Directors so chosen shall hold office for a
term expiring at the annual meeting of stockholders at which the term of office
of the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of authorized directors constituting the full Board of Directors shall shorten
the term of any incumbent director.
Section 9. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefore.
22
<PAGE>
Section 10. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless a
dissent shall be entered into the minutes of the meeting or unless such person
shall file a written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 11. Committees. The Board of Directors may in its discretion,
by resolution passed by a majority of the whole Board, designate from among its
members one or more committees which shall consist of two or more directors. The
Board may designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee. Except as otherwise required by applicable law, such committees
shall have and may exercise such powers as shall be conferred or authorized by
the resolution appointing them. A majority of any such committee may determine
its action and fix the time and place of its meetings unless the Board of
Directors shall otherwise provide. The Board shall have power at any time to
change the membership of any such committee to fill vacancies in it or to
dissolve it.
Section 12. Executive Committee. There may be an Executive Committee of
the Board of Directors consisting of directors chosen by the Board.
The Executive Committee shall have power to take any and all action
which the Board of Directors might itself have the legal power to take at any
time between meetings of the Board of Directors; provided, however, that such
Committee shall not have the power to take action on any of the following
matters, the exclusive power to deal with which is resolved to the Board of
Directors: filling of vacancies on the Board of Directors or Executive
Committee; fixing of compensation of officers; approval of any borrowings by the
Corporation which involve the issuance of securities having a maturity of longer
than one year from the date of issue or which involve the creation of any
mortgages, liens, pledges or other encumbrances on any substantial portion of
the corporate assets; approval of any amendment to the Certificate of
Incorporation or Bylaws; approval of or recommending to the stockholders any
sale, lease or exchange of all or substantially all of the Corporation's
property and assets; declaration of a dividend or authorization of an issuance
of stock; or approval of a dissolution or liquidation of the Corporation.
23
<PAGE>
ARTICLE III
OFFICERS
Section 1. Number. The officers of the corporation shall be a
President, one or more Vice Presidents (the number thereof to be determined by
the Board of Directors), a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
Any two or more offices may be held by the same person, except the offices of
President and Secretary.
Section 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at the first meeting of the Board of Directors held after each
annual meeting of the stockholders. If the election of officers shall not be
held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his death or until such
person shall resign or shall have been removed in the manner hereinafter
provided.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the Corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. Vacancies. A vacancy in an office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. The President shall, when present, preside at all
meetings of the stockholders and of the Board of Directors. The President may
sign, with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed; and in general
shall perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time.
24
<PAGE>
Section 6. Acting President; Vice Presidents. In the absence of the
President, or in the event of his death, inability or refusal to act, the Board
of Directors shall select the acting President, who shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may sign, with
the Secretary or an Assistant Secretary, certificates for shares of the
Corporation and shall perform such other duties as from time to time may be
assigned by the President or by the Board of Directors.
Section 7. The Secretary. The Secretary shall: (a) keep the minutes of
the stockholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized; (d) keep a register of the
post office address of each stockholder which shall be furnished to the
Secretary by such stockholder; (e) sign with the President, or a Vice President,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general charge
of the stock transfer books of the Corporation; and (g) in general perform all
duties incident to the office of Secretary and such other duties as from time to
time may be assigned by the President or by the Board of Directors.
Section 8. The Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. The
Treasurer shall: (a) have charge and custody of and be responsible for all funds
and securities of the Corporation; receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever, and deposit all such
moneys in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with provisions of Article V of
these Bylaws; and (b) in general perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
by the President or by the Board of Directors.
Section 9. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries, when authorized by the Board of Directors, may sign with
the President or a Vice President certificates for shares of the Corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall respectively, if required by the Board
of Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The Assistant
Secretaries and Assistant Treasurers, in general, shall perform such duties as
25
<PAGE>
shall be assigned to them by the Secretary or the Treasurer, respectively, or by
the President or the Board of Directors.
Section 10. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that such person is also a director
of the Corporation.
ARTICLE IV
INDEMNIFICATION
Section 1. Actions by Others. Valmont shall indemnify any person who
was or is a party to or is threatened to be made a party to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
Valmont) by reason of the fact that such person is or was a director, officer,
employee or agent of Valmont, or is or was serving at the request of Valmont as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of Valmont,
and, with respect to any criminal action or proceedings, had no reasonable cause
to believe the conduct was criminal. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of Valmont,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that the conduct was criminal.
Section 2. Actions by or in the Right of Valmont. Valmont shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
Valmont to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of Valmont, or is or was
serving at the request of Valmont as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of Valmont and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to Valmont unless
and only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that despite
the
26
<PAGE>
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
Section 3. Successful Defense. To the extent that a director, officer,
employee or agent of Valmont has been successful on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, in
defense of any action, suit or proceeding referred to in Sections 1 and 2 of
this Article, or in defense of any claims, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 4. Specific Authorization. Any indemnification under Sections 1
and 2 of this Article (unless ordered by a court) shall be made by Valmont only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
such person has met the applicable standard of conduct set forth in said
Sections 1 and 2. Such determination shall be made: (a) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding; or (b) if such quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (c) by the
stockholders.
Section 5. Advance of Expenses. Expenses incurred by an elected officer
or director in defending a civil or criminal action, suit or proceeding shall be
paid by Valmont in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
elected officer to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by Valmont as authorized in this
Article. Such expenses incurred by other officers, employees and agents may be
so paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
Section 6. Right of Indemnity not Exclusive. The indemnification and
advancement of expenses provided by or granted pursuant to the Certificate of
Incorporation or these Bylaws shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Section 7. Insurance. Valmont may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
Valmont, or is or was serving at the request of Valmont as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other
27
<PAGE>
enterprise against any liability asserted against such person and incurred
by such person in any such capacity, or arising out of the status as such,
whether or not Valmont would have the power to indemnify such person against
such liability under the provisions of this Article, Section 145 of the General
Corporation Law of the State of Delaware, or otherwise.
Section 8. Employee Benefit Plan. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of Valmont" shall include any service as a director, officer, employee or agent
of Valmont which imposes duties on, or involves services by such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of Valmont" as referred to in this
Article.
Section 9. Invalidity of any Provisions of this Article. The invalidity
or unenforceability of any provision of this Article shall not affect the
validity or enforceability of the remaining provisions of this Article.
Section 10. Continuation of Indemnification. The indemnification and
advancement of expenses, to the extent provided by or granted pursuant to this
Article, these Bylaws, or the Certificate of Incorporation shall continue as to
a person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such person.
All rights to indemnification provided by or granted pursuant to this Article,
these Bylaws, or the Certificate of Incorporation shall be deemed to be a
contract between Valmont and each director, officer, employee or agent of
Valmont who serves or served in such capacity at any time while this Article IV
is in effect. Any repeal or modification of this Article IV shall not in any way
diminish any rights or indemnification of such director, officer, employee or
agent, or the obligations of Valmont arising hereunder.
Section 11. Certain Claims. Notwithstanding Section 1 and Section 2 of
this Article IV, Valmont shall be required to indemnify a person described in
the first sentence of Section 1 or Section 2 of this Article IV in connection
with an action, suit or proceeding (or part thereof) commenced by such a person
only if the commencement of such proceeding (or part thereof) by such person was
authorized by the Board of Directors.
28
<PAGE>
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificates shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, destroyed or mutilated certificate,
a new one may be issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
29
<PAGE>
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be the owner thereof for all purposes.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall end on the last Saturday of
December in each year.
ARTICLE VIII
DIVIDENDS
The Board of Directors may, from time to time, declare and the
Corporation may pay dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Certificate of Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words, "Corporate Seal."
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to any stockholders or
directors of the Corporation under the provisions of these Bylaws or under the
provisions of the Certificate of Incorporation or under the provisions of the
General Corporation Law of the State of Delaware, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
30
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit 4(iii)
CREDIT AGREEMENT
by and among
VALMONT INDUSTRIES, INC.,
THE SUBSIDIARY BORROWERS PARTY HERETO,
THE LENDERS PARTY HERETO,
and
THE BANK OF NEW YORK,
AS ISSUING BANK, AS SWING LINE LENDER
and
AS ADMINISTRATIVE AGENT
with
BNY CAPITAL MARKETS, INC.,
AS ARRANGER
Dated as of October 7, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
31
<PAGE>
CREDIT AGREEMENT, dated as of October 7, 1997, by and among VALMONT
INDUSTRIES, INC., a Delaware corporation (the "PARENT BORROWER"), the direct and
indirect wholly-owned Subsidiaries of the Parent Borrower party hereto or which
from time to time become party hereto (each a "SUBSIDIARY BORROWER" and,
collectively, the "SUBSIDIARY BORROWERS"), the lenders party hereto (each a
"LENDER" and, collectively, the "LENDERS"), and THE BANK OF NEW YORK ("BNY"), as
issuing bank (in such capacity, the "ISSUING BANK"), as swing line lender (in
such capacity, the "SWING LINE LENDER"), and as administrative agent for the
Lenders, the Issuing Bank and the Swing Line Lender (in such capacity, the
"ADMINISTRATIVE AGENT").
1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1. DEFINITIONS
As used in this Agreement, terms defined in the preamble have
the meanings therein indicated, and the following terms have the following
meanings:
"ABR ADVANCES": the Revolving Credit Loans (or any portions
thereof), at such time as they (or such portions) are made and/or being
maintained at a rate of interest based upon the Alternate Base Rate.
"ACCOUNTANTS": Deloitte & Touche LLP (or any successor
thereto), or such other firm of certified public accountants of recognized
national standing selected by the Parent Borrower.
"ACCUMULATED FUNDING DEFICIENCY": as defined in Section 302 of
ERISA.
"ACQUISITION": with respect to any Person, the purchase or
other acquisition by such Person, by any means whatsoever (including through a
merger, dividend, or otherwise and whether in a single transaction or in a
series of related transactions), of (i) any Capital Stock of any other Person
if, immediately thereafter, such other Person would be either a Subsidiary of
such Person or otherwise under the control of such Person, (ii) any business,
going concern, or divisions or segment of any other Person, or (iii) any
Property of any other Person other than in the ordinary course of business,
PROVIDED, HOWEVER, that no acquisition of all or substantially all of the assets
of such other Person shall be deemed to be in the ordinary course of business.
"ACTIVE SUBSIDIARY BORROWER": at any time, any Subsidiary
Borrower other than an Inactive Subsidiary Borrower.
"ADVANCE": an ABR Advance, a Eurodollar Advance, or a Core
Currency Euro Advance, as the case may be.
"AFFECTED ADVANCE": as defined in Section 3.8.
32
<PAGE>
"AGENT PAYMENT OFFICE": (i) with respect to all amounts owing
under the Loan Documents (other than in respect of Alternate Currency Loans),
initially, the office, branch, affiliate, or correspondent bank of the
Administrative Agent designated as its "DOMESTIC PAYMENT OFFICE" in Exhibit M
and, thereafter, such other office, branch, affiliate, or correspondent bank
thereof as it may from time to time designate in writing as such to the Parent
Borrower, the Issuing Bank, the Swing Line Lender and each Lender, and (ii) with
respect to all amounts owing in respect of each Alternate Currency Loan,
initially, the office, branch, affiliate, or correspondent bank of the
Administrative Agent designated as its payment office for the applicable
Alternate Currency in Exhibit M and, thereafter, such other office, branch,
affiliate, or correspondent bank thereof as it may from time to time designate
in writing as such to the Parent Borrower, the Issuing Bank, the Swing Line
Lender and each Lender.
"AFFILIATE": as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, control of a Person
shall mean the power, direct or indirect, to direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.
"AGGREGATE CREDIT EXPOSURE": at any time, the sum at such time
of (i) the outstanding principal amount of the Revolving Credit Loans and Bid
Loans of all Lenders (determined, in the case of each Alternate Currency Loan,
on the basis of the Dollar Equivalent thereof), PLUS (ii) the outstanding
principal amount of the Swing Line Loans, PLUS (iii) an amount equal to the
Letter of Credit Exposure of all Lenders.
"AGGREGATE REVOLVING CREDIT COMMITMENT AMOUNT": at any
time, the sum at such time of the Revolving Credit Commitment Amounts of all
Lenders.
"AGREEMENT": this Credit Agreement, as the same may be
amended, supplemented, or otherwise modified from time to time.
"ALTERNATE BASE RATE": on any date, a rate of interest per
annum equal to the higher of (i) the Federal Funds Rate in effect on such date
plus 1/2 of 1% and (ii) the BNY Rate in effect on such date.
"ALTERNATE CURRENCY": any Currency (other than Dollars).
"ALTERNATE CURRENCY BID LOAN": each Bid Loan denominated in an
Alternate Currency.
"ALTERNATE CURRENCY EQUIVALENT": on any date of determination
thereof, the amount, as determined by the Administrative Agent, of the relevant
Alternate Currency which could be purchased with the amount of Dollars involved
in such computation at the spot rate at which such Alternate Currency may be
exchanged into Dollars as set forth on such date on Dow Jones Telerate pages
262, 264, 265, 266 or 9993 (or any successor
33
<PAGE>
pages) or, if such rate does not appear on such pages, at the arithmetic mean of
the respective spot exchange rates therefor notified to the Administrative Agent
by BNY as of 11:00 a.m. (London time) on such date for delivery, (i) in the case
of an exchange of Canadian Dollars into Dollars, one Core Currency Business Day
later, and (ii) in all other cases, two Core Currency Business Days later.
"ALTERNATE CURRENCY LOAN": an Alternate Currency Revolving
Credit Loan or an Alternate Currency Bid Loan, as the case may be.
"ALTERNATE CURRENCY REVOLVING CREDIT LOAN": each Revolving
Credit Loan denominated in Alternate Currency.
"APPLICABLE MARGIN": (i) Subject to clause (ii) of this
definition, (a) with respect to the Eurodollar Advances, Core Currency Euro
Advances, and the Standby Letter of Credit Commissions, at all times during
which the applicable Pricing Level set forth below is in effect, the percentage
set forth below under the heading "Applicable Eurodollar, Core Currency Euro and
Standby LC Margin" and adjacent to such Pricing Level, and (b) with respect to
the Facility Fee and Trade Letter of Credit Commissions, at all times during
which the applicable Pricing Level set forth below is in effect, the percentage
set forth below under the heading "Applicable Fee and Trade LC Margin" and
adjacent to such Pricing Level:
<TABLE>
<CAPTION>
Applicable
Eurodollar, Applicable
Core Currency Fee and
Euro and Trade LC
PRICING LEVEL STANDBY LC MARGIN MARGIN
------------- ----------------- ------
<S> <C> <C>
Pricing Level I 0.175% 0.075%
Pricing Level II 0.200% 0.100%
Pricing Level III 0.275% 0.100%
</TABLE>
(ii) Changes in the Applicable Margin resulting from a change
in a Pricing Level shall be based upon the Compliance Certificate most recently
delivered pursuant to Section 7.1(a) and shall become effective on the date such
Compliance Certificate is delivered to the Administrative Agent and the Lenders.
Notwithstanding anything to the contrary contained in this definition, (a) if,
at any time and from time to time, the Parent Borrower shall be in Default of
its obligations under Section 7.1(a), Pricing Level III shall apply until such
Default is cured, and (b) during the period commencing on the Effective Date and
ending on the date of delivery thereafter of the first Compliance Certificate
pursuant to Section 7.1(a), Pricing Level I shall apply.
"APPROVED BANK": any bank whose (or whose parent company's)
unsecured non-credit supported short-term commercial paper rating from (i)
Standard &
34
<PAGE>
Poor's is at least A-1, or the equivalent thereof, or (ii) Moody's is at least
P-1, or the equivalent thereof.
"ASSIGNMENT": as defined in Section 11.6(b).
"ASSIGNMENT AND ACCEPTANCE AGREEMENT": an assignment and
acceptance agreement executed by an assignor and an assignee, substantially in
the form of Exhibit H.
"AUSTRALIAN DOLLARS": freely transferable lawful money of
Australia.
"BID": an offer by a Lender to make a Bid Loan, substantially
in the form of Exhibit K.
"BID ACCEPT/REJECT LETTER": a notification given by a Borrower
or, if such Borrower is a Subsidiary Borrower, the Parent Borrower, on behalf of
such Borrower, pursuant to Section 2.4(d), substantially in the form of Exhibit
L.
"BID INTEREST PERIOD": as to any Bid Loan, the period
commencing on the Borrowing Date with respect to such Bid Loan and ending on the
date requested in the Bid Request with respect to such Bid Loan, which date
shall be neither earlier than seven days, nor later than 180 days, after such
Borrowing Date; PROVIDED, HOWEVER, that (i) if any Bid Interest Period would
otherwise end on a day which is not a Business Day, such Bid Interest Period
shall be extended to the next succeeding Business Day, unless such next
succeeding Business Day would be a date on or after the Scheduled Revolving
Credit Commitment Termination Date, in which event such Bid Interest Period
shall end on the next preceding Business Day, and (ii) no Bid Interest Period
shall end after the Scheduled Revolving Credit Commitment Termination Date.
Interest shall accrue from and including the first day of a Bid Interest Period
to, but excluding, the last day of such Bid Interest Period.
"BID LOAN": each loan made pursuant to Section 2.4.
"BID RATE": as to any Bid made by a Lender pursuant to Section
2.4(b), the fixed rate of interest offered by such Lender with respect thereto
as set forth in such Bid.
"BID REQUEST": a request by a Borrower or, if such Borrower
is a Subsidiary Borrower, the Parent Borrower, on behalf of such Borrower, for
Bids, substantially in the form of Exhibit I.
"BNY RATE": a rate of interest per annum equal to the rate of
interest publicly announced in New York City by BNY from time to time as its
prime commercial lending rate, such rate to be adjusted automatically (without
notice) on the effective date of any change in such publicly announced rate.
35
<PAGE>
"BORROWER ADDENDUM": an Addendum, duly completed and executed
by each of the Parent Borrower and the relevant Subsidiary thereof,
substantially in the form of Exhibit B-1.
"BORROWERS": collectively, the Parent Borrower and the
Subsidiary Borrowers.
"BORROWING DATE": (i) any Business Day on which (a) the
Lenders make ABR Advances, (b) a Lender makes a Bid Loan, (c) the Swing Line
Lender makes a Swing Line Loan, or (d) the Issuing Bank issues a Letter of
Credit, as the case may be, or (ii) any Core Currency Business Day on which the
Lenders make Eurodollar Advances or Core Currency Euro Advances, as the case may
be.
"BORROWING REQUEST": a request for Revolving Credit Loans
or a Swing Line Loan, substantially in the form of Exhibit C-1.
"BRAZILIAN REALS": freely transferable lawful money of Brazil.
"BUSINESS DAY": any day except Saturday, Sunday or a day which
in New York City is a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close.
"CANADIAN DOLLARS": freely transferable lawful money of
Canada.
"CAPITAL LEASE": a lease the obligations in respect of which
are required to be capitalized by the lessee thereunder for financial reporting
purposes in accordance with GAAP.
"CAPITAL STOCK": as to any Person, all shares, interests,
partnership interests, limited liability company interests, participations and
other rights in, or other equivalents (however designated) of, such Person's
equity (however designated), and any rights, warrants or options exchangeable
for, or convertible into, such shares, interests, participations, rights or
other equivalents.
"CASH EQUIVALENTS": (i) securities issued or directly and
fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in full support thereof), in each case having a maturity of
not more than six months from the date of acquisition thereof, (ii) Dollar
denominated time deposits, certificates of deposit and bankers acceptances of
any Lender or any Approved Bank, in each case having a maturity of not more than
six months from the date of acquisition thereof, (iii) commercial paper (a)
issued by any Approved Bank or the parent company of any Approved Bank, (b)
issued or directly and fully guaranteed or insured by any industrial or
financial company with an unsecured non-credit supported short-term commercial
paper rating of at least A-1, or the equivalent thereof, by Standard & Poor's or
at least P-1, or the equivalent thereof, by Moody's, or
36
<PAGE>
(c) directly and fully guaranteed or insured by any industrial or financial
company with a long term unsecured non-credit supported senior debt rating of at
least A or A-2, or the equivalent thereof, by Standard & Poor's or Moody's, as
the case may be, in each case having a maturity of not more than six months from
the date of acquisition thereof, (iv) marketable direct obligations issued by
any State of the United States or any political subdivision or public
instrumentality of any such State, in each case having a maturity of not more
than six months from the date of acquisition thereof and, at the time of such
acquisition, having one of the two highest ratings obtainable from either
Standard & Poor's or Moody's, and (v) investments in money market funds
substantially all the assets of which are comprised of securities of the types
described in clauses (i) through (iv) of this definition.
"CHANGE OF CONTROL": one or both of the following events:
(a) any person or group (other than any one or more
permitted investors) shall have become the beneficial owner of voting
shares entitled to exercise more than 30% of the total power of all
outstanding voting shares (including any voting shares which are not then
outstanding of which such person or group is deemed the beneficial owner);
and
(b) a change in the composition of the Managing Person
of the Parent Borrower shall have occurred in which the individuals who
constituted the Managing Person of the Parent Borrower at the beginning of
the two year period immediately preceding such change (together with any
other director whose election by the Managing Person of the Parent Borrower
or whose nomination for election by the shareholders of the Parent Borrower
was approved by a vote of at least a majority of the members of such
Managing Person then in office who either were members of such Managing
Person at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of such Managing Person then in office.
For purposes of this definition, (i) the terms "PERSON" and
"GROUP" shall have the respective meanings ascribed thereto in Sections 13(d)
and 14(d)(2) of the Exchange Act, (ii) the term "BENEFICIAL OWNER" shall have
the meaning ascribed thereto in Rule 13d-3 under the Exchange Act, (iii) the
term "PERMITTED INVESTORS" shall mean any one or more of the following: (A)
Robert B. Daugherty, (B) any of his immediate family members, (C) any of his
heirs or beneficiaries, (D) any tax-exempt entity established by him, (E) any
key employee of the Parent Borrower which shall have acquired voting shares from
him, and (F) any employee stock ownership plan sponsored by or otherwise
established by the Parent Borrower, and (iv) the term "VOTING SHARES" shall mean
outstanding shares of any class or classes (however designated) of Capital Stock
of the Parent Borrower entitled to vote generally in the election of members of
the Managing Person thereof.
37
<PAGE>
"CODE": the Internal Revenue Code of 1986, as the same may be
amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"COMMITMENT PERCENTAGE": with respect to any Lender as of any
date, the percentage as of such date equal to such Lender's Revolving Credit
Commitment Amount divided by the Aggregate Revolving Credit Commitment Amount
(or, if no Revolving Credit Commitments then exist, the percentage equal to such
Lender's Revolving Credit Commitment Amount on the last day upon which Revolving
Credit Commitments did exist divided by the Aggregate Revolving Credit
Commitment Amount as in effect on such day).
"COMPLIANCE CERTIFICATE": a certificate substantially in the
form of Exhibit E.
"CONSOLIDATED": the Parent Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED EBITDA": for any period, net income of the
Parent Borrower and its Subsidiaries, determined on a Consolidated basis in
accordance with GAAP, for such period, PLUS the sum of, without duplication,
each of the following with respect to the Parent Borrower and its Subsidiaries,
to the extent utilized in determining such net income: (i) all interest expense,
(ii) provision for income taxes, and (iii) depreciation and amortization,
PROVIDED, HOWEVER, that, for purposes of this definition, the 1996 pre-tax asset
valuation charge in the amount of $15,800,000 referred to in the Parent
Borrower's Form 10K for the fiscal year ending December 28, 1996 shall be
excluded to the extent utilized in determining such net income.
"CONSOLIDATED DEBT SERVICE": for any period, the sum of (i)
interest expense for such period of the Parent Borrower and its Subsidiaries,
determined on a Consolidated basis in accordance with GAAP, and (ii) all
repayments of Indebtedness (including Indebtedness under the Loan Documents) of
the Parent Borrower and its Subsidiaries, determined on a Consolidated basis in
accordance with GAAP, which were required to be made during such period.
"CONSOLIDATED FIXED CHARGES": for any period, the sum of,
without duplication, (i) Consolidated Debt Service for such period, (ii) all
income taxes payable during such period by the Parent Borrower and its
Subsidiaries, determined on a Consolidated basis in accordance with GAAP, and
(iii) all Restricted Payments made pursuant to Section 8.7(ii) in cash during
such period by the Parent Borrower and its Subsidiaries, determined on a
Consolidated basis in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH": as of any date, the total
stockholders' equity of the Parent Borrower and its Subsidiaries, less
intangible assets, all determined on a Consolidated basis in accordance with
GAAP, as set forth in, (i) during the period
38
<PAGE>
commencing on the Effective Date and ending on the date of delivery thereafter
of the first annual audited financial statements pursuant to Section 7.1(b), the
Parent Borrower's December 28, 1996 audited Consolidated financial statements
constituting a part of the Financial Statements, and (ii) at all other times,
the most recent annual audited Consolidated financial statements delivered
pursuant to Section 7.1(b).
"CONTINGENT OBLIGATION": as to any Person ( a "SECONDARY
OBLIGOR"), any obligation of such secondary obligor (i) guaranteeing or in
effect guaranteeing any return on any investment made by another Person, or (ii)
guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend or
other obligation (a "PRIMARY OBLIGATION") of any other Person (a "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including any
obligation of such secondary obligor, whether contingent, (a) to purchase any
primary obligation or any Property constituting direct or indirect security
therefor, (b) to advance or supply funds (A) for the purchase or payment of any
primary obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of a primary
obligor, (c) to purchase Property, securities or services primarily for the
purpose of assuring the beneficiary of any primary obligation of the ability of
a primary obligor to make payment of a primary obligation, (d) otherwise to
assure or hold harmless the beneficiary of a primary obligation against loss in
respect thereof, and (e) in respect of the liabilities of any partnership in
which a secondary obligor is a general partner, except to the extent that such
liabilities of such partnership are nonrecourse to such secondary obligor and
its separate Property, PROVIDED, HOWEVER, that the term "CONTINGENT OBLIGATION"
shall not include the indorsement of instruments for deposit or collection in
the ordinary course of business. The amount of any Contingent Obligation of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of a primary obligation in respect of which such Contingent Obligation is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"CONTROL PERSON": as defined in Section 3.5.
"CONVERSION DATE": any date on which (i) a Eurodollar Advance
is converted to an ABR Advance or a new Eurodollar Advance, as the case may be,
(ii) an ABR Advance is converted to a Eurodollar Advance or (iii) a Core
Currency Euro Advance is converted to a new Core Currency Euro Advance, as the
case may be.
"CORE CURRENCY": any Currency other than a Non-Core Currency.
"CORE CURRENCY BUSINESS DAY": with respect to any Currency,
any Business Day which is a day on which dealings in eurocurrencies and exchange
between banks may be carried on in London, England and which is not a legal
holiday or a day on which banking institutions are authorized or required by law
or other government action to close in the national jurisdiction in which the
Agent Payment Office with respect to
39
<PAGE>
such Currency is located or, if there is no such Agent Payment Office, the
national jurisdiction of which such Currency is the freely transferable lawful
money.
"CORE CURRENCY EURO ADVANCES": the Revolving Credit Loans (or
any portions thereof) at such time as they (or such portions) are made and/or
being maintained in a Core Currency (other than Dollars) at a rate of interest
based upon the applicable Core Currency Euro Rate.
"CORE CURRENCY EURO RATE": with respect to each Core Currency
Euro Advance, a rate of interest per annum, as determined by the Administrative
Agent, obtained by dividing (and then rounding to the nearest 1/16 of 1% or, if
there is no nearest 1/16 of 1%, then to the next higher 1/16 of 1%):
(a) (i) the rate per annum for deposits in the applicable
Core Currency having a maturity most nearly comparable to the Euro Interest
Period in respect of such Core Currency Euro Advance which appears on page
3740 or 3750, or any other applicable page with respect to such Core
Currency, of the Dow Jones Telerate Screen (or any successor page) as of
11:00 a.m. London time on the date which is two Core Currency Business Days
prior to the first day of such Euro Interest Period, (ii) if such rate does
not appear on such page of the Dow Jones Telerate Screen (or any successor
page), the rate, as reported by BNY to the Administrative Agent, quoted by
BNY at approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date which is two Core Currency Business Days prior to
the first day of such Euro Interest Period to leading banks in the
interbank eurocurrency market as the rate at which BNY is offering deposits
in such Core Currency in an amount approximately equal to BNY's Commitment
Percentage of such Core Currency Euro Advance and having a period to
maturity approximately equal to such Euro Interest Period, or (iii) to the
extent required by Section 3.8, the rate, as reported by BNY to the
Administrative Agent, determined by BNY to be reflective of the all-in cost
of funds to BNY of funding such Core Currency Euro Advance in an amount
approximately equal to its Commitment Percentage of such Core Currency Euro
Advance and having a period to maturity approximately equal to such Euro
Interest Period, by
(b) a number equal to 1.00 MINUS the aggregate of the
then stated maximum rates during such Euro Interest Period of all reserve
requirements (including marginal, emergency, supplemental and special
reserves), expressed as a decimal, established by any Governmental
Authority, including those established by the Board of Governors of the
Federal Reserve System and any other banking authority to which BNY and
other major United States money center banks are subject in respect of
eurocurrency funding (currently referred to as "EUROCURRENCY LIABILITIES"
in Regulation D), without benefit of credits for
40
<PAGE>
proration, exceptions or offsets which may be available from time to time to
BNY.
"CREDIT PARTY": each Borrower and each other party (other
than the Administrative Agent, the Issuing Bank, the Swing Line Lender, and the
Lenders) to a Loan Document.
"CURRENCIES": collectively, Dollars, Dutch Guilders, French
Francs, German Marks, and the Non-Core Currencies.
"CURRENCY ADDENDUM": an Addendum, duly completed and
executed by the Parent Borrower, substantially in the form of Exhibit B-2.
"DEFAULT": any event or condition which constitutes an Event
of Default or which, with the giving of notice, the lapse of time, or any other
condition, would, unless cured or waived, become an Event of Default.
"DISPOSITION": with respect to any Person, any sale,
assignment, transfer or other disposition by such Person, by any means, of (i)
the Capital Stock of any other Person, (ii) any business, going concern or
division or segment thereof, or (iii) any other Property of such Person other
than in the ordinary course of business, PROVIDED, HOWEVER, that no such sale,
assignment, transfer or other disposition of Property (other than inventory,
except to the extent subject to a bulk sale) shall be deemed to be in the
ordinary course of business if it is the sale, assignment, transfer or
disposition of (a) all or substantially all of the Property of such Person, or
(b) any Operating Entity.
"DOLLAR BID LOAN": each Bid Loan denominated in Dollars.
"DOLLAR EQUIVALENT": on any date of determination thereof, the
amount, as determined by the Administrative Agent, of Dollars which could be
purchased with the amount of the relevant Alternate Currency involved in such
computation at the spot rate at which Dollars may be exchanged into such
Alternate Currency as set forth on such date on Dow Jones Telerate pages 262,
264, 265, 266 or 9993 (or any successor pages) or, if such rate does not appear
on such pages, at the spot exchange rate therefor notified to the Administrative
Agent by BNY as of 11:00 a.m. (London time) on such date for delivery, (i) in
the case of an exchange of Dollars into Canadian Dollars, one Core Currency
Business Day later, and (ii) in all other cases, two Core Currency Business Days
later.
"DOLLAR REVOLVING CREDIT LOAN": as defined in Section
2.1(b)(i).
"DOLLARS" and "$": lawful currency of the United States.
41
<PAGE>
"DOMESTIC SUBSIDIARY": any direct or indirect wholly-owned
Subsidiary of the Parent Borrower which is organized under the laws of the
United States or any State thereof.
"DUTCH BORROWER": any Borrower which is organized under the
laws of, and has its principal office in, the Netherlands.
"DUTCH GUILDERS": freely transferable lawful money of the
Netherlands.
"EFFECTIVE DATE": October 7, 1997.
"ELIGIBLE ASSIGNEE": (i) at all times upon the occurrence and
during the continuance of any Default, any commercial bank, trust company,
banking association, insurance company, financial institution, pension fund,
mutual fund or other similar fund, and (ii) at all other times, any commercial
bank, trust company or banking association having undivided capital surplus and
retained earnings exceeding $100,000,000, PROVIDED, HOWEVER, that, for purposes
of this definition, "Eligible Assignee" shall not include any Lender or any
subsidiary or affiliate thereof.
"EMPLOYEE BENEFIT PLAN": an employee benefit plan within the
meaning of Section 3(3) of ERISA maintained, sponsored or contributed to by the
Parent Borrower, any of its Subsidiaries or any ERISA Affiliate.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations issued thereunder,
as from time to time in effect.
"ERISA AFFILIATE": when used with respect to an Employee
Benefit Plan, ERISA, the PBGC or a provision of the Code pertaining to employee
benefit plans, any Person which is a member of any group of organizations within
the meaning of Sections 414(b) or (c) of the Code (or, solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, Sections 414(m) or (o) of the Code) of which the Parent Borrower or
any of its Subsidiaries is a member.
"EURO INTEREST PERIOD": with respect to any Eurodollar Advance
or Core Currency Euro Advance, as the case may be, requested by any Borrower or,
if such Borrower is a Subsidiary Borrower, the Parent Borrower, on behalf of
such Borrower, the period commencing on the Borrowing Date or Conversion Date,
as the case may be, with respect to such Advance and ending one, two, three or
six months thereafter, as selected by such Borrower or, if such Borrower is a
Subsidiary Borrower, the Parent Borrower, on behalf of such Borrower, in the
applicable Borrowing Request or Notice of Conversion, as the case may be,
therefor, PROVIDED, HOWEVER, that (i) if any Euro Interest Period would
otherwise end on a day which is not a Core Currency Business Day, such Euro
Interest Period shall be extended to the next succeeding Core Currency Business
Day unless (a)
42
<PAGE>
such next succeeding Core Currency Business Day would be a date on or after the
Scheduled Revolving Credit Commitment Termination Date, in which event such Euro
Interest Period shall end on the next preceding Core Currency Business Day, or
(b) the result of such extension would be to carry such Euro Interest Period
into another calendar month, in which event such Euro Interest Period shall end
on the immediately preceding Core Currency Business Day, (ii) any Euro Interest
Period that begins on the last Core Currency 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 Euro Interest Period) shall end on the last Core
Currency Business Day of a calendar month, and (iii) no Euro Interest Period
shall end after the Scheduled Revolving Credit Commitment Termination Date.
Interest shall accrue from and including the first day of a Euro Interest Period
to, but excluding, the last day of such Euro Interest Period.
"EURODOLLAR ADVANCES": the Revolving Credit Loans (or any
portions thereof), at such time as they (or such portions) are made and/or being
maintained at a rate of interest based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each Eurodollar Advance, a
rate of interest per annum, as determined by the Administrative Agent, obtained
by dividing (and then rounding to the nearest 1/16 of 1% or, if there is no
nearest 1/16 of 1%, then to the next higher 1/16 of 1%):
(a) (i) the rate per annum for deposits in Dollars having a
maturity most nearly comparable to the Euro Interest Period in respect
of such Eurodollar Advance which appears on page 3750 of the Dow Jones
Telerate Screen (or any successor page) as of 11:00 a.m. London time on
the date that is two Core Currency Business Days prior to the first day
of such Euro Interest Period, or (ii) if such rate does not appear on
page 3750 of the Dow Jones Telerate Screen (or any successor page), the
rate, as reported by BNY to the Administrative Agent, quoted by BNY at
approximately 11:00 a.m. London time (or as soon thereafter as
practicable) on the date which is two Core Currency Business Days prior
to the first day of such Euro Interest Period to leading banks in the
interbank eurocurrency market as the rate at which BNY is offering
Dollar deposits in an amount approximately equal to BNY's Commitment
Percentage of such Eurodollar Advance and having a period to maturity
approximately equal to such Euro Interest Period, by
(b) a number equal to 1.00 MINUS the aggregate of the then
stated maximum rates during such Euro Interest Period of all reserve
requirements (including marginal, emergency, supplemental and special
reserves), expressed as a decimal, established by the Board of
Governors of the Federal Reserve System and any other banking authority
to which BNY and other major United States money center banks are
subject in respect of eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D), without benefit of
43
<PAGE>
credits for proration, exceptions or offsets which may be available
from time to time to BNY.
"EVENT OF DEFAULT": as defined in Section 9.1.
"EXCHANGE ACT": the Securities Exchange Act of 1934, as
amended.
"FACILITY FEE": as defined in Section 3.2(a).
"FEDERAL FUNDS RATE": for any day, a rate per annum (expressed
as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%)
equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that, (i) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if
such rate is not so published for any day, the Federal Funds Rate for such day
shall be the average of the quotations for such day on such transactions
received by the Administrative Agent.
"FEES": as defined in Section 2.11.
"FINANCIAL OFFICER": as to any Person, the chief financial
officer of such Person, or such other officer as shall be satisfactory to the
Administrative Agent.
"FINANCIAL STATEMENTS": as defined in Section 4.13.
"FIXED CHARGE COVERAGE RATIO": as of any date, the ratio of
(i) Consolidated EBITDA to (ii) Consolidated Fixed Charges, in each case for the
four fiscal quarter period ending on such date or, if such date is not the last
day of a fiscal quarter, the immediately preceding four fiscal quarter period.
"FIXED RATE LOAN": any Eurodollar Advance, Core Currency Euro
Advance, Bid Loan or Swing Line Loan, as the case may be.
"FRENCH BORROWER": any Borrower which is organized under the
laws of, and has its principal office in, France.
"FRENCH FRANCS": freely transferable lawful money of France.
"GAAP": generally accepted accounting principles as in effect
from time to time in the United States.
"GERMAN BORROWER": any Borrower which is organized under the
laws of, and has its principal office in, Germany.
44
<PAGE>
"GERMAN MARKS": freely transferable lawful money of Germany.
"GOVERNMENTAL AUTHORITY": any foreign, federal, state,
municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof, or any court or arbitrator.
"GUARANTOR": as defined in the Subsidiary Guaranty.
"INACTIVE SUBSIDIARY BORROWER": at any time, any Subsidiary
Borrower which has no Subsidiary Borrower Obligations.
"INDEBTEDNESS": as to any Person, at a particular time, all
items which constitute, without duplication, (i) indebtedness for borrowed
money, (ii) indebtedness in respect of the deferred purchase price of Property
(other than trade payables incurred in the ordinary course of business), (iii)
indebtedness evidenced by notes, bonds, debentures or similar instruments, (iv)
obligations with respect to any conditional sale or title retention agreement,
(v) indebtedness arising under acceptance facilities and the amount available to
be drawn under all letters of credit issued for the account of such Person
(other than letters of credit issued in support of trade payables incurred in
the ordinary course of business) and, without duplication, all drafts drawn
thereunder to the extent such Person shall not have reimbursed the issuer in
respect of the issuer's payment thereof, (vi) all liabilities secured by any
Lien on any Property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof (other than
carriers', warehousemen's, mechanics', repairmen's or other like non-consensual
statutory Liens arising in the ordinary course of business), (vii) obligations
under Capital Leases, and (viii) all Contingent Obligations of such Person in
respect of any of the foregoing.
"INDEMNIFIED LIABILITIES": as defined in Section 11.5.
"INDEMNIFIED PERSON": as defined in Section 11.7.
"INDEMNIFIED TAX": as to any Person, any Tax, except (i) a Tax
on the Income imposed on such Person and (ii) any interest, fees or penalties
for late payment imposed on such Person, in each case to the extent not
attributable to the failure of the Parent Borrower or any of its Subsidiaries to
obtain any necessary approvals or consents of, or file or cause to be filed any
reports, applications, documents, instruments or information required to be
filed pursuant to any applicable law, rule, regulation or request of, any
Governmental Authority.
"INDEMNIFIED TAX PERSON": the Administrative Agent, the
Issuing Bank, the Swing Line Lender, or any Lender, as the case may be.
"INTEREST PAYMENT DATE": (i) as to any ABR Advance, the last
day of each March, June, September and December commencing on the first of such
days to occur
45
<PAGE>
after such ABR Advance is made or any Eurodollar Advance is converted to an ABR
Advance, (ii) as to any Swing Line Loan, the date on which the outstanding
principal amount of such Swing Line Loan shall become due and payable in
accordance with Section 2.2, (iii) as to any Eurodollar Advance or Core Currency
Euro Advance, as the case may be, as to which the applicable Borrower has
selected a Euro Interest Period of one, two or three months, or any Bid Loan in
respect of which the Bid Interest Period applicable thereto is less than or
equal to 90 days, the last day of such Euro Interest Period or such Bid Interest
Period, as the case may be, (iv) as to any Eurodollar Advance or Core Currency
Euro Advance, as the case may be, as to which the applicable Borrower has
selected a Euro Interest Period of six months, or any Bid Loan in respect of
which the Bid Interest Period applicable thereto is greater than 90 days, the
last day of each three month or 90 day, as the case may be, interval occurring
during such Euro Interest Period or such Bid Interest Period, as the case may
be, and the last day of such Euro Interest Period or such Bid Interest Period,
as the case may be, and (v) as to any all Advances and all Bid Loans, the
Revolving Credit Maturity Date, and (vi) as to all Swing Line Loans, the Swing
Line Maturity Date.
"INVESTMENTS": as defined in Section 8.6.
"INVITATION TO BID": an invitation to make Bids in the form of
Exhibit J.
"JUDGMENT CURRENCY": as defined in Section 11.14.
"JUDGMENT CURRENCY CONVERSION DATE": as defined in Section
11.14.
"LETTER OF CREDIT": as defined in Section 2.8.
"LETTER OF CREDIT COMMISSIONS": as defined in Section 3.2(b).
"LETTER OF CREDIT COMMITMENT": the commitment of the Issuing
Bank to issue Letters of Credit having an aggregate outstanding face amount up
to the Letter of Credit Commitment Amount, and the commitment of the Lenders to
participate in the Letter of Credit Exposure as set forth in Section 2.10.
"LETTER OF CREDIT COMMITMENT AMOUNT": $30,000,000.
"LETTER OF CREDIT EXPOSURE": as of any date and in respect of
any Lender, an amount equal to (i) the sum as of such date, without duplication,
of (a) the aggregate undrawn face amount of all outstanding Letters of Credit,
(b) the aggregate amount of unpaid drafts drawn on all Letters of Credit, and
(c) the aggregate unpaid Reimbursement Obligations (after giving effect to any
Revolving Credit Loans made on such date to pay any such Reimbursement
Obligations), MULTIPLIED BY (ii) such Lender's Commitment Percentage.
"LETTER OF CREDIT REQUEST": a request in the form of Exhibit
C-2.
46
<PAGE>
"LEVERAGE RATIO": as of any date, the ratio of (i) the
aggregate Indebtedness as of such date of the Parent Borrower and its
Subsidiaries, determined on a Consolidated basis in accordance with GAAP, to
(ii) Consolidated EBITDA for the four fiscal quarter period ending on such date
or, if such date is not the last day of a fiscal quarter, for the immediately
preceding four fiscal quarter period.
"LIEN": any mortgage, pledge, hypothecation, assignment,
deposit or preferential arrangement, encumbrance, lien (statutory or other), or
other security agreement or security interest of any kind or nature whatsoever,
including any conditional sale or other title retention agreement and any
capital or financing lease having substantially the same economic effect as any
of the foregoing.
"LOAN": a Revolving Credit Loan, Bid Loan, or Swing Line Loan,
as the case may be.
"LOAN DOCUMENTS": collectively, this Agreement, the Subsidiary
Guaranty, the Reimbursement Agreements, and all agreements, instruments and
other documents executed or delivered in connection with any of the foregoing,
including any promissory notes executed and delivered pursuant to Section 2.13,
in each case as amended, supplemented or otherwise modified from time to time.
"LOANS": the Revolving Credit Loans, the Bid Loans and/or the
Swing Line Loans, as the case may be.
"MANAGING PERSON": with respect to any Person that is (i) a
corporation, its board of directors, (ii) a limited liability company, its board
of control or managing member or members, (iii) a limited partnership, its
general partner, (iv) a general partnership or a limited liability partnership,
its managing partner or executive committee, or (v) any other Person, the
managing body thereof or other Person analogous to the foregoing.
"MARGIN STOCK": any "margin stock", as defined in Regulation U
of the Board of Governors of the Federal Reserve System, as amended,
supplemented or otherwise modified from time to time.
"MATERIAL ADVERSE CHANGE": a material adverse change in (i)
the condition (financial or otherwise), operations, business or Property of the
Parent Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the
Parent Borrower or any of its Subsidiaries to perform its obligations under any
Loan Document, or (iii) the ability of the Administrative Agent, the Issuing
Bank, the Swing Line Lender or any Lender to enforce any Loan Document.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (i)
the condition (financial or otherwise), operations, business or Property of the
Parent Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the
Parent Borrower or any of its
47
<PAGE>
Subsidiaries to perform its obligations under any Loan Document, or (iii) the
ability of the Administrative Agent, the Issuing Bank, the Swing Line Lender or
any Lender to enforce any Loan Document.
"MATERIAL SUBSIDIARY": at any time, each Domestic Subsidiary
which has at such time assets or net sales greater than or equal to 5% of the
aggregate assets or net sales of the Parent Borrower and its Subsidiaries,
determined on a Consolidated basis in accordance with GAAP.
"MOODY'S": Moody's Investors Service, Inc., or any successor
thereto.
"MULTIEMPLOYER PLAN": a Pension Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"NEGOTIATED RATE": with respect to each Swing Line Loan, the
rate per annum equal to, (i) at all times during the period, if any, commencing
on the date of delivery of a notice of an Event of Default by the Administrative
Agent to the Lenders under Section 2.2(c) with respect to such Swing Line Loan
and terminating on the date on which such Event of Default shall no longer be
continuing, the Alternate Base Rate, and (ii) at all other times, the rate
agreed to by the Parent Borrower and the Swing Line Lender in accordance with
Section 2.2 as the interest rate that such Swing Line Loan shall bear.
"NON-CORE CURRENCIES": collectively, Australian Dollars,
Brazilian Reals, Canadian Dollars, and Sterling Pounds, and such other
currencies as shall become Non-Core Currencies in accordance with Section
2.12(b).
"NOTICE OF CONVERSION": a notice substantially in the form of
Exhibit D.
"OBLIGATION CURRENCY": as defined in Section 11.14.
"OPERATING ENTITY": any Person or any business or operating
unit of a Person which is, or could be, operated separate and apart from (i) the
other businesses and operations of such Person, or (ii) any other line of
business or business segment.
"ORGANIZATIONAL DOCUMENTS": as to any Person which is (i) a
corporation, the certificate or articles of incorporation and by-laws of such
Person, (ii) a limited liability company, the limited liability company
agreement or similar agreement of such Person, (iii) a partnership, the
partnership agreement or similar agreement of such Person, or (iv) any other
form of entity or organization, the organizational documents analogous to the
foregoing.
"OTHER INTERCOMPANY ACQUISITION": an Acquisition by the Parent
Borrower or any Subsidiary thereof from the Parent Borrower or any such
Subsidiary, PROVIDED,
48
<PAGE>
HOWEVER, that, for purposes hereof, "Other Intercompany Acquisition" shall not
include any Unrestricted Intercompany Acquisition.
"OTHER INTERCOMPANY BASKET AMOUNT": at any time, an amount
equal to the sum of, without duplication, (i) the aggregate outstanding
principal amount of all Other Intercompany Indebtedness at such time, PLUS (ii)
the aggregate consideration paid as of such time for all Other Intercompany
Investments made under Section 8.6(g) on and after the date hereof, PLUS (iii)
the aggregate amount as of such time of all Other Intercompany Restricted
Payments made on or after the date hereof.
"OTHER INTERCOMPANY DISPOSITION": a Disposition by the Parent
Borrower or any Subsidiary thereof to the Parent Borrower or any such
Subsidiary, PROVIDED, HOWEVER, that, for purposes hereof, "Other Intercompany
Disposition" shall not include any Unrestricted Intercompany Disposition.
"OTHER INTERCOMPANY INDEBTEDNESS": Indebtedness of the Parent
Borrower or any Subsidiary thereof to the Parent Borrower or any such
Subsidiary, PROVIDED, HOWEVER, that, for purposes hereof, "Other Intercompany
Indebtedness" shall not include any Unrestricted Intercompany Indebtedness.
"OTHER INTERCOMPANY INVESTMENT": an Investment by the Parent
Borrower or any Subsidiary thereof in the Parent Borrower or any such
Subsidiary, PROVIDED, HOWEVER, that, for purposes hereof, "Other Intercompany
Investment" shall not include any Unrestricted Intercompany Investment.
"OTHER INTERCOMPANY RESTRICTED PAYMENT": a Restricted Payment
made by any Subsidiary of the Parent Borrower to the Parent Borrower or any such
Subsidiary, to the extent received by the Parent Borrower or such Subsidiary, as
the case may be, PROVIDED, HOWEVER, that, for purposes hereof, "Other
Intercompany Restricted Payment" shall not include any Unrestricted Intercompany
Payment.
"OUTSTANDING PERCENTAGE": as of any date and with respect to
the Issuing Bank, the Swing Line Lender or any Lender, as the case may be, a
fraction the numerator of which is the Outstandings on such date of the Issuing
Bank, the Swing Line Lender or such Lender, as applicable, and the denominator
of which is the aggregate Outstandings on such date of the Issuing Bank, the
Swing Line Lender and all Lenders.
"OUTSTANDINGS": with respect to the Issuing Bank, the Swing
Line Lender or any Lender, as the case may be, as of any date, an amount equal
to (i) the outstanding principal amount on such date of all the Loans
(determined, in the case of each Alternate Currency Loan, on the basis of the
Dollar Equivalent thereof) of such Lender, PLUS (ii) with respect to the Issuing
Bank only, the excess of (a) the aggregate sum of all drafts honored under all
Letters of Credit, over (b) all payments made to the Issuing Bank by the Credit
Parties and the Lenders in reimbursement thereof or participation therein, as
the case may be, PLUS (iii) with respect to the Swing Line Lender only, the
excess of (a)
49
<PAGE>
the outstanding principal amount on such date of all the Swing Line Loans, over
(b) all payments made to the Swing Line Lender by the Credit Parties and the
Lenders in repayment thereof or participation therein, as the case may be, PLUS
(iv) with respect to each Lender, the excess of (a) the aggregate sum of all
payments by such Lender in participation of the Reimbursement Obligations and
the Swing Line Loans, over (b) all reimbursements of such Lender in respect
thereof.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental Authority
succeeding to the functions thereof.
"PENSION PLAN": at any date of determination, any Employee
Benefit Plan (including a Multiemployer Plan), the funding requirements of which
(under Section 302 of ERISA or Section 412 of the Code) are, or at any time
within the six years immediately preceding such date, were in whole or in part,
the responsibility of the Parent Borrower, any of its Subsidiaries or any ERISA
Affiliate.
"PERMITTED LIEN": a Lien permitted to exist under Section 8.2.
"PERSON": any individual, firm, partnership, limited liability
company, joint venture, corporation, association, business enterprise, joint
stock company, unincorporated association, trust, Governmental Authority or any
other entity, whether acting in an individual, fiduciary or other capacity, and
for the purpose of the definition of "ERISA Affiliate", a trade or business.
"PRICING LEVEL": Pricing Level I, Pricing Level II, or Pricing
Level III, as applicable.
"PRICING LEVEL I": any time when the Leverage Ratio is less
than 1.00:1.00.
"PRICING LEVEL II": any time when the Leverage Ratio is
greater than or equal to 1.00:1.00 but less than 1.50:1.00.
"PRICING LEVEL III": any time when the Leverage Ratio is
greater than or equal to 1.50:1.00.
"PROHIBITED TRANSACTION": a transaction which is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"PROPERTY": all types of real, personal, tangible, intangible
or mixed property.
"PROPOSED LENDER": as defined in Section 3.12.
50
<PAGE>
"REAL PROPERTY": all real property owned or leased by the
Parent Borrower or any of its Subsidiaries.
"REGULATION D": Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"REGULATORY CHANGE": (i) the introduction or phasing in of any
law, rule or regulation after the Relevant Date, (ii) the issuance or
promulgation after the Relevant Date of any directive, guideline or request from
any Governmental Authority (whether or not having the force of law), or (iii)
any change after the Relevant Date in the interpretation of any existing law,
rule, regulation, directive, guideline or request by any Governmental Authority
charged with the administration thereof.
"REIMBURSEMENT AGREEMENT": as defined in Section 2.8(a).
"REIMBURSEMENT OBLIGATION": the obligation of the Parent
Borrower to reimburse the Issuing Bank for amounts drawn under a Letter of
Credit.
"RELEVANT DATE": (i) in the case of each Lender listed on the
signature pages hereof, the Effective Date, and (ii) in the case of each other
Lender, the effective date of the Assignment and Acceptance Agreement or other
document pursuant to which it became a Lender.
"REPORTABLE EVENT": with respect to any Pension Plan, (i) any
event set forth in Sections 4043(b) (other than a Reportable Event as to which
the 30 day notice requirement is waived by the PBGC under applicable
regulations), 4062(c) or 4063(a) of ERISA or the regulations thereunder, (ii) an
event requiring the Parent Borrower, any of its Subsidiaries or any ERISA
Affiliate to provide security to a Pension Plan under Section 401(a)(29) of the
Code, or (iii) any failure to make any payment required by Section 412(m) of the
Code.
"REQUIRED LENDERS": at any time prior to the Revolving Credit
Commitment Termination Date, Lenders having Revolving Credit Commitment Amounts
greater than or equal to 51% of the Aggregate Revolving Credit Commitment
Amount, and, at all other times, the Issuing Bank, the Swing Line Lender and the
Lenders having Outstandings greater than or equal to 51% of the aggregate
Outstandings of the Issuing Bank, the Swing Line Lender and all Lenders.
"REQUIRED PAYMENT": as defined in Section 3.9(a).
"RESTRICTED PAYMENT": as to any Person (i) any dividend or
other distribution, direct or indirect, on account of any shares of Capital
Stock of such Person now or hereafter outstanding (other than a dividend payable
solely in shares of such Capital Stock to the holders of such shares) and (ii)
any redemption, retirement, sinking
51
<PAGE>
fund or similar payment, purchase or other acquisition, direct or indirect, of
any shares of any class of Capital Stock of such Person now or hereafter
outstanding.
"REVOLVING CREDIT COMMITMENT": in respect of any Lender, such
Lender's undertaking during the Revolving Credit Commitment Period to make
Revolving Credit Loans, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount not exceeding the Revolving Credit
Commitment Amount of such Lender.
"REVOLVING CREDIT COMMITMENT AMOUNT": as of any date and with
respect to any Lender, the amount set forth adjacent to its name under the
heading "Revolving Credit Commitment Amount" in Exhibit A on such date or, in
the event that such Lender is not listed in Exhibit A, the "Revolving Credit
Commitment Amount" which such Lender shall have assumed from another Lender in
accordance with Section 11.6 on or prior to such date, in each case as the same
may be adjusted from time to time pursuant to Sections 2.5 and 11.6.
"REVOLVING CREDIT COMMITMENT PERIOD": the period from the
Effective Date until the Revolving Credit Commitment Termination Date.
"REVOLVING CREDIT COMMITMENT TERMINATION DATE": the earlier of
the Business Day immediately preceding the Scheduled Revolving Credit Commitment
Termination Date or such other date upon which the Revolving Credit Commitments
shall have been terminated in accordance with Section 2.5 or Section 9.2.
"REVOLVING CREDIT EXPOSURE": with respect to any Lender as of
any date, the sum as of such date of (i) the outstanding principal amount of
such Lender's Revolving Credit Loans (determined, in the case of each Alternate
Currency Loan, on the basis of the Dollar Equivalent thereof), (ii) such
Lender's Swing Line Exposure, and (iii) such Lender's Letter of Credit Exposure.
"REVOLVING CREDIT LOAN" and "REVOLVING CREDIT LOANS": as
defined in Section 2.1.
"REVOLVING CREDIT MATURITY DATE": the Scheduled Revolving
Credit Commitment Termination Date, or such earlier date on which the Revolving
Credit Loans shall become due and payable, whether by acceleration or otherwise.
"SCHEDULED REVOLVING CREDIT COMMITMENT TERMINATION DATE": June
30, 2002.
"SCHEDULED SWING LINE COMMITMENT TERMINATION DATE": the fifth
Business Day preceding the Scheduled Revolving Credit Commitment Termination
Date.
"SEC": the Securities and Exchange Commission or any
Governmental Authority succeeding to the functions thereof.
52
<PAGE>
"SPECIAL COUNSEL": Emmet, Marvin & Martin, LLP, special
counsel to the Administrative Agent.
"STANDARD & POOR'S": Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or any successor thereto.
"STANDBY LETTERS OF CREDIT": as defined in Section 2.8(a).
"STERLING POUNDS": freely transferable lawful money of the
United Kingdom.
"SUBSIDIARY": as to any Person, any corporation, association,
partnership, limited liability company, joint venture or other business entity
of which such Person or any Subsidiary of such Person, directly or indirectly,
either (i) in respect of a corporation, owns or controls more than 50% of the
outstanding Capital Stock having ordinary voting power to elect a majority of
the managing Person thereof, irrespective of whether a class or classes shall or
might have voting power by reason of the happening of any contingency, or (ii)
in respect of an association, partnership, limited liability company, joint
venture or other business entity, is entitled to share in more than 50% of the
profits and losses thereof, however determined.
"SUBSIDIARY BORROWER OBLIGATIONS": at any time, in respect of
any Subsidiary Borrower, the principal amount outstanding at such time of the
Loans made to such Subsidiary Borrower (determined on the basis of the Dollar
Equivalent thereof), together with all accrued interest thereon and all other
sums due and owing at such time from such Subsidiary Borrower under the Loan
Documents.
"SUBSIDIARY GUARANTY": as defined in Section 5.4.
"SWING LINE COMMITMENT": the undertaking of the Swing Line
Lender during the Swing Line Commitment Period to make Swing Line Loans, subject
to the terms and conditions hereof, in an aggregate outstanding principal amount
not in excess of the Swing Line Commitment Amount, and the commitment of the
Lenders to participate therein as set forth in Section 2.2, as the same may be
adjusted from time to time pursuant to Sections 2.5 and 11.6.
"SWING LINE COMMITMENT AMOUNT": $5,000,000.
"SWING LINE COMMITMENT PERIOD": the period from the Effective
Date until the Swing Line Commitment Termination Date.
"SWING LINE COMMITMENT TERMINATION DATE": the earlier of the
Business Day immediately preceding the Scheduled Swing Line Commitment
Termination Date or such other date upon which the Swing Line Commitment shall
have been terminated in accordance with Section 2.5 or Section 9.2.
53
<PAGE>
"SWING LINE EXPOSURE": at any time, in respect of any Lender,
an amount equal to the aggregate outstanding principal amount of the Swing Line
Loans at such time, MULTIPLIED BY such Lender's Commitment Percentage at such
time.
"SWING LINE INTEREST PERIOD": with respect to any Swing Line
Loan requested by the Parent Borrower, the period commencing on the Borrowing
Date with respect to such Swing Line Loan and ending not in excess of five days
thereafter, as selected by the Parent Borrower in the applicable Borrowing
Request therefor, PROVIDED, HOWEVER, that (i) if any Swing Line Interest Period
would otherwise end on a day that is not a Business Day, such Swing Line
Interest Period shall be extended to the next succeeding Business Day, unless
such next succeeding Business Day would be a date on or after the Scheduled
Swing Line Commitment Termination Date, in which event such Euro Interest Period
shall end on the next preceding Business Day, and (ii) no Swing Line Interest
Period shall end after the Scheduled Swing Line Commitment Termination Date.
Interest shall accrue from and including the first day of a Swing Line Interest
Period to, but excluding, the last day of such Swing Line Interest Period.
"SWING LINE LOAN" and "SWING LINE LOANS": as defined in
Section 2.2(a).
"SWING LINE MATURITY DATE": the Scheduled Swing Line
Commitment Termination Date, or such earlier date on which the Swing Line Loans
shall become due and payable, whether by acceleration or otherwise.
"SWING LINE PARTICIPATION AMOUNT": as defined in Section
2.2(c).
"SYNTHETIC LEASE ARRANGEMENT": the synthetic lease arrangement
by and among the Borrower, Wachovia Capital Markets, Inc. and Wachovia Bank,
N.A., as Agent, relating to the office building/headquarters project located in
Omaha, Nebraska.
"TAX": any present or future tax, levy, impost, duty, charge,
fee, deduction or withholding of any nature and whatever called, by a
Governmental Authority, on whomsoever and wherever imposed, levied, collected,
withheld or assessed.
"TAX ON THE INCOME": as to any Person, a Tax imposed by one of
the following jurisdictions or by any political subdivision or taxing authority
thereof: (i) the United States, (ii) the jurisdiction in which such Person is
organized, (iii) the jurisdiction in which such Person's principal office is
located, or (iv) in the case of each Lender, any jurisdiction in which such
Person is deemed to be doing business; which Tax is an income tax (or any tax in
lieu thereof or equivalent thereto) or franchise tax imposed on all or part of
the net income or net profits of such Person or with respect to the net increase
in the shareholders' or owners' equity or capital in such Person or which Tax
represents interest, fees or penalties for payment of any such income tax or
franchise tax.
"TERMINATION EVENT": with respect to any Pension Plan, (i) a
Reportable Event, (ii) the termination of a Pension Plan, or the filing of a
notice of intent to terminate
54
<PAGE>
a Pension Plan, or the treatment of a Pension Plan amendment as a termination
under Section 4041(c) of ERISA, (iii) the institution of proceedings to
terminate a Pension Plan under Section 4042 of ERISA, or (iv) the appointment of
a trustee to administer any Pension Plan under Section 4042 of ERISA.
"TRADE LETTERS OF CREDIT": as defined in Section 2.8(a).
"UNFUNDED PENSION LIABILITIES": with respect to any Pension
Plan, at any date of determination, the amount determined by taking the
accumulated benefit obligation, as disclosed in accordance with Statement of
Accounting Standards No. 87, "Employers' Accounting for Pensions", over the fair
market value of Pension Plan assets.
"UNITED STATES": the United States of America.
"UNRECOGNIZED RETIREE WELFARE LIABILITY": with respect to any
Employee Benefit Plan that provides postretirement benefits other than pension
benefits, the amount of the transition obligation, as determined in accordance
with Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," as of the most recent
valuation date, that has not been recognized as an expense in an income
statement of the Parent Borrower and its Consolidated subsidiaries, provided
that, prior to the date such Statement is applicable to the Parent Borrower,
such amount shall be based on an estimate made in good faith of such transition
obligation.
"UNRESTRICTED INTERCOMPANY ACQUISITION": (i) an Acquisition by
the Parent Borrower or any Guarantor from the Parent Borrower or any Subsidiary
of the Parent Borrower or (ii) an Acquisition by any such Subsidiary (other than
a Guarantor) from any such Subsidiary (other than a Guarantor).
"UNRESTRICTED INTERCOMPANY DISPOSITION": (i) a Disposition by
the Parent Borrower or any Subsidiary thereof to the Parent Borrower or any
Guarantor or (ii) a Disposition by any such Subsidiary (other than a Guarantor)
to any such Subsidiary (other than a Guarantor).
"UNRESTRICTED INTERCOMPANY INDEBTEDNESS": (i) Indebtedness of
the Parent Borrower or any Guarantor to the Parent Borrower or any Subsidiary of
the Parent Borrower or (ii) Indebtedness of any such Subsidiary (other than a
Guarantor) to any such Subsidiary (other than a Guarantor).
"UNRESTRICTED INTERCOMPANY INVESTMENT": (i) an Investment by
the Parent Borrower or any Subsidiary thereof in the Parent Borrower or any
Guarantor or (ii) an Investment by any such Subsidiary (other than a Guarantor)
in any such Subsidiary (other than a Guarantor).
55
<PAGE>
"UNRESTRICTED INTERCOMPANY PAYMENT": (i) a Restricted Payment
made by any Subsidiary of the Parent Borrower to the Parent Borrower or any
Guarantor, to the extent received by the Parent Borrower or such Guarantor, as
the case may be, or (ii) a Restricted Payment made by any such Subsidiary (other
than a Guarantor) to any such Subsidiary (other than a Guarantor), to the extent
received by such Subsidiary.
1.2. PRINCIPLES OF CONSTRUCTION
(a) All terms defined in a Loan Document shall have the
meanings given such terms therein when used in the other Loan Documents or any
certificate, opinion or other document made or delivered pursuant thereto to the
extent not otherwise provided therein.
(b) As used in the Loan Documents and in any certificate,
opinion or other document made or delivered pursuant thereto, accounting terms
not defined in Section 1.1, and accounting terms partly defined in Section 1.1,
to the extent not defined, shall have the respective meanings given to them
under GAAP. If at any time any change in GAAP would affect the computation of
any financial ratio or requirement set forth in this Agreement, the
Administrative Agent, the Issuing Bank, the Swing Line Lender, the Lenders and
the Parent Borrower shall negotiate in good faith to amend such ratio or
requirement to reflect such change in GAAP (subject to the approval of the
Required Lenders), provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) the Parent Borrower shall provide to the Administrative
Agent and the Lenders financial statements and other documents required under
this Agreement (or such other items as the Administrative Agent may reasonably
requested) setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and
similar words when used in a Loan Document shall refer to such Loan Document as
a whole and not to any particular provision thereof, and Section, schedule and
exhibit references contained therein shall refer to Sections thereof or
schedules or exhibits thereto unless otherwise expressly provided therein.
(d) The phrase "may not" is prohibitive and not permissive.
(e) Unless the context otherwise requires, words in the
singular number include the plural, and words in the plural include the
singular.
(f) Unless specifically provided in a Loan Document to the
contrary, any reference to a time shall refer to such time in New York.
(g) Unless specifically provided in a Loan Document to the
contrary, in the computation of periods of time from a specified date to a later
specified date, the
56
<PAGE>
word "from" means "from and including" and the words "to" and "until" each means
"to but excluding".
(h) References in any Loan Document to a fiscal period shall
refer to that fiscal period of the Parent Borrower.
(i) The words "include" and "including", when used in each
Loan Document, shall mean that the same shall be included "without limitation",
unless otherwise expressly provided therein.
2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT
2.1. REVOLVING CREDIT LOANS
Subject to the terms and conditions of this Agreement, each
Lender severally (and not jointly) agrees to make revolving credit loans (each a
"REVOLVING CREDIT LOAN" and, as the context may require, collectively with all
other Revolving Credit Loans of such Lender and with the Revolving Credit Loans
of all other Lenders, the "REVOLVING CREDIT LOANS") to one or more of the
Borrowers in the Core Currencies from time to time during the Revolving Credit
Commitment Period, PROVIDED, HOWEVER, that:
(a) immediately after giving effect thereto, (i) such Lender's
Revolving Credit Exposure shall not exceed such Lender's Revolving
Credit Commitment Amount, (ii) the Aggregate Credit Exposure shall not
exceed the Aggregate Revolving Credit Commitment Amount, and (iii) if
such Revolving Credit is an Alternate Currency Revolving Credit Loan,
the aggregate principal amount of all Alternate Currency Loans (in
each case determined on the basis of the Dollar Equivalent thereof)
shall not exceed $50,000,000, and
(b) such Revolving Credit Loan, (i) if to be made in Dollars
(each a "DOLLAR REVOLVING CREDIT LOAN"), shall be made to the Parent
Borrower, (ii) if to be made in Dutch Guilders, shall be made to a
Dutch Borrower, (iii) if to be made in French Francs, shall be made to
a French Borrower, and (iv) if to be made in German Marks, shall be
made to a German Borrower.
During the Revolving Credit Commitment Period, the Borrowers may borrow, prepay
in whole or in part and reborrow under the Revolving Credit Commitments, all in
accordance with the terms and conditions of this Agreement. Subject to the
provisions of Sections 2.3 and 3.3, at the option of the Parent Borrower, Dollar
Revolving Credit Loans may be made as (A) one or more ABR Advances, (B) one or
more Eurodollar Advances, or (C) a combination thereof. The outstanding
principal amount of the Revolving Credit Loans shall be due and payable on the
Revolving Credit Maturity Date.
57
<PAGE>
2.2. SWING LINE LOANS
(a) Subject to the terms and conditions hereof, the Swing Line
Lender agrees to make swing line loans (each a "SWING LINE Loan" and,
collectively, the "SWING LINE LOANS") to the Parent Borrower in Dollars from
time to time during the Swing Line Commitment Period in an aggregate principal
amount at any one time outstanding not to exceed the Swing Line Commitment
Amount, PROVIDED, HOWEVER, that, immediately after making each Swing Line Loan,
(i) the aggregate unpaid balance of the Swing Line Loans would not exceed the
Swing Line Commitment Amount and (ii) the Aggregate Credit Exposure would not
exceed the Aggregate Revolving Credit Commitment Amount. During the Swing Line
Commitment Period, the Parent Borrower may borrow, prepay in whole or in part
and reborrow under the Swing Line Commitment, all in accordance with the terms
and conditions of this Agreement. No Swing Line Loan shall be made prior to the
making of the first Revolving Credit Loans on the first Borrowing Date.
(b) The Swing Line Lender shall not be obligated to make any
Swing Line Loan at a time when any Lender shall be in default of its obligations
under this Agreement unless arrangements to eliminate the Swing Line Lender's
risk with respect to such defaulting Lender's participation in such Swing Line
Loan shall have been made for the benefit of the Swing Line Lender and such
arrangements are in all respects satisfactory to the Swing Line Lender. The
Swing Line Lender will not make any Swing Line Loan if the Administrative Agent
or any Lender, by notice to the Swing Line Lender and the Parent Borrower no
later than one Business Day prior to the Borrowing Date with respect to such
Swing Line Loan, shall have determined that the conditions set forth in Section
6 have not been satisfied and such conditions remain unsatisfied as of the
requested time of the making such Swing Line Loan. Each Swing Line Loan shall be
due and payable on the earlier to occur of the last day of the Swing Line
Interest Period applicable thereto and the Swing Line Maturity Date.
(c) Upon each receipt by a Lender of notice of an Event of
Default from the Administrative Agent pursuant to Section 10.5, such Lender
shall purchase unconditionally, irrevocably, and severally (and not jointly)
from the Swing Line Lender a participation in the outstanding Swing Line Loans
(including accrued interest thereon) in an amount (the "SWING LINE PARTICIPATION
AMOUNT") equal to the product of its Commitment Percentage and the aggregate
outstanding principal amount of the Swing Line Loans plus all accrued and unpaid
interest thereon. Each Lender shall also be liable for an amount equal to the
product of its Commitment Percentage and any amounts paid by any Credit Party
pursuant to this Section that are subsequently rescinded or avoided, or must be
otherwise restored or returned. Such liabilities shall be absolute and
unconditional and without regard to the occurrence of any Default or the
compliance by and Credit Party with any of its obligations under the Loan
Documents.
(d) In furtherance of Section 2.2(c), upon each receipt by a
Lender of notice of an Event of Default from the Administrative Agent pursuant
to Section 10.5,
58
<PAGE>
such Lender shall promptly make available its Swing Line Participation Amount to
the Administrative Agent for the account of the Swing Line Lender at the
applicable Agent Payment Office, in Dollars, and in immediately available funds.
The Administrative Agent shall deliver the payments made by each Lender pursuant
to the immediately preceding sentence to the Swing Line Lender promptly upon
receipt thereof in like funds as received. Each Lender shall indemnify and hold
harmless the Administrative Agent and the Swing Line Lender from and against any
and all losses, liabilities (including liabilities for penalties), actions,
suits, judgments, demands, costs and expenses resulting from any failure on the
part of such Lender to pay, or from any delay in paying the Administrative Agent
any amount such Lender is required to pay in accordance with this Section 2.2
(except in respect of losses, liabilities, actions, suits, judgments, demands,
costs and expenses suffered by the Administrative Agent or the Swing Line
Lender, as the case may be, resulting from the gross negligence or willful
misconduct of the Administrative Agent or the Swing Line Lender, as the case may
be), and such Lender shall be required to pay interest to the Administrative
Agent for the account of the Swing Line Lender from the date such amount was due
until paid in full, on the unpaid portion thereof, at a rate of interest per
annum equal to the Federal Funds Rate payable upon demand by the Swing Line
Lender. The Administrative Agent shall distribute such interest payments to the
Swing Line Lender upon receipt thereof in like funds as received.
(e) Whenever the Administrative Agent is reimbursed by any
Credit Party, for the account of the Swing Line Lender, for any payment in
connection with Swing Line Loans and such payment relates to an amount
previously paid by a Lender pursuant to this Section, the Administrative Agent
will promptly pay over such payment to such Lender.
2.3. PROCEDURE FOR BORROWING
(a) REVOLVING CREDIT LOANS. Any Borrower may borrow under the
Revolving Credit Commitments on any Business Day or any Core Currency Business
Day, as the case may be, during the Revolving Credit Commitment Period, provided
that such Borrower or, if such Borrower is a Subsidiary Borrower, the Parent
Borrower, on behalf of such Borrower, shall notify the Administrative Agent by
the delivery of a Borrowing Request, which shall be sent by facsimile and shall
be irrevocable (confirmed promptly by the delivery to the Administrative Agent
of a Borrowing Request manually signed by such Borrower or the Parent Borrower,
on behalf of such Borrower, as the case may be), no later than: 11:00 a.m. three
Core Currency Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Advances, 11:00 a.m. four Core Currency Business Days prior to the
requested Borrowing Date, in the case of Core Currency Euro Advances, and 10:00
a.m. on the requested Borrowing Date, in the case of ABR Advances, specifying
(i) the requested Borrowing Date, (ii) whether such borrowing is to consist of
one or more Eurodollar Advances, one or more Core Currency Euro Advances, ABR
Advances, or a combination thereof, and the amount of each
59
<PAGE>
thereof (stated in the applicable Currency), and (iii) if the borrowing is to
consist of one or more Eurodollar Advances or Core Currency Euro Advances, the
length of the Euro Interest Period for each such Eurodollar Advance and Core
Currency Euro Advance. Notwithstanding anything to the contrary contained
herein, (A) each Eurodollar Advance to be made on a Borrowing Date, when
aggregated with all amounts to be converted to a Eurodollar Advance on such date
and having the same Euro Interest Period as such first Eurodollar Advance, shall
equal no less than $5,000,000 or such amount plus a whole multiple of $1,000,000
in excess thereof, (B) each Core Currency Euro Advance to be made on a Borrowing
Date, when aggregated with all amounts to be converted to a Core Currency Euro
Advance on such date and having the same Euro Interest Period, and being
denominated in the same Currency, as such first Core Currency Euro Advance shall
not be less than an amount in such Currency having a Dollar Equivalent of
approximately $2,500,000 or such amount plus an amount in such Currency having a
Dollar Equivalent of a whole multiple of approximately $1,000,000 in excess
thereof, and (C) each ABR Advance to be made on a Borrowing Date shall equal no
less than $1,000,000 or such amount plus a whole multiple of $100,000 in excess
thereof or, if less, the unused portion of the Aggregate Revolving Credit
Commitment Amount.
(b) SWING LINE LOANS. The Parent Borrower may borrow under the
Swing Line Commitment on any Business Day during the Swing Line Commitment
Period, provided that the Parent Borrower shall notify the Administrative Agent
and the Swing Line Lender (by telephone or facsimile confirmed promptly by the
delivery to the Administrative Agent and the Swing Line Lender of a Borrowing
Request manually signed by the Parent Borrower) no later than: 3:00 p.m. on the
requested Borrowing Date, specifying (i) the aggregate principal amount to be
borrowed under the Swing Line Commitment, (ii) the requested Borrowing Date, and
(iii) the amount of, and the length of the Swing Line Interest Period for, each
Swing Line Loan. The Swing Line Lender will then, subject to its determination
that the terms and conditions of this Agreement have been satisfied and subject
to its agreement with the Parent Borrower on the Negotiated Rate to be
applicable thereto, make the requested amount available, in Dollars, and in
immediately available funds, promptly on that same day, to the Administrative
Agent at the applicable Agent Payment Office who, thereupon, will promptly make
such amount available to the Parent Borrower at the such Agent Payment Office,
in Dollars, and in immediately available funds. Each borrowing of Swing Line
Loans shall be in an aggregate principal amount equal to $500,000 or such amount
plus a whole multiple of $100,000 in excess thereof or, if less, the unused
portion of the Swing Line Commitment Amount.
(c) FUNDING OF REVOLVING CREDIT LOANS. Upon receipt of each
Borrowing Request requesting Revolving Credit Loans, the Administrative Agent
shall promptly notify each Lender thereof. Subject to its receipt of the notice
referred to in the preceding sentence, each Lender will make the amount of its
Commitment Percentage of the requested Revolving Credit Loans available to the
Administrative Agent for the account of the applicable Borrower at the
applicable Agent Payment Office in the
60
<PAGE>
applicable Currency not later than (i) 11:00 a.m. (local time in the city in
which such Agent Payment Office is located), in the case of an Alternate
Currency Revolving Credit Loan, and (ii) 2:00 p.m. (New York City time), in the
case of a Dollar Revolving Credit Loan, in each case on the on the relevant
Borrowing Date requested by such Borrower or the Parent Borrower, on behalf of
such Borrower, as the case may be, in funds immediately available to the
Administrative Agent at such Agent Payment Office. The amounts so made available
to the Administrative Agent on such Borrowing Date will then, subject to the
satisfaction of the terms and conditions of this Agreement, as determined by the
Administrative Agent, be made available on such Borrowing Date to such Borrower
by the Administrative Agent at such Agent Payment Office, in such Currency, and
in immediately available funds, no later than (A) 1:30 p.m. (local time in the
city in which such Agent Payment Office is located), in the case of an Alternate
Currency Revolving Credit Loan, and (B) 3:00 p.m. (New York City time), in the
case of a Dollar Revolving Credit Loan.
(d) FAILURE TO FUND. Unless the Administrative Agent shall
have received prior notice from a Lender (by telephone or otherwise, such notice
to be promptly confirmed by facsimile or other writing) that such Lender will
not make available to the Administrative Agent such Lender's Commitment
Percentage of the Revolving Credit Loans to be made on a Borrowing Date, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent on the Borrowing Date in accordance with this
Section, provided that such Lender received notice thereof from the
Administrative Agent in accordance with the terms hereof, and the Administrative
Agent may, in reliance upon such assumption, make available to the applicable
Borrower on such Borrowing Date a corresponding amount. If and to the extent
such Lender shall not have so made such amount available to the Administrative
Agent, such Lender and such Borrower severally agree to pay to the
Administrative Agent, forthwith on demand, such corresponding amount (to the
extent not previously paid by the other), together with interest thereon for
each day from the date such amount is made available to such Borrower until the
date such amount is paid to the Administrative Agent, at a rate per annum equal
to, in the case of such Borrower, the applicable interest rate set forth in
Section 3.1, and, in the case of such Lender, the Federal Funds Rate (or, in the
case of each Alternate Currency Loan, a rate determined by the Administrative
Agent to be reflective of the all-in cost of funds to the Administrative Agent
in funding such Alternate Currency Loan). Such payment by such Borrower,
however, shall be without prejudice to its rights against such Lender. If such
Lender shall pay to the Administrative Agent such corresponding amount, such
amount so paid shall constitute such Lender's Revolving Credit Loan as part of
such Revolving Credit Loans for purposes of this Agreement, which Revolving
Credit Loan shall be deemed to have been made by such Lender on the such
Borrowing Date.
(e) BORROWER ACCOUNTS. Each Loan shall be made to the
applicable payment account of the applicable Borrower set forth in Exhibit P or
the Borrower Addendum, if any, executed and delivered with respect to such
Borrower pursuant to
61
<PAGE>
Section 2.12, as the case may be, or such other account which such Borrower may
from time to time specify by written notice to the Administrative Agent and the
Lenders.
2.4. BID PROCEDURE
(a) Each Borrower may, provided that no Default shall have
occurred and be continuing, request Bids for one or more Bid Loans denominated
in any Currency during the Commitment Period by delivering, or, if such Borrower
is a Subsidiary Borrower, causing the Parent Borrower to deliver, on behalf of
such Borrower, by hand or facsimile to the Administrative Agent a duly completed
Bid Request no later than 12:00 noon: four Core Currency Business Days, in the
case of Alternate Currency Bid Loans, and one Business Day, in the case of
Dollar Bid Loans, in each case before the proposed Borrowing Date therefor. A
request for Bids that does not conform substantially to the format of Exhibit I
may be rejected in the Administrative Agent's sole discretion, and the
Administrative Agent shall promptly notify the applicable Borrower and, if such
Borrower is a Subsidiary Borrower, the Parent Borrower of such rejection by
facsimile. Each Bid Request shall specify (i) the amount of each Bid Loan
(stated in the applicable Currency), (ii) the proposed Borrowing Date therefor,
and (iii) the Bid Interest Period or Bid Interest Periods (which shall not
exceed three different Bid Interest Periods in a single Bid Request), with
respect thereto. Promptly after its receipt of each Bid Request that is not
rejected as aforesaid, the Administrative Agent shall send to each Lender an
Invitation to Bid, appropriately completed by the Administrative Agent with
reference to such Bid Request.
(b) Each Lender may, in its sole and absolute discretion, make
one or more Bids in response to each Invitation to Bid. Each Bid by a Lender
must be received by the Administrative Agent not later than 9:30 a.m.: one Core
Currency Business Day before the proposed Borrowing Date for a proposed
Alternate Currency Bid Loan and on the proposed Borrowing Date for a proposed
Dollar Bid Loan. Bids to make Bid Loans that do not conform substantially to the
format of Exhibit K may be rejected by the Administrative Agent after conferring
with, and upon the instruction of, the applicable Borrower and, if such Borrower
is a Subsidiary Borrower, the Parent Borrower, and the Administrative Agent
shall notify the Lender making such nonconforming bid of such rejection as soon
as practicable. Each Bid shall be irrevocable and shall specify (i) the amount
(stated in the applicable Currency and which (A) shall be in a minimum principal
amount of $5,000,000 or such amount plus a whole multiple of $1,000,000 in
excess thereof (or, in the case of Alternate Currency Bid Loans, an amount in
the applicable Alternate Currency having a Dollar Equivalent of approximately
$5,000,000 or such amount plus an amount in the applicable Alternate Currency
having a Dollar Equivalent of a whole multiple of approximately $1,000,000 in
excess thereof), and (B) may equal the entire principal amount requested by such
Borrower) of such Bid Loan, (ii) the Bid Rate with respect to such Bid Loan, and
(iii) the Bid Interest Period with respect to such Bid Loan and the last day
thereof. If any Lender shall elect not to make a Bid, such Lender shall so
notify the Administrative Agent by facsimile not later than 9:30 a.m.: one
62
<PAGE>
Core Currency Business Day before the proposed Borrowing Date for a proposed
Alternate Currency Bid Loan and on the proposed Borrowing Date for a proposed
Dollar Bid Loan, PROVIDED, HOWEVER, that the failure by any Lender to give any
such notice shall not obligate such Lender to make any Bid Loan in connection
with the relevant Bid Request.
(c) With respect to each Invitation to Bid sent to the
Lenders, the Administrative Agent shall (i) promptly notify the applicable
Borrower and, if such Borrower is a Subsidiary Borrower, the Parent Borrower by
facsimile of each Bid made, the amount (stated in the applicable Currency) of
the Bid Loan offered thereby, and the identity of the Lender that made such Bid,
and (ii) send a list of all Bids to such Borrower and, if such Borrower is a
Subsidiary Borrower, the Parent Borrower for their respective records as soon as
practicable after completion of the bidding process. Each notice and list sent
by the Administrative Agent pursuant to this Section 2.4(c) shall list the Bids
in ascending yield order.
(d) The applicable Borrower may in its sole and absolute
discretion, subject only to the provisions of this Section 2.4(d), accept or
reject any Bid made in accordance with the procedures set forth in this Section
2.4, and such Borrower or, if such Borrower is a Subsidiary Borrower, the Parent
Borrower, on behalf of such Borrower, shall notify the Administrative Agent by
telephone, confirmed by facsimile in the form of a Bid Accept/Reject Letter,
whether and to what extent it has decided to accept or reject any or all of such
Bids, not later than 10:30 a.m.: one Core Currency Business Day before the
proposed Borrowing Date for a proposed Alternate Currency Bid Loan and on the
proposed Borrowing Date for a proposed Dollar Bid Loan, PROVIDED, HOWEVER, that
the failure by such Borrower or the Parent Borrower, on behalf of such Borrower,
as the case may be, to give such notice shall be deemed to be a rejection of all
such Bids. In connection with each acceptance of one or more Bids by such
Borrower:
(i) such Borrower shall not accept a Bid made at a particular
Bid Rate if it has decided to reject any other Bid made at a lower Bid
Rate and having the same Bid Interest Period as such Bid,
(ii) the aggregate amount of the Bids accepted by such
Borrower shall not exceed the principal amount specified in the Bid
Request therefor (determined, in the case of each Alternate Currency
Bid Loan, on the basis of the Dollar Equivalent thereof),
(iii) if such Borrower shall desire to accept a Bid made at a
particular Bid Rate and having a particular Bid Interest Period, it
must accept all other Bids made at such Bid Rate and having such Bid
Interest Period, PROVIDED, HOWEVER, that, if the acceptance of all
such other Bids would cause the aggregate amount of all such accepted
Bids to exceed the amount requested (determined, in the case of each
Alternate Currency Bid Loan, on the basis of the Dollar Equivalent
thereof), then such acceptance shall be made pro rata in accordance
63
<PAGE>
with the amount of each such Bid at such Bid Rate and having such Bid
Interest Period, and
(iv) except pursuant to Section 2.4(d)(ii), no Bid shall be
accepted unless the Bid Loan with respect thereto shall be in (1) a
minimum principal amount of $5,000,000, or such amount plus a whole
multiple of $1,000,000 in excess thereof (or, in the case of Alternate
Currency Bid Loans, an amount in the applicable Alternate Currency
having a Dollar Equivalent of approximately $5,000,000, or such amount
plus an amount in the applicable Alternate Currency having a Dollar
Equivalent of a whole multiple of approximately $1,000,000 in excess
thereof), or (2) if less, an aggregate principal amount equal to the
excess of the Aggregate Commitment Amount over the outstanding
principal amount of all Loans (determined, in the case of each
Alternate Currency Bid Loan, on the basis of the Dollar Equivalent
thereof).
(e) The Administrative Agent shall promptly notify each
bidding Lender whether or not each Bid of such Lender has been accepted (and, if
so, in what amount) by facsimile sent by the Administrative Agent, and, if such
Bid has been accepted by the applicable Borrower, in whole or in part, such
bidding Lender shall, after its receipt of such notice, make immediately
available funds in the applicable Currency and in the amount in which such Bid
was so accepted available, (i) in the case of Dollar Bid Loans, to the
Administrative Agent at the applicable Agent Payment Office, and (ii) in the
case of Alternate Currency Bid Loans, (A) directly to such Borrower, or (B) upon
the occurrence and during the continuance of an Event of Default, if directed by
the Required Lenders and with the consent of the Administrative Agent, to the
Administrative Agent at the applicable Agent Payment Office, in each case no
later than 12:00 noon (local time in the city in which such funds are to be made
available in accordance with the terms hereof) on the proposed Borrowing Date.
The Administrative Agent will make available to such Borrower at the applicable
Agent Payment Office, in the applicable Currency, and in immediately available
funds, the aggregate of any amount so made available by such Lender no later
than 2:30 p.m. (such local time) on such Borrowing Date. Notwithstanding
anything to the contrary contained herein, no Lender shall be obligated to make
a Bid Loan if, immediately after making such Bid Loan, (1) the outstanding
principal amount of the Bid Loans of all Lenders (determined, in the case of
each Alternate Currency Bid Loan, on the basis of the Dollar Equivalent thereof)
would exceed 50% of the Aggregate Revolving Credit Commitment Amount, and (2) if
such Bid Loan is an Alternate Currency Bid Loan, the aggregate principal amount
of all Alternate Currency Loans (in each case determined on the basis of the
Dollar Equivalent thereof) shall not exceed $50,000,000.
(f) A Bid Request shall not be made within five Business Days
after the date of any previous Bid Request, unless the applicable Borrower has
accepted one or more Bids pursuant to a Bid Request made within such five
Business Days.
64
<PAGE>
(g) If the Administrative Agent shall elect to submit a Bid in
its capacity as a Lender, it shall submit such bid directly to the applicable
Borrower and, if such Borrower is a Subsidiary Borrower, the Parent Borrower
fifteen minutes earlier than the latest time at which the other Lenders are
required to submit their bids to the Administrative Agent pursuant to Section
2.4(b).
(h) All notices required by this Section 2.4 shall be given in
accordance with Section 11.2.
(i) Each Bid Loan shall be due and payable on the last day of
the Bid Interest Period applicable thereto.
2.5. TERMINATION OR REDUCTION OF COMMITMENTS
(a) VOLUNTARY TERMINATION OR REDUCTIONS. The Parent Borrower
shall have the right, upon at least three Business Days' prior written notice to
the Administrative Agent, (i) at any time when the Aggregate Credit Exposure
shall be zero, to terminate the Revolving Credit Commitments of all of the
Lenders, and (A) at any time and from time to time when the Aggregate Revolving
Credit Commitment Amount shall exceed the Aggregate Credit Exposure, to reduce
permanently the Aggregate Revolving Credit Commitment Amount by a sum not
greater than the amount of such excess, PROVIDED, HOWEVER, that each such
reduction shall be in the amount of $5,000,000 or such amount plus a whole
multiple of $1,000,000 in excess thereof. Each of the Parent Borrower and the
Swing Line Lender shall have the right, upon at least three Business Days' prior
written notice to the other and the Administrative Agent, to terminate the Swing
Line Commitment and/or permanently reduce the Swing Line Commitment Amount,
PROVIDED, HOWEVER, that each such reduction shall be in the amount of $1,000,000
or such amount plus a whole multiple of $1,000,000 in excess thereof.
(b) REDUCTIONS IN GENERAL. Each reduction of the Aggregate
Revolving Credit Commitment Amount shall be made by reducing each Lender's
Revolving Credit Commitment Amount by an amount equal to such Lender's
Commitment Percentage of such reduction.
2.6. PREPAYMENTS
(a) VOLUNTARY PREPAYMENTS. Each Borrower may, at its option,
prepay the Revolving Credit Loans or the Swing Line Loans, as the case may be,
without premium or penalty (but subject to Section 3.4), in full at any time or
in part from time to time by delivering, or, if such Borrower is a Subsidiary
Borrower, causing the Parent Borrower, on behalf of such Borrower, to deliver,
to the Administrative Agent an irrevocable written notice thereof at least one
Business Day's prior to the proposed prepayment date, in the case of Revolving
Credit Loans consisting of ABR Advances or Swing Line Loans, as the case may be,
and at least three Core Currency Business Days prior to the proposed prepayment
date, in the case of Revolving Credit Loans consisting
65
<PAGE>
of Eurodollar Advances or Core Currency Euro Advances, as the case may be, in
each case specifying whether the Loans to be prepaid consist of Revolving Credit
Loans or Swing Line Loans, and, in the case of Revolving Credit Loans, whether
such Revolving Credit Loans consist of ABR Advances, Eurodollar Advances, Core
Currency Euro Advances, or a combination thereof, the amount to be prepaid
(stated in the applicable Currency), and the date of prepayment, whereupon the
amount specified in such notice shall be due and payable on the date specified.
Upon receipt of such notice, the Administrative Agent shall promptly notify each
Lender thereof. Each partial prepayment pursuant to this Section 2.6(a) shall be
(i) in the case of Swing Line Loans, in a minimum amount of $500,000 or such
amount plus a whole multiple of $100,000 in excess thereof, (ii) in the case of
ABR Advances and Eurodollar Advances, in a minimum amount of $1,000,000 or such
amount plus a whole multiple of $1,000,000 in excess thereof, and (iii) in the
case of Core Currency Euro Advances, in a minimum amount in the applicable
Currency having an Alternate Currency Equivalent of approximately $1,000,000 or
such amount plus an amount in the applicable Currency having an Alternate
Currency Equivalent of a whole multiple of approximately $100,000 in excess
thereof. Except as otherwise permitted by Sections 2.6(b) or 3.7, no Borrower
shall, or shall be permitted to, prepay any Bid Loan without the prior consent
of the applicable Lender.
(b) AGGREGATE CREDIT EXPOSURE PREPAYMENTS. If, on the last day
of any calendar quarter, the Aggregate Credit Exposure shall exceed the
Aggregate Revolving Credit Commitment Amount, then the Borrowers shall prepay
the Loans on the immediately succeeding Business Day such that, immediately
after giving effect thereto, the Aggregate Credit Exposure shall not exceed the
Aggregate Revolving Credit Commitment Amount.
(c) IN GENERAL. Simultaneously with each prepayment hereunder,
the Borrowers shall prepay all accrued and unpaid interest on the amount prepaid
through the date of prepayment.
2.7. USE OF PROCEEDS
Each Borrower agrees that the proceeds of the Loans shall be
used solely (i) to pay all of the Fees, (ii) to pay the reasonable out-of-pocket
fees and expenses incurred by the Borrowers in connection with the Loan
Documents, (iii) for the Borrowers' working capital purposes in the ordinary
course of business, and (iv) for the Borrowers' general corporate purposes not
inconsistent with the provisions hereof. Notwithstanding anything to the
contrary contained in any Loan Document, each Borrower further agrees that no
part of the proceeds of any Loan, and no Letter of Credit, will be used,
directly or indirectly, for a purpose which violates any law, rule or regulation
of any Governmental Authority, including the provisions of Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System, as amended.
66
<PAGE>
2.8. LETTER OF CREDIT SUB-FACILITY
(a) Subject to the terms and conditions of this Agreement, the
Issuing Bank agrees, in reliance on the agreement of the other Lenders set forth
in Section 2.9, to issue standby letters of credit (the "STANDBY LETTERS OF
CREDIT") or commercial (trade) letters of credit (the "TRADE LETTERS OF CREDIT"
and, together with the Standby Letters of Credit, the "LETTERS OF CREDIT")
denominated in Dollars during the Revolving Credit Commitment Period for the
account of the Parent Borrower, provided that, immediately after the issuance of
each Letter of Credit, (i) the Letter of Credit Exposure of all Lenders (whether
or not the conditions for drawing under any Letter of Credit have or may be
satisfied) would not exceed the Letter of Credit Commitment Amount, and (ii) the
Aggregate Credit Exposure would not exceed the Aggregate Revolving Credit
Commitment Amount. Each Letter of Credit shall have an expiration date which
shall be not later than the earlier of (i) twelve months after the date of
issuance thereof or (ii) five Business Days before the Scheduled Revolving
Credit Commitment Termination Date. No Letter of Credit shall be issued if the
Administrative Agent, or any Lender by notice to the Administrative Agent no
later than 1:00 p.m. one Business Day prior to the requested date of issuance of
such Letter of Credit, shall have determined that any condition set forth in
Sections 5 or 6 has not been satisfied.
(b) Each Letter of Credit shall be issued for the account of
the Parent Borrower in support of an obligation of the Parent Borrower or any
Subsidiary thereof in favor of a beneficiary who has requested the issuance of
such Letter of Credit as a condition to a transaction entered into in the
ordinary course of business. The Parent Borrower shall give the Administrative
Agent a Letter of Credit Request for the issuance of each Letter of Credit by no
later than 11:00 a.m. three Business Days prior to the requested date of
issuance. Each Letter of Credit Request shall be accompanied by the Issuing
Bank's standard letter of credit application, standard reimbursement agreement
(each a "REIMBURSEMENT AGREEMENT") and such other documentation as the Issuing
Bank may reasonably require, executed by the Parent Borrower. Upon receipt of
such Letter of Credit Request from the Parent Borrower, the Administrative Agent
shall promptly notify the Issuing Bank and each other Lender thereof. Each
Letter of Credit shall be in form and substance reasonably satisfactory to the
Issuing Bank, with such provisions with respect to the conditions under which a
drawing may be made thereunder and the documentation required in respect of such
drawing as the Issuing Bank shall reasonably require. The Issuing Bank shall, on
the proposed date of issuance, and subject to the terms and conditions of the
Reimbursement Agreement and to the other terms and conditions of this Agreement,
issue the requested Letter of Credit.
(c) Upon each payment by the Issuing Bank of a draft drawn
under a Letter of Credit, the Parent Borrower shall pay to the Administrative
Agent, for the account of the Issuing Bank, an amount equal to such payment.
67
<PAGE>
(d) Notwithstanding anything to the contrary contained herein
or in any Reimbursement Agreement, to the extent that the terms of this
Agreement shall be inconsistent with the terms of such Reimbursement Agreement,
the terms of this Agreement shall govern.
2.9. LETTER OF CREDIT PARTICIPATION AND FUNDING COMMITMENTS
(a) Each Lender hereby unconditionally, irrevocably and
severally (and not jointly) for itself only and without any notice to or the
taking of any action by such Lender, takes an undivided participating interest
in the obligations of the Issuing Bank under and in connection with each Letter
of Credit in an amount equal to such Lender's Commitment Percentage of the
amount of such Letter of Credit. Each Lender shall be liable to the Issuing Bank
for its Commitment Percentage of (i) the unreimbursed amount of any draft drawn
and honored under each Letters of Credit, and (ii) any amounts paid by any
Credit Party pursuant to Sections 2.8(c) or 3.6 that are subsequently rescinded
or avoided, or must be otherwise restored or returned. Such liabilities shall be
unconditional and without regard to the occurrence of any Default or the
compliance by any Credit Party with the Loan Documents.
(b) The Issuing Bank will promptly notify the Administrative
Agent, and the Administrative Agent will promptly notify each Lender (which
notice shall be promptly confirmed in writing) of the date and the amount of any
draft presented under each Letters of Credit with respect to which full
reimbursement is not made as provided in Section 2.8(c), and forthwith upon
receipt of each such notice, such Lender (other than the Issuing Bank in its
capacity as a Lender) shall make available to the Administrative Agent for the
account of the Issuing Bank its Commitment Percentage of the amount of such
unreimbursed draft at the office of the applicable Agent Payment Office, in
Dollars, and in immediately available funds, before 4:00 p.m. on the day such
notice was given by the Administrative Agent, if the relevant notice was given
by the Administrative Agent at or prior to 1:00 p.m. on such day, and before
12:00 noon, on the next Business Day, if the relevant notice was given by the
Administrative Agent after 1:00 p.m. on such day. The Administrative Agent shall
distribute the payments made pursuant to the immediately preceding sentence to
the Issuing Bank promptly upon receipt thereof in like funds as received. Each
Lender shall indemnify and hold harmless the Administrative Agent and the
Issuing Bank from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, costs and
expenses (including reasonable attorneys' fees and expenses and an
administration fee of not less than $100 payable to the Issuing Bank as the
issuer of the relevant Letter of Credit) resulting from any failure on the part
of such Lender to perform its obligations under this Section 2.9 (except in
respect of losses, liabilities, actions, suits, judgments, demands, costs and
expenses incurred by the Issuing Bank to the extent resulting from the gross
negligence or willful misconduct of the Issuing Bank). If a Lender does not make
any payment required under this Section when due, such Lender shall be required
to pay interest to the Administrative Agent for the account of the Issuing Bank
(upon demand therefor) the amount of such
68
<PAGE>
payment at a rate of interest per annum equal to the Federal Funds Rate from the
due date of such payment until the date such payment is received by the
Administrative Agent. The Administrative Agent shall distribute such interest
payments to the Issuing Bank upon receipt thereof in like funds as received.
(c) Whenever the Issuing Bank is reimbursed by any Credit
Party or the Administrative Agent is reimbursed by any Credit Party, for the
account of the Issuing Bank, for any payment under a Letter of Credit and such
payment relates to an amount previously paid by a Lender pursuant to this
Section, the Administrative Agent (or the Issuing Bank, to the extent that it
has received the same) will pay over such payment to such Lender (i) before 4:00
p.m. on the day such payment from such Credit Party is received, if such payment
is received at or prior to 1:00 p.m. on such day, or (ii) before 12:00 noon on
the next succeeding Business Day, if such payment from such Credit Party is
received after 1:00 p.m. on such day.
2.10. ABSOLUTE OBLIGATION WITH RESPECT TO LETTER OF CREDIT PAYMENTS
The Parent Borrower's obligation to reimburse the
Administrative Agent for the account of the Issuing Bank in respect of each
payment under or in respect of the Letters of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which any Credit Party may have or have had
against the beneficiary of such Letter of Credit, the Administrative Agent, the
Issuing Bank, the Swing Line Lender, any Lender or any other Person, including
any defense based on the failure of any drawing to conform to the terms of such
Letter of Credit, any drawing document proving to be forged, fraudulent or
invalid, or the legality, validity, regularity or enforceability of such Letter
of Credit, provided that, with respect to any Letter of Credit, the foregoing
shall not relieve the Issuing Bank of any liability it may have to the Parent
Borrower for any actual damages sustained by the Parent Borrower arising from a
wrongful payment under such Letter of Credit made as a result of the Issuing
Bank's gross negligence, willful misconduct or failure to meet the applicable
standard of care required under UPC 500 issued by the International Chamber of
Commerce (or any customs or practices published in substitution or in lieu
thereof).
2.11. PAYMENTS
(a) Except as otherwise specifically provided in this
Agreement, each payment, including each prepayment, of principal and interest on
the Loans, the Facility Fee, the Letter of Credit Commissions and all other fees
to be paid to the Administrative Agent, the Issuing Bank, the Swing Line Lender
and the Lenders in connection with the Loan Documents (the Facility Fee and the
Letter of Credit Commissions, together with all of such other fees, being
sometimes hereinafter collectively referred to as the "FEES") shall be made by
the Borrowers to the Administrative Agent at the applicable Agent Payment Office
in funds immediately available to the Administrative Agent at such office by
12:00 noon (local time in the city in which such Agent Payment Office is
located) on the due date for such payment, PROVIDED, HOWEVER, that, unless an
Event of Default has
69
<PAGE>
occurred and is continuing and the Required Lenders have directed the
Administrative Agent and the Borrowers to the contrary, and the Administrative
Agent shall have consented thereto, each payment, including each prepayment, of
principal and interest on the Alternate Currency Bid Loans shall be made
directly by the applicable Borrower to the applicable Lender by 12:00 noon
(local time in the city in which such payment is to be made in accordance with
the terms hereof), and such Lender and such Borrower or, if such Borrower is a
Subsidiary Borrower, the Parent Borrower, on behalf of such Borrower, shall
promptly notify the Administrative Agent of the date and amount of such payment.
The failure of the applicable Borrower to make any such payment by such time
shall not constitute a default hereunder, provided that such payment is made on
such due date, but any such payment made after 2:00 p.m. (local time in the city
in which such payment is to be made in accordance with the terms hereof) on such
due date shall be deemed to have been made on the next Business Day or Core
Currency Business Day, as the case may be, for the purpose of calculating
interest on amounts outstanding on the applicable Loans. Subject to Section
9.2(b), promptly upon receipt thereof by the Administrative Agent, (i) each
payment of principal and interest on the Loans shall be remitted by the
Administrative Agent in like funds as received to the Swing Line Lender and each
Lender pro rata according to its Outstanding Percentage of the Loans, and (ii)
each payment of the Facility Fee shall be remitted by the Administrative Agent
in like funds as received to each Lender pro rata according to such Lender's
Revolving Credit Commitment Amount or, if the Revolving Credit Commitments shall
have terminated or been terminated, according to the outstanding principal
amount of such Lender's Revolving Credit Loans.
(b) Notwithstanding anything to the contrary contained in any
Loan Document, each payment (including each prepayment) of principal and
interest on each Alternate Currency Loan shall be made solely in the Currency in
which such Alternate Currency Loan is denominated.
(c) If any payment hereunder or under any Reimbursement
Agreement shall be due and payable on a day which is not a Business Day or a
Core Currency Business Day, as the case may be, the due date thereof (except as
otherwise provided herein) shall be extended to the next Business Day or Core
Currency Business Day, as the case may be, and (except with respect to payments
in respect of the Fees) interest shall be payable at the applicable rate
specified herein during such extension, PROVIDED, HOWEVER, that, if such next
Business Day or Core Currency Business Day, as the case may be, is after the
Revolving Credit Maturity Date or the Swing Line Maturity Date, as the case may
be, any such payment shall be due on the immediately preceding Business Day or
Core Currency Business Day, as the case may be.
70
<PAGE>
2.12. ADDITION AND REMOVAL OF SUBSIDIARY BORROWERS; ADDITION OF
NON-CORE CURRENCIES
(a) ADDITION AND REMOVAL OF SUBSIDIARY BORROWERS
(i) Provided that no Default has occurred and is then
continuing, the Parent Borrower may from time to time direct that any
of its direct or indirect wholly-owned Subsidiaries which is not then
a Subsidiary Borrower become a Subsidiary Borrower by submitting a
Borrower Addendum to the Administrative Agent with respect to such
Subsidiary, together with (A) a certificate, dated the date of such
Borrower Addendum, of the Secretary or Assistant Secretary of such
Subsidiary and substantially in the form of, and with substantially
the same attachments as, the certificate which would have been
required under Section 5.1 if such Subsidiary had become a party
hereto on the Effective Date, and (B) an opinion of counsel (excluding
opinions of foreign counsel) to such Subsidiary in all respects
reasonably satisfactory to the Administrative Agent, provided that, to
the extent that any such certificate, attachment or opinion is not in
English, it shall be accompanied by a certified English translation
thereof. Upon receipt of such Borrower Addendum and all of the
supporting items referred to in clauses (A) and (B) of this Section
2.12(a)(i), the Administrative Agent shall confirm such Borrower
Addendum by signing a copy thereof and shall deliver a copy thereof to
the Parent Borrower, the Issuing Bank, the Swing Line Lender and each
Lender, at which time such Subsidiary shall become a "SUBSIDIARY
BORROWER" hereunder.
(ii) REMOVAL OF SUBSIDIARY BORROWERS. The Parent Borrower may
from time to time direct that any Inactive Subsidiary Borrower cease
to be a Subsidiary Borrower by submitting written notice thereof to
the Administrative Agent. Upon receipt of such notice, the
Administrative Agent shall confirm such notice by signing a copy
thereof and shall deliver a copy thereof to the Parent Borrower and
each Lender, at which time such Inactive Subsidiary Borrower shall
cease to be a "SUBSIDIARY BORROWER" hereunder.
(b) ADDITION OF NON-CORE CURRENCIES. Provided that no Default
has occurred and is then continuing, the Parent Borrower may from time to time
request that any currency which is not then a Non-Core Currency become a
Non-Core Currency by submitting a Currency Addendum with respect to such
currency to the Administrative Agent. Upon receipt of such Currency Addendum,
the Administrative Agent shall confirm such Currency Addendum by signing a copy
thereof and shall deliver a copy thereof to the Parent Borrower, the Issuing
Bank, the Swing Line Lender and each Lender. In the event that BNY consents
(which consent shall not be unreasonably withheld) to such currency becoming a
Non-Core Currency in a writing delivered to the Administrative Agent and the
Parent Borrower on or prior to the third day following the
71
<PAGE>
date of such Currency Addendum, then, on the fourth day following such Currency
Addendum, such currency shall become a "NON-CORE CURRENCY".
2.13. RECORDS
(a) LENDER RECORDS. Each of the Lenders and the Swing Line
Lender will note on its internal records with respect to each Loan made by it:
(i) the date of such Loan and the identity of the Borrower to whom such Loan was
made, (ii) whether such Loan is a Revolving Credit Loan, a Bid Loan, or a Swing
Line Loan, (iii) in the case of each Revolving Credit Loan, (A) whether such
Loan consists of one or more ABR Advances, one or more Eurodollar Advances, one
or more Core Currency Euro Advances, or a combination thereof, and the amount of
each thereof (stated in the applicable Currency), (B) the interest rate (without
regard to the Applicable Margin) applicable to each Advance, and (C) in the case
of each Eurodollar Advance and each Core Currency Euro Advance, the Euro
Interest Period applicable thereto, (iv) in the case of each Bid Loan and each
Swing Line Loan, (A) the Bid Rate or the Negotiated Rate, as the case may be,
applicable thereto, and (B) the Bid Interest Period or the Swing Line Period, as
the case may be, applicable thereto, and (v) each payment and prepayment of the
principal of such Loan.
(b) ADMINISTRATIVE AGENT RECORDS. The Administrative Agent
shall keep records regarding the Loans, the Letters of Credit and the Loan
Documents in accordance with its customary procedures for agented credits.
(c) PRIMA FACIE EVIDENCE. The entries made in the records
maintained pursuant to Sections 2.13(a) and (b) shall, to the extent not
prohibited by applicable law and not otherwise inconsistent with any entries
made in the Notes, be prima facie evidence of the existence and amount of the
obligations of the Borrowers recorded therein; provided that the failure of the
Administrative Agent, the Swing Line Lender or any Lender, as the case may be,
to make any notation on its records shall not affect the respective obligations
of the Credit Parties in respect of the Loan Documents.
(d) NOTES. Upon the request of any Lender or the Swing Line
Lender, as the case may be, to the Administrative Agent and the Parent Borrower,
with respect to any Loan made by such Lender or the Swing Line Lender, as the
case may be, the Parent Borrower agrees to execute and deliver (or cause the
applicable Subsidiary Borrower to execute and deliver), at the Parent Borrower's
own cost and expense, to the Administrative Agent (for delivery to such Lender
or the Swing Line Lender, as the case may be) a promissory note of the
applicable Borrower evidencing such Loan, substantially in the form of Exhibit
Q-1, Q-2 or Q-3, as the case may be, payable to the order of such Lender or the
Swing Line Lender, as the case may be, and dated the Effective Date.
72
<PAGE>
3. INTEREST, FEES, CONVERSIONS AND YIELD PROTECTIONS
3.1. INTEREST RATES AND PAYMENT DATES
(a) PRIOR TO MATURITY. Except as otherwise provided in Section
3.1(b), prior to maturity, the Loans shall bear interest on the outstanding
principal amount thereof at the applicable interest rate or rates per annum set
forth below:
<TABLE>
<CAPTION>
ADVANCES/LOANS RATE
-------------- ----
<S> <C>
Each ABR Advance Alternate Base Rate.
Each Eurodollar Advance Eurodollar Rate for the applicable Euro Interest
Period PLUS the Applicable Margin.
Each Core Currency Euro Core Currency Euro Rate for the
Advance applicable Euro Interest Period PLUS the
Applicable Margin.
Each Bid Loan Bid Rate applicable thereto for the applicable Bid
Interest Period.
Each Swing Line Loan Negotiated Rate applicable thereto for the
applicable Swing Line Interest Period.
</TABLE>
(b) DEFAULT RATE. Upon the occurrence and during the
continuance of an Event of Default under Section 9.1(a) or (b), (i) the unpaid
principal amount of any Loans shall bear interest payable on demand at a rate
per annum (whether before or after the entry of a judgment thereon) equal to (A)
in the case of each Dollar Bid Loan and each Swing Line Loan, 2% PLUS the Bid
Rate or the Negotiated Rate, as the case may be, applicable thereto until the
last day of the Bid Interest Period or the Swing Line Interest Period, as the
case may be, applicable thereto and, thereafter, 2% PLUS the Alternate Base
Rate, (B) in the case of each Alternate Currency Bid Loan, 2% PLUS the Bid Rate
applicable thereto until the last day of the Bid Interest Period applicable
thereto and, thereafter, 2% PLUS the rate determined by the applicable Lender to
be reflective of the all-in cost of funds to such Lender with respect thereto,
and (C) in all other cases, 2% PLUS the rate which would be otherwise applicable
under Section 3.1(a), and (ii) any overdue interest or other amount payable
under the Loan Documents shall bear interest (whether before or after the entry
of a judgment thereon) payable on demand at a rate per annum equal to 2% PLUS
the Alternate Base Rate.
(c) IN GENERAL. Interest on all Loans shall be calculated on
the basis of a 360-day year for the actual number of days elapsed, except that
interest on (i) ABR Advances, to the extent based on the BNY Rate, and (ii) Bid
Loans denominated in Canadian Dollars or Sterling Pounds, in each case shall be
calculated on the basis of a
73
<PAGE>
365- or 366-day year (as the case may be) for the actual number of days elapsed.
Except as otherwise expressly provided herein, interest shall be payable in
arrears on each Interest Payment Date and upon each payment (including
prepayment) of the Loans. Any change in the interest rate on the Loans resulting
from a change in the Alternate Base Rate or reserve requirements shall become
effective as of the opening of business on the day on which such change shall
become effective. The Administrative Agent shall, as soon as practicable, notify
the Parent Borrower, the Issuing Bank, the Swing Line Lender and the Lenders of
the effective date and the amount of each such change in the BNY Rate, but any
failure to so notify shall not in any manner affect the obligation of any
Borrower to pay interest on the Loans in the amounts and on the dates required.
Each determination of a rate of interest by the Administrative Agent or BNY, as
the case may be, pursuant to the Loan Documents shall be conclusive and binding
on all parties hereto absent manifest error. Each Borrower acknowledges that to
the extent interest payable on ABR Advances is based on the BNY Rate, such rate
is only one of the bases for computing interest on loans made by the Lenders,
and by basing interest payable on ABR Advances on the BNY Rate, the Lenders have
not committed to charge, and no Borrower has in any way bargained for, interest
based on a lower or the lowest rate at which any Lender may now or in the future
make loans to other borrowers.
3.2. FEES
(a) FACILITY FEE. The Parent Borrower agrees to pay to the
Administrative Agent, for the account of the Lenders in accordance with each
Lender's Commitment Percentage, a fee (the "FACILITY FEE"), during the Revolving
Credit Commitment Period, at a rate per annum equal to the Applicable Margin
applicable thereto on the average daily Aggregate Revolving Credit Commitment
Amount, regardless of usage. The Facility Fee shall be payable (i) quarterly in
arrears on the last day of each March, June, September and December during the
Revolving Credit Commitment Period, commencing on the first such day following
the Effective Date, (ii) on the date of any reduction in the Aggregate Revolving
Credit Commitment Amount (to the extent of the amount which shall have accrued
on the amount of such reduction), and (iii) on the Revolving Credit Maturity
Date. The Facility Fee shall be calculated on the basis of a 360-day year for
the actual number of days elapsed.
(b) LETTER OF CREDIT COMMISSIONS. The Parent Borrower agrees
to pay to the Administrative Agent, for the account of the Lenders in accordance
with each Lender's Commitment Percentage, commissions (the "LETTER OF CREDIT
COMMISSIONS") with respect to the Letters of Credit for the period from and
including the date of issuance of each thereof to and including the expiration
date thereof, at a rate per annum equal to (i) with respect to Standby Letters
of Credit, the Applicable Margin applicable thereto in effect on the date of
issuance thereof, and (ii) with respect to Trade Letters of Credit, the
Applicable Margin applicable thereto in effect on the date of issuance thereof,
in each case on the average daily maximum amount available under any contingency
to be drawn under such Letter of Credit. The Letter of Credit Commissions shall
be (A) calculated on
74
<PAGE>
the basis of a 360-day year for the actual number of days elapsed and (B)
payable quarterly in arrears on the last day of each March, June, September
and December of each year and on the Revolving Credit Commitment Termination
Date.
(c) AGENTS' FEES. Each Borrower agrees to pay to the
Administrative Agent, for its own account, such other fees, if any, as have been
agreed to in writing by such Borrower and the Administrative Agent.
3.3. CONVERSIONS; CONCERNING INTEREST PERIODS
(a) Each applicable Borrower may elect from time to time to
convert one or more Eurodollar Advances to ABR Advances by giving, or, if such
Borrower is a Subsidiary Borrower, by causing the Parent Borrower, on behalf of
such Borrower, to give, the Administrative Agent at least two Business Day's
prior irrevocable notice of such election, specifying the amount to be
converted, provided, that any such conversion of Eurodollar Advances shall only
be made on the last day of the Interest Period applicable thereto, except as
otherwise provided in Section 3.7. In addition, each applicable Borrower may
elect from time to time to convert (i) ABR Advances to Eurodollar Advances, (ii)
Eurodollar Advances to new Eurodollar Advances by selecting a new Euro Interest
Period therefor, and (iii) Core Currency Euro Advances to new Core Currency Euro
Advances in the same applicable Currency by selecting a new Euro Interest Period
therefor, in each case by giving, or, if such Borrower is a Subsidiary Borrower,
by causing the Parent Borrower, on behalf of the Borrower, to give, the
Administrative Agent at least three Core Currency Business Days' prior
irrevocable notice of such election, specifying the amount to be so converted
and the initial Euro Interest Period relating thereto, provided that any such
conversion of ABR Advances to Eurodollar Advances shall only be made on a Core
Currency Business Day and, except as otherwise provided in Section 3.7, any such
conversion of Eurodollar Advances to new Eurodollar Advances or Core Currency
Euro Advances to new Core Currency Euro Advances, as the case may be, shall only
be made on the last day of the Euro Interest Period applicable to the Eurodollar
Advances or Core Currency Euro Advances, as the case may be, which are to be
converted to such new Eurodollar Advances or such new Core Currency Euro
Advances, as the case may be. Each such notice shall be irrevocable and shall be
promptly confirmed by delivery to the Administrative Agent of a Notice of
Conversion manually signed by the applicable Borrower or, if such Borrower is a
Subsidiary Borrower, the Parent Borrower, on behalf of such Borrower, as the
case may be. The Administrative Agent shall promptly notify each Lender (by
telephone or otherwise, such notice to be confirmed by facsimile or other
writing) of each such election. Advances may be converted pursuant to this
Section in whole or in part, provided that (A) the amount to be converted to
each Eurodollar Advance, when aggregated with any Eurodollar Advance to be made
on such date in accordance with Section 2.3 and having the same Euro Interest
Period as such first Eurodollar Advance, shall equal no less than $5,000,000 or
such amount plus a whole multiple of $1,000,000 in excess thereof, and (B) the
amount to be converted to each Core Currency Euro
75
<PAGE>
Advance, when aggregated with any Core Currency Euro Advance to be made on such
date in accordance with Section 2.3 and having the same Euro Interest Period,
and being denominated in the same applicable Currency, as such first Core
Currency Euro Advance, shall equal no less than an amount in such Currency
having a Dollar Equivalent of approximately $2,500,000 or such amount plus an
amount in such Currency having a Dollar Equivalent of a whole multiple of
approximately $1,000,000 in excess thereof.
(b) Notwithstanding anything in this Agreement to the
contrary, upon the occurrence and during the continuance of an Event of Default,
no Borrower shall have the right to elect to convert any existing ABR Advance to
a new Eurodollar Advance or to convert any existing Eurodollar Advance to a new
Eurodollar Advance. In such event, except as otherwise provided in Section 3.7,
(i) each ABR Advance shall be automatically continued as an ABR Advance, (ii)
each Eurodollar Advance shall be automatically converted to an ABR Advance on
the last day of the Euro Interest Period applicable thereto, and (iii) each Core
Currency Euro Advance shall, on the last day of the Euro Interest Period
applicable thereto, be automatically converted to a new Core Currency Euro
Advance in the same applicable Currency with a one month Euro Interest Period.
(c) Each conversion shall be effected by each Lender by
applying the proceeds of its new ABR Advance, new Eurodollar Advance or new Core
Currency Euro Advance, as the case may be, to its Advances (or portion thereof)
being converted (it being understood that any such conversion shall not
constitute a borrowing for purposes of Sections 4, 5 or 6).
(d) Notwithstanding anything to the contrary contained in any
Loan Document, if the applicable Borrower or, if such Borrower is a Subsidiary
Borrower, the Parent Borrower, on behalf of such Borrower, shall have failed,
for any reason, to elect a Eurodollar Advance or Core Currency Euro Advance, as
the case may be, under Sections 2.3 or 3.3, as the case may be, in connection
with any borrowing of new Loans or expiration of a Euro Interest Period with
respect to any existing Eurodollar Advance or Core Currency Euro Advance, as the
case may be, the amount of the Loans subject to such borrowing or such existing
Eurodollar Advance or Core Currency Euro Advance, as the case may be, shall,
except as otherwise provided in Section 3.7, thereafter be (i) in the case of a
Eurodollar Advance, an ABR Advance, and (ii) in the case of a Core Currency Euro
Advance, a new Core Currency Euro Advance in the same applicable Currency with a
one month Euro Interest Period, in each case until such time, if any, as such
Borrower shall elect a new Eurodollar Advance or Core Currency Euro Advance, as
the case may be, pursuant to Section 3.3.
(e) Neither Bid Loans nor Swing Line Loans may be converted.
(f) At no time shall the aggregate outstanding number (whether
as a result of borrowings or conversions), of (i) all Eurodollar Advances exceed
ten, (ii) all
76
<PAGE>
Core Currency Euro Advances exceed eight, and (iii) all Swing Line Interest
Periods exceed three.
3.4. INDEMNIFICATION FOR LOSS
Notwithstanding anything contained herein to the contrary, (i)
if any Borrower shall fail for any reason to borrow or convert from or into any
Fixed Rate Loan on the date specified therefor in the applicable Borrowing
Request, Notice of Conversion, or Bid, as the case may be, or (ii) if any Fixed
Rate Loan to such Borrower shall terminate for any reason prior to the last day
of the Euro Interest Period, Bid Interest Period or Swing Line Interest Period,
as the case may be, applicable thereto, or (iii) if such Fixed Rate Loan is
repaid or prepaid, in whole or in part, for any reason prior to the last day of
the Euro Interest Period, Bid Interest Period or Swing Line Interest Period, as
the case may be, applicable thereto, such Borrower agrees to indemnify each
applicable Lender or the Swing Line Lender, as the case may be, against, and to
pay on demand directly to such Lender or the Swing Line Lender, as the case may
be, the amount (calculated by such Lender or the Swing Line Lender, as the case
may be, using any method chosen by it which is customarily used by it for such
purpose) equal to any loss or out-of-pocket expense (excluding loss of margin)
suffered by such Lender or the Swing Line Lender, as the case may be, as a
result of such failure to borrow or convert or such termination, repayment or
prepayment, including any loss, cost or expense suffered by such Lender or the
Swing Line Lender, as the case may be, in liquidating or employing deposits
acquired to fund or maintain the funding of its Fixed Rate Loans to such
Borrower, or redeploying funds prepaid or repaid, in amounts which correspond to
such Fixed Rate Loans, and any internal processing charge customarily charged by
such Lender or the Swing Line Lender, as the case may be, in connection
therewith.
3.5. CAPITAL ADEQUACY
If the amount of capital required to be maintained by any
Lender, the Issuing Bank or the Swing Line Lender, as the case may be, or any
Person directly or indirectly owning or controlling such Lender, the Issuing
Bank or the Swing Line Lender, as the case may be (each a "CONTROL PERSON"),
shall be affected by the occurrence of a Regulatory Change and such Lender, the
Issuing Bank or the Swing Line Lender, as the case may be, shall have determined
that such Regulatory Change shall have had or will thereafter have the effect of
reducing (i) the rate of return on capital of such Lender, the Issuing Bank, the
Swing Line Lender or such Control Person, as the case may be, or (ii) the asset
value to such Lender, the Issuing Bank, the Swing Line Lender or such Control
Person, as the case may be, of the Loans, Letters of Credit, Revolving Credit
Commitments, Letter of Credit Commitment or Swing Line Commitment made or
maintained by such Lender, the Issuing Bank or the Swing Line Lender, as the
case may be, to a level below that which such Lender, the Issuing Bank, the
Swing Line Lender or such Control Person, as the case may be, could have
achieved or would thereafter be able to achieve but for such Regulatory Change
(after taking into account its policies
77
<PAGE>
regarding capital adequacy) by an amount deemed by such Lender, the Issuing Bank
or the Swing Line Lender, as the case may be, to be material to such Lender, the
Issuing Bank, the Swing Line Lender or such Control Person, as the case may be,
then the Borrowers severally agree to pay to such Lender, the Issuing Bank, the
Swing Line Lender or such Control Person, as the case may be, within ten days
after demand by such Lender, the Issuing Bank or the Swing Line Lender, such
additional amount or amounts as shall be sufficient to compensate such Lender,
the Issuing Bank, the Swing Line Lender or such Control Person, as the case may
be, for such reduction (which demand shall be accompanied by a statement setting
forth the calculations of such additional amount or amounts which statement
shall be conclusive absent manifest error).
3.6. REIMBURSEMENT FOR INCREASED COSTS
If any Lender, the Issuing Bank or the Swing Line Lender, as
the case may be, shall determine that a Regulatory Change does or shall impose,
modify or make applicable any reserve, special deposit, compulsory loan,
assessment, increased cost or similar requirement against assets held by, or
deposits of, or advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender in respect of its Fixed Rate
Loans or Letter of Credit, as the case may be, which is not otherwise included
in the determination of a Eurodollar Rate, Core Currency Euro Rate, Bid Rate or
Negotiated Rate, as the case may be, and the result of any of the foregoing is
to increase the cost to such Lender, the Issuing Bank or the Swing Line Lender,
as the case may be, of making, renewing, converting or maintaining its Fixed
Rate Loans or Letters of Credit, as the case may be, or its commitment to make
such Fixed Rate Loans or the Letters of Credit, as the case may be, or to reduce
any amount receivable under the Loan Documents in respect of its Fixed Rate
Loans or Letters of Credit, as the case may be, then, in any such case, the
Borrowers severally agree to pay such Lender, the Issuing Bank or the Swing Line
Lender, as the case may be, within ten days after demand therefor, such
additional amounts as is sufficient to compensate such Lender, the Issuing Bank
or the Swing Line Lender, as the case may be, for such additional cost or
reduction in such amount receivable which it deems to be material as determined
by it (which demand shall be accompanied by a statement setting forth the
calculations of such additional amounts which statement shall be conclusive
absent manifest error).
3.7. ILLEGALITY OF FUNDING
Notwithstanding any other provision hereof, if any Lender or
the Swing Line Lender, as the case may be, shall reasonably determine that any
law, regulation, treaty or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for such Lender or
the Swing Line Lender, as the case may be, to make or maintain any Fixed Rate
Loan as contemplated by this Agreement, such Lender or the Swing Line Lender, as
the case may be, shall promptly notify the Parent Borrower and the
Administrative Agent thereof, and (i) the commitment or other obligation of such
Lender or the Swing Line Lender, as the case may be, to make such Fixed Rate
Loans or
78
<PAGE>
convert ABR Advances to Eurodollar Advances or Core Currency Euro Advances to
new Core Currency Euro Advances, as the case may be, shall forthwith be
suspended, (ii) such Lender or the Swing Line Lender, as the case may be, shall
fund its portion of each requested Eurodollar Advance as an ABR Advance, (iii)
such Lender's or the Swing Line Lender's, as the case may be, Loans then
outstanding as such Eurodollar Advances, if any, shall be converted
automatically to an ABR Advance on the last day of the then current Euro
Interest Period applicable thereto or at such earlier time as may be required,
and (iv) in the case of each Core Currency Euro Advance, each Bid Loan and each
Swing Line Loan, the applicable Borrower shall take such action as such Lender
or the Swing Line Lender, as the case may be, may reasonably request with a view
to minimizing the obligations of such Borrower under Section 3.4. If the
commitment of any Lender or the Swing Line Lender, as the case may be, with
respect to Fixed Rate Loans is suspended pursuant to this Section and such
Lender shall have obtained actual knowledge that it is once again legal for such
Lender or the Swing Line Lender, as the case may be, to make or maintain Fixed
Rate Loans, such Lender or the Swing Line Lender, as the case may be, shall
promptly notify the Administrative Agent and the Parent Borrower thereof and,
upon receipt of such notice by each of the Administrative Agent and the Parent
Borrower, such Lender's or the Swing Line Lender's, as the case may be,
commitment to make or maintain Fixed Rate Loans shall be reinstated.
3.8. SUBSTITUTED INTEREST RATE
In the event that (i) the Administrative Agent or BNY shall
have determined (which determination shall be conclusive and binding upon the
Borrowers) that by reason of circumstances affecting the interbank market either
adequate or reasonable means do not exist for ascertaining the Eurodollar Rate
or Core Currency Euro Rate, as the case may be, applicable pursuant to Section
3.1 or (ii) the Required Lenders shall have notified the Administrative Agent
that they have determined (which determination shall be conclusive and binding
on the Borrowers) that the applicable Eurodollar Rate or Core Currency Euro
Rate, as the case may be, will not adequately and fairly reflect the cost to
such Lenders of maintaining or funding loans bearing interest based on such
Eurodollar Rate or Core Currency Euro Rate, as the case may be, with respect to
any portion of the Loans that any Borrower has requested be made as Eurodollar
Advances or Core Currency Euro Advances, as the case may be, or Eurodollar
Advances or Core Currency Euro Advances, as the case may be, that will result
from the requested conversion of any portion of the Advances into or of
Eurodollar Advances or Core Currency Euro Advances, as the case may be (each an
"AFFECTED ADVANCE"), the Administrative Agent shall promptly notify the Parent
Borrower and the Lenders (by telephone or otherwise, to be promptly confirmed in
writing) of such determination, on or, to the extent practicable, prior to the
requested Borrowing Date or Conversion Date for such Affected Advances. If the
Administrative Agent shall give such notice, (a) in the case of Eurodollar
Advances, (A) such Affected Advances shall be made as ABR Advances, (B) the
Advances (or any portion thereof) that were to have been converted to Affected
Advances shall be converted to ABR Advances, and (C) any outstanding
79
<PAGE>
Affected Advances shall be converted, on the last day of the then current Euro
Interest Period with respect thereto, to ABR Advances, and (b) in the case of
Core Currency Euro Advances, the interest rate for such Affected Advances shall
be determined pursuant to clause (a)(iii) of the definition of Core Currency
Euro Rate. Until any notice under clause (i) or (ii), as the case may be, of
this Section has been withdrawn by the Administrative Agent (by notice to the
Parent Borrower promptly upon either (1) the Administrative Agent having
determined that such circumstances affecting the interbank market no longer
exist and that adequate and reasonable means do exist for determining the
Eurodollar Rate or Core Currency Euro Rate, as the case may be, pursuant to
Section 3.1 or (2) the Administrative Agent having been notified by such
Required Lenders that circumstances no longer render the Advances (or any
portion thereof) Affected Advances, (x) no further Eurodollar Advances shall be
required to be made by the Lenders, (y) no Borrower shall have the right to
convert all or any portion of the Loans to or as Eurodollar Advances, and (z)
the interest rate for Core Currency Euro Advances shall be determined pursuant
to clause (a)(iii) of the definition of Core Currency Euro Rate.
3.9. TAXES
(a) PAYMENTS TO BE FREE AND CLEAR. Subject to Sections 3.9(d),
3.9(e) and 3.9(f), all payments by each Credit Party under the Loan Documents
shall be made free and clear of, and without any deduction or withholding for,
any Indemnified Tax. If any Credit Party or any other Person is required by any
law, rule, regulation, order, directive, treaty or guideline to make any
deduction or withholding (which deduction or withholding would constitute an
Indemnified Tax) from any amount required to be paid by any Credit Party to or
on behalf of any Indemnified Tax Person under any Loan Document (each a
"REQUIRED PAYMENT"), then:
(i) such Credit Party shall notify the Administrative Agent
and such Indemnified Tax Person of any such requirement or any change
in any such requirement as soon as such Credit Party becomes aware
thereof;
(ii) such Credit Party shall pay such Indemnified Tax prior to
the date on which penalties attach thereto, such payment to be made
(to the extent that the liability to pay is imposed on such Credit
Party) for its own account or (to the extent that the liability to pay
is imposed on such Indemnified Tax Person) on behalf and in the name
of such Indemnified Tax Person;
(iii) such Credit Party shall pay to such Indemnified Tax
Person an additional amount such that such Indemnified Tax Person
shall receive on the due date therefor an amount equal to the Required
Payment had no such deduction or withholding been required; and
(iv) such Credit Party shall, within 30 days after paying such
Indemnified Tax, deliver to the Administrative Agent and such
Indemnified Tax
80
<PAGE>
Person satisfactory evidence of such payment to the relevant
Governmental Authority.
(b) OTHER INDEMNIFIED TAXES. If any Indemnified Tax Person or
any affiliate thereof is required by any law, rule, regulation, order,
directive, treaty or guideline to pay any Indemnified Tax (excluding an
Indemnified Tax which is subject to Section 3.9(a)) with respect to any sum paid
or payable by any Credit Party to such Indemnified Tax Person under the Loan
Documents, then, within five days after such Indemnified Tax Person shall have
notified such Credit Party thereof (which notice shall be accompanied by a
statement setting forth the reasonable calculation thereof), such Credit Party
shall pay to such Indemnified Tax Person the amount of such Indemnified Tax.
(c) TAX ON INDEMNIFIED TAXES. If any amounts are payable by
any Credit Party in respect of Indemnified Taxes pursuant to Section 3.9(a) or
(b), such Credit Party agrees to pay to the applicable Indemnified Tax Person,
within five days of written request therefor (which request shall set forth the
reasonable calculations thereof), an amount equal to all Taxes imposed with
respect to such amounts as such Indemnified Tax Person shall determine in good
faith are payable by such Indemnified Tax Person or any affiliate thereof in
respect of such amounts and in respect of any amounts paid to or on behalf of
such Indemnified Tax Person pursuant to this Section 3.9(c).
(d) EXCEPTION FOR EXISTING TAXES. No amount shall be required
to be paid to any Indemnified Tax Person under Section 3.9(a) or (b) with
respect to any Indemnified Tax to the extent that such Indemnified Tax would
have been required to have been paid under any law, rule, regulation, order,
directive, treaty or guideline in effect on (i) the date of the applicable Bid,
in the case of any Bid Loan, (ii) the date of the applicable Borrowing Request,
in the case of any Swing Line Loan, and (iii) the Relevant Date, in all other
cases.
(e) U.S. TAX CERTIFICATES. Each Lender that is organized under
the laws of any jurisdiction other than the United States or any political
subdivision thereof shall deliver to the Administrative Agent for transmission
to the Parent Borrower, on or prior to the Relevant Date, and at such other
times, as may be necessary in the determination of the Parent Borrower, any
other Credit Party or the Administrative Agent (each in the reasonable exercise
of its discretion), such certificates, documents or other evidence, properly
completed and duly executed by such Lender (including Internal Revenue Service
Form 1001 or Form 4224 (or, in each case, any equivalent or successor form)) to
establish that such Lender is not subject to deduction or withholding of United
States federal income tax under Section 1441 or 1442 of the Code or otherwise
(or under any comparable provisions of any successor statute) with respect to
any payments to such Lender of principal, interest, fees or other amounts
payable under the Loan Documents. No Credit Party shall be required to pay any
additional amount to any such Lender under Section 3.9(a)(iii) if such Lender
shall have failed to satisfy the requirements of the
81
<PAGE>
immediately preceding sentence; provided that, if such Lender shall have
satisfied such requirements on the Relevant Date, nothing in this Section 3.9(e)
shall relieve any Credit Party of its obligation to pay any additional amounts
pursuant to Section 3.9(a)(iii) in the event that, as a result of any change in
applicable law (including any change in the interpretation thereof), such Lender
is no longer properly entitled to deliver certificates, forms, documents or
other evidence at a subsequent date establishing the fact that such Lender is
not subject to deduction or withholding as described in the immediately
preceding sentence.
(f) OTHER TAX CERTIFICATES. Each Indemnified Tax Person agrees
to use reasonable efforts to deliver to any Credit Party or the Administrative
Agent, promptly upon any reasonable request therefor from time to time by such
Credit Party or the Administrative Agent, such certificates, forms, documents
and information as may be required by applicable law, regulation, order,
directive, guideline or treaty from time to time and to file all appropriate
forms to obtain a certificate, form or other appropriate documents from the
appropriate Governmental Authorities to establish that payments made in respect
of any Alternate Currency Loan by such Credit Party can be made without (or at a
reduced rate of) deduction or withholding of Indemnified Taxes, PROVIDED,
HOWEVER, that if such Indemnified Tax Person is or becomes unable by virtue of
any change in applicable law, regulation or treaty, to establish such exemption
or reduction, such Credit Party shall nonetheless remain obligated under Section
3.9(a) to pay the amounts described therein, and PROVIDED FURTHER that no
Indemnified Tax Person shall be required to take any action under this Section
3.9(f) which, in the sole discretion of such Indemnified Tax Person, would cause
such Indemnified Tax Person or any affiliate thereof to suffer a material
economic, legal or regulatory disadvantage.
(g) OTHER TAXES. Each Credit Party agrees to pay any current
or future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, the Loan
Documents or otherwise with respect to, the Loan Documents.
3.10. OPTION TO FUND
Each Lender and the Swing Line Lender has indicated that, if
any Borrower requests a Eurodollar Advance, a Core Currency Euro Advance or a
Swing Line Loan, or if such Lender makes a Bid Loan to any Borrower, as the case
may be, such Lender or the Swing Line Lender, as the case may be, may wish to
purchase one or more deposits in order to fund or maintain its funding of its
Commitment Percentage of such Eurodollar Advance or Core Currency Euro Advance,
its Bid Loan or its Swing Line Loan, as the case may be, during the Euro
Interest Period, Bid Interest Period or Swing Line Interest Period, as the case
may be, applicable thereto; it being understood that the provisions of this
Agreement relating to such funding are included only for the
82
<PAGE>
purpose of determining the rate of interest to be paid in respect of such
Eurodollar Advance, Core Currency Euro Advance, Bid Loan or Swing Line Loan, as
the case may be, and any amounts owing under Sections 3.4 and 3.6. Each Lender
and the Swing Line Lender shall be entitled to fund and maintain its funding of
all or any part of each Eurodollar Advance, each Core Currency Euro Advance,
each Bid Loan and each Swing Line Loan in any manner it sees fit, but all such
determinations under Sections 3.4 and 3.6 shall be made as if each Lender and
the Swing Line Lender had actually funded and maintained its Commitment
Percentage of each such Eurodollar Advance or such Core Currency Euro Advance,
or the amount of its Bid Loan or Swing Line Loan, as the case may be, during the
applicable Euro Interest Period, Bid Interest Period or Swing Line Interest
Period, as the case may be, through the purchase of deposits in an amount equal
to the amount of its Commitment Percentage of such Eurodollar Advance or such
Core Currency Euro Advance, or the amount of its Bid Loan or Swing Line Loan, as
the case may be, having a maturity corresponding to such Euro Interest Period,
Bid Interest Period or Swing Line Interest Period, as the case may be. Any
Lender or the Swing Line Lender, as the case may be, may fund its Commitment
Percentage of each Eurodollar Advance or Core Currency Euro Advance, or each Bid
Loan or Swing Line Loan, as the case may be, from or for the account of any
branch, office, affiliate, or correspondent bank of such Lender or the Swing
Line Lender, as the case may be, as such Lender or the Swing Line Lender, as the
case may be, may choose from time to time.
3.11. CHANGES OF LENDING OFFICES
(a) With respect to any Loan of any Lender or the Swing Line
Lender, or any Letter of Credit, as the case may be, such Lender, the Swing Line
Lender or the Issuing Bank, as the case may be, agrees that upon the occurrence
of any event giving rise to the operation of Section 3.4, 3.5, 3.6, 3.7 or 3.9
with respect to such Loan or such Letter of Credit, as the case may be, it will,
if requested by the applicable Borrower or, if such Borrower is a Subsidiary
Borrower, the Parent Borrower, on behalf of such Borrower, use reasonable
efforts (subject to overall policy considerations of such Lender, the Swing Line
Lender or the Issuing Bank, as the case may be) to designate another office of
such Lender, the Swing Line Lender or the Issuing Bank, as the case may be, for
such Loan or such Letter of Credit, as the case may be, affected by such event,
provided that such designation is made on such terms that such Lender, the Swing
Line Lender or the Issuing Bank, as the case may be, suffers no economic, legal
or regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of such Section. Nothing in this Section
shall affect or postpone any of the obligations of any Borrower or the right of
any Lender, the Swing Line Lender or the Issuing Bank, as the case may be,
provided in Sections 3.4, 3.5, 3.6, 3.7 and 3.9.
(b) Each of the Lenders, the Swing Line Lender and the Issuing
Bank shall have the right at any time and from time to time to transfer any of
its Loans to a different office, affiliate or
83
<PAGE>
subsidiary thereof, provided that it shall promptly notify the Administrative
Agent and the Parent Borrower of any such change of office, affiliate or
subsidiary, PROVIDED, HOWEVER, that such Lender, the Swing Line Lender or the
Issuing Bank, as the case may be, shall not be entitled to receive any greater
amount under Sections 3.4, 3.5, 3.6, 3.7 or 3.9 as a result of such transfer
than it would be entitled to immediately prior thereto unless such claim would
have arisen even if such transfer had not occurred.
3.12. REPLACEMENT OF LENDERS
Notwithstanding the foregoing, if (i) any Lender shall request
compensation pursuant to Section 3.5 or 3.6, (ii) any Lender shall give any
notice to the Parent Borrower or the Administrative Agent pursuant to Section
3.7, or (iii) any Borrower shall be required to pay any additional amounts
pursuant to Section 3.9 in respect of any Lender, then, in each such case, the
Parent Borrower may require that such Lender transfer all of its right, title
and interest under the Loan Documents to any lender identified by the Parent
Borrower (a "PROPOSED LENDER") if such Proposed Lender agrees to assume all of
the obligations of such Lender for consideration equal to the outstanding
principal amount of such Lender's Loans and all unreimbursed sums paid by such
Lender under Sections 2.2(d) and 2.9(b), together with interest thereon to the
date of such transfer and all other amounts payable under the Loan Documents to
such Lender on or prior to the date of such transfer (including any fees accrued
hereunder and any amounts which would be payable under Section 3.4 as if all of
such Lender's Loans were being prepaid in full on such date). Subject to the
execution and delivery of an Assignment and Acceptance Agreement and such other
documents as such Lender may reasonably require, and the satisfaction of all of
the other terms and conditions of Section 11.6, such Proposed Lender shall be a
"LENDER" for all purposes hereunder. Without prejudice to the survival of any
other agreement of the Borrowers under the Loans Documents, the agreements of
the Borrowers contained in Sections 3.4, 3.5, 3.6, 11.5 and 11.7 (without
duplication of any payments made to such Lender by any Borrower or the Proposed
Lender) shall survive for the benefit of any Lender replaced under this Section
3.12 with respect to the time prior to such replacement.
4. REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and the Lenders to enter
into this Agreement, the Lenders to make the Revolving Credit Loans, the Issuing
Bank to issue the Letters of Credit and the Lenders to participate therein, and
the Swing Line Lender to make the Swing Line Loans and the Lenders to
participate therein, the Parent Borrower makes the following representations and
warranties to the Administrative Agent, the Issuing Bank, the Swing Line Lender
and each Lender:
4.1. SUBSIDIARIES; CAPITALIZATION
As of the Effective Date, the Parent Borrower has only the
Subsidiaries set forth on, and the authorized, issued and outstanding Capital
Stock of the Parent Borrower
84
<PAGE>
and each such Subsidiary is as set forth on, Schedule 4.1. Except as set forth
on Schedule 4.1, the shares of, or partnership or other interests in, each
Subsidiary of the Parent Borrower are owned beneficially and of record by the
Parent Borrower or another Subsidiary of the Parent Borrower, are free and clear
of all Liens (other than Permitted Liens) and are duly authorized, validly
issued, fully paid and nonassessable. As of the Effective Date, except as set
forth on Schedule 4.1, (i) neither the Parent Borrower nor any of its
Subsidiaries has issued any securities convertible into, or options or warrants
for, any common or preferred equity securities thereof, (ii) there are no
agreements, voting trusts or understandings binding upon the Parent Borrower or
any of its Subsidiaries with respect to the voting securities of the Parent
Borrower or any of its Subsidiaries or affecting in any manner the sale, pledge,
assignment or other disposition thereof, including any right of first refusal,
option, redemption, call or other right with respect thereto, whether similar or
dissimilar to any of the foregoing, and (iii) all of the outstanding Capital
Stock of each Subsidiary of the Parent Borrower is owned by the Parent Borrower
or another Subsidiary of the Parent Borrower.
4.2. EXISTENCE AND POWER
Each of the Parent Borrower and its Subsidiaries is duly
organized or formed and validly existing in good standing under the laws of the
jurisdiction of its formation, has all requisite power and authority to own its
Property and to carry on its business as now conducted, and is in good standing
and authorized to do business in each jurisdiction in which the nature of the
business conducted therein or the Property owned by it therein makes such
qualification necessary, except where such failure to qualify could not
reasonably be expected to have a Material Adverse Effect.
4.3. AUTHORITY AND EXECUTION
Each of the Parent Borrower and each of its Subsidiaries has
full legal power and authority to enter into, execute, deliver and perform the
terms of the Loan Documents to which it is a party all of which have been duly
authorized by all proper and necessary corporate, partnership or other
applicable action and are in full compliance with its Organizational Documents.
The Parent Borrower and each of its Subsidiaries has duly executed and delivered
the Loan Documents to which it is a party.
4.4. BINDING AGREEMENT
The Loan Documents constitute the valid and legally binding
obligations of each of the Parent Borrower and its Subsidiaries, in each case to
the extent it is a party thereto, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally.
85
<PAGE>
4.5. LITIGATION
Except as set forth on Schedule 4.5, there are no actions,
suits or proceedings at law or in equity or by or before any Governmental
Authority (whether purportedly on behalf of the Parent Borrower or any of its
Subsidiaries) pending or, to the knowledge of the Parent Borrower, threatened
against the Parent Borrower or any of its Subsidiaries or maintained by the
Parent Borrower or any of its Subsidiaries or which may affect the Property of
the Parent Borrower or any of its Subsidiaries or any of their respective
Properties or rights, which (i) could reasonably be expected to have a Material
Adverse Effect, (ii) call into question the validity or enforceability of, or
otherwise seek to invalidate, any Loan Document, or (iii) might, individually or
in the aggregate, materially and adversely affect any of the transactions
contemplated by any Loan Document.
4.6. REQUIRED CONSENTS
Except for information filings required to be made in the
ordinary course of business which are not a condition to the performance by the
Parent Borrower or any of its Subsidiaries under the Loan Documents to which it
is a party, no consent, authorization or approval of, filing with, notice to, or
exemption by, stockholders or holders of any other equity interest, any
Governmental Authority or any other Person, which has not already been obtained
or made, is required to authorize, or is required in connection with the
execution, delivery or performance of, the Loan Documents to which the Parent
Borrower or any of its Subsidiaries is a party, or is required as a condition to
the validity or enforceability of the Loan Documents to which any of the same is
a party. Each Borrower, prior to each borrowing by it hereunder in any
jurisdiction, has obtained all necessary approvals and consents of, and has
filed or caused to be filed all reports, applications, documents, instruments
and information required to be filed pursuant to all applicable laws, rules,
regulations and requests of, all Governmental Authorities in connection with
such borrowing in such jurisdiction.
4.7. ABSENCE OF DEFAULTS; NO CONFLICTING AGREEMENTS
(a) None of the Parent Borrower or any of its Subsidiaries is
in default under any mortgage, indenture, contract or agreement to which it is a
party or by which it or any of its Property is bound, the effect of which
default could reasonably be expected to have a Material Adverse Effect. The
execution, delivery or carrying out of the terms of the Loan Documents will not
constitute a default under, or result in the creation or imposition of, or
obligation to create, any Lien upon any Property of the Parent Borrower or any
of its Subsidiaries or result in a breach of or require the mandatory repayment
of or other acceleration of payment under or pursuant to the terms of any such
mortgage, indenture, contract or agreement.
(b) None of the Parent Borrower or any of its Subsidiaries is
in default with respect to any judgment, order, writ, injunction, decree or
decision of any
86
<PAGE>
Governmental Authority which default could reasonably be expected to have a
Material Adverse Effect.
4.8. COMPLIANCE WITH APPLICABLE LAWS
Each of the Parent Borrower and its Subsidiaries is complying
in all material respects with all statutes, regulations, rules and orders of all
Governmental Authorities which are applicable to it, a violation of which could
reasonably be expected to have a Material Adverse Effect.
4.9. TAXES
Each of the Parent Borrower and each of its Subsidiaries has
filed or caused to be filed all tax returns required to be filed and has paid,
or has made adequate provision for the payment of, all taxes shown to be due and
payable on said returns or in any assessments made against it (other than those
being contested as required under Section 7.4) which would be material to the
Parent Borrower or any of its Subsidiaries, and no tax Liens have been filed
with respect thereto. The charges, accruals and reserves on the books of the
Parent Borrower and each of its Subsidiaries with respect to all taxes are, to
the best knowledge of the Parent Borrower, adequate for the payment of such
taxes, and the Parent Borrower knows of no unpaid assessment which is due and
payable against the Parent Borrower or any of its Subsidiaries or any claims
being asserted which could reasonably be expected to have a Material Adverse
Effect, except such thereof as are being contested as required under Section
7.4, and for which adequate reserves have been set aside in accordance with
GAAP.
4.10. GOVERNMENTAL REGULATIONS
Neither the Parent Borrower, any of its Subsidiaries nor any
Person controlled by, controlling, or under common control with, the Parent
Borrower or any of its Subsidiaries, is subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, as
amended, or the Investment Company Act of 1940, as amended, or is subject to any
statute or regulation which prohibits or restricts the incurrence of
Indebtedness, including statutes or regulations relative to common or contract
carriers or to the sale of electricity, gas, steam, water, telephone, telegraph
or other public utility services.
4.11. FEDERAL RESERVE REGULATIONS; USE OF LOAN PROCEEDS
Neither the Parent Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock.
After giving effect to the making of each Loan and each Letter of Credit, Margin
Stock will constitute less than 25% of the assets (as determined by any
reasonable method) of the Parent Borrower and its Subsidiaries.
87
<PAGE>
4.12. PLANS
Each Employee Benefit Plan is in compliance with ERISA and the
Code, where applicable, in all material respects. As of the Effective Date, (i)
the amount of all Unfunded Pension Liabilities under the Pension Plans,
excluding any plan which is a Multiemployer Plan, does not exceed $50,000, and
(ii) the amount of the aggregate Unrecognized Retiree Welfare Liability under
all applicable Employee Benefit Plans does not exceed $50,000. The Parent
Borrower and each of its Subsidiaries and ERISA Affiliates has complied with the
requirements of Section 515 of ERISA with respect to each Pension Plan which is
a Multiemployer Plan. As of the Effective Date, the Parent Borrower and its
Subsidiaries and ERISA Affiliates have no liability under Section 4201 or 4204
of ERISA (including the obligation to satisfy secondary liability as a result of
purchaser default) and the aggregate potential annual withdrawal liability
payments, as determined in accordance with Title IV of ERISA, of the Parent
Borrower and its Subsidiaries and ERISA Affiliates with respect to all Pension
Plans which are Multiemployer Plans is approximately $50,000. The Parent
Borrower and its Subsidiaries and ERISA Affiliates have, as of the Effective
Date, made all contributions or payments to or under each such Pension Plan
required by law or the terms of such Pension Plan or any contract or agreement
with respect thereto. No material liability to the PBGC has been, or is expected
by the Parent Borrower, any of its Subsidiaries or any ERISA Affiliate to be,
incurred by the Parent Borrower, any such Subsidiary or any ERISA Affiliate.
Liability, as referred to in this Section includes any joint and several
liability. Each Employee Benefit Plan which is a group health plan within the
meaning of Section 5000(b)(1) of the Code is in material compliance with the
continuation of health care coverage requirements of Section 4980B of the Code.
4.13. FINANCIAL STATEMENTS
The Parent Borrower has heretofore delivered to the
Administrative Agent and the Lenders copies of its Form 10K for the fiscal year
ending December 28, 1996, containing the audited Consolidated Balance Sheets of
the Parent Borrower and its Subsidiaries as of December 28, 1996, and the
related Consolidated Statements of Operations, Stockholder's Equity and Cash
Flows for the such fiscal year, and its Form 10Q for the fiscal quarter ended
March 29, 1997, containing the unaudited Consolidated Balance Sheet of the
Parent Borrower and its Subsidiaries for such fiscal quarter, together with the
related Consolidated Statements of Operations and Cash Flows for such fiscal
quarter (with the applicable related notes and schedules, the "FINANCIAL
STATEMENTS"). The Financial Statements fairly present the Consolidated financial
condition and results of the operations of the Parent Borrower and its
Subsidiaries as of the dates and for the periods indicated therein and have been
prepared in conformity with GAAP. Except as reflected in the Financial
Statements or in the footnotes thereto, neither the Parent Borrower nor any of
its Subsidiaries has any obligation or liability of any kind (whether fixed,
accrued, Contingent, unmatured or otherwise) which, in accordance with GAAP,
should have been shown in the Financial Statements and was not. Since December
28,
88
<PAGE>
1996, the Parent Borrower and each of its Subsidiaries has conducted its
business only in the ordinary course, and there has been no Material Adverse
Change.
4.14. PROPERTY
Each of the Parent Borrower and each of its Subsidiaries has
good and marketable title to, or a valid leasehold interest in, all of its real
Property, and is the owner of, or has a valid lease of, all personal property,
in each case which is material to the Parent Borrower and its Subsidiaries,
taken as a whole, subject to no Liens, except such Permitted Liens. All leases
of Property to the Parent Borrower or any of its Subsidiaries are in full force
and effect, the Parent Borrower or such Subsidiary, as the case may be, enjoys
quiet and undisturbed possession under all leases of real property and neither
the Parent Borrower nor any of its Subsidiaries is in default beyond any
applicable grace period of any provision thereof, the effect of which could
reasonably be expected to have a Material Adverse Effect.
4.15. AUTHORIZATIONS
Each of the Parent Borrower and each of its Subsidiaries
possesses or has the right to use all franchises, licenses and other rights as
are material and necessary for the conduct of its business, and with respect to
which it is in compliance, with no known conflict with the valid rights of
others which could reasonably be expected to have a Material Adverse Effect. No
event has occurred which permits or, to the best knowledge of the Parent
Borrower, after notice or the lapse of time or both, or any other condition,
could reasonably be expected to permit, the revocation or termination of any
such franchise, license or other right which revocation or termination could
reasonably be expected to have a Material Adverse Effect.
4.16. ENVIRONMENTAL MATTERS
Neither the Parent Borrower nor any of its Subsidiaries (i)
has received written notice or otherwise learned of any claim, demand, action,
event, condition, report or investigation indicating or concerning any potential
or actual liability which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect, arising in connection with (a) any
non-compliance with or violation of the requirements of any applicable federal,
state, local or foreign environmental health or safety statute or regulation, or
(b) the release or threatened release of any toxic or hazardous waste, substance
or constituent, or other substance into the environment, (ii) to the best
knowledge of the Parent Borrower, has any threatened or actual liability in
connection with the release or threatened release of any toxic or hazardous
waste, substance or constituent, or other substance into the environment which
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect, (iii) has received notice of any federal, state, local or
foreign investigation evaluating whether any remedial action is needed to
respond to a release or threatened release of any toxic or hazardous waste,
substance or constituent or other substance into the environment for
89
<PAGE>
which the Parent Borrower or any of its Subsidiaries is or would be liable,
which liability would reasonably be expected to have a Material Adverse Effect,
or (iv) has received notice that the Parent Borrower or any of its Subsidiaries
is or may be liable to any Person under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et
seq., or any analogous state law, which liability would reasonably be expected
to have a Material Adverse Effect. The Parent Borrower and each of its
Subsidiaries is in compliance with the financial responsibility requirements of
federal, state, local and foreign environmental laws to the extent applicable,
including those contained in 40 C.F.R., parts 264 and 265, subpart H, and any
analogous state law, except in those cases in which the failure so to comply
would not reasonably be expected to have a Material Adverse Effect.
4.17. ABSENCE OF CERTAIN RESTRICTIONS
No indenture, certificate of designation for preferred stock,
agreement or instrument to which the Parent Borrower or any of its Subsidiaries
is a party (other than this Agreement), prohibits or limits in any way, directly
or indirectly the ability of any Subsidiary of the Parent Borrower to make
Restricted Payments or repay any Indebtedness to the Parent Borrower or to
another Subsidiary of the Parent Borrower.
4.18. NO MISREPRESENTATION
No representation or warranty contained in any Loan
Document and no certificate or report from time to time furnished by the
Parent Borrower or any of its Subsidiaries in connection with the
transactions contemplated thereby, contains or will contain a misstatement of
material fact or omits or will omit to state a material fact required to be
stated in order to make the statements therein contained not misleading in
the light of the circumstances under which made, provided that any
projections or pro-forma financial information contained therein are based
upon good faith estimates and assumptions believed by the Parent Borrower to
be reasonable at the time made, it being recognized by the Agents and the
Lenders that such projections as to future events are not to be viewed as
facts, and that actual results during the period or periods covered thereby
may differ from the projected results.
5. CONDITIONS OF LENDING - THE FIRST BORROWING DATE
In addition to the conditions precedent set forth in Section 6, the
obligation of each Lender to make Revolving Credit Loans and the Issuing Bank to
issue Letters of Credit on the first Borrowing Date shall be subject to the
fulfillment of the following conditions precedent:
90
<PAGE>
5.1. EVIDENCE OF ACTION
The Administrative Agent shall have received a certificate,
dated the first Borrowing Date, of the Secretary or Assistant Secretary or other
analogous counterpart of each Credit Party (i) attaching a true and complete
copy of the resolutions of its Managing Person and of all documents evidencing
all necessary corporate, partnership or similar action (in form and substance
satisfactory to the Administrative Agent) taken by it to authorize the Loan
Documents to which it is a party and the transactions contemplated thereby, (ii)
attaching a true and complete copy of its Organizational Documents, (iii)
setting forth the incumbency of its officer or officers or other analogous
counterpart who may sign the Loan Documents, including therein a signature
specimen of such officer or officers, and (iv) attaching a certificate of good
standing of the Secretary of State of the jurisdiction of its formation.
5.2. OPINIONS OF COUNSEL
The Administrative Agent shall have received (i) an opinion of
McGrath, North, Mullin & Kratz, P.C., counsel to the Parent Borrower and its
Subsidiaries, dated the first Borrowing Date, substantially in the form of
Exhibit F-1, and (ii) an opinion of Thomas P. Egan, corporate counsel of the
Parent Borrower and its Subsidiaries, dated the first Borrowing Date,
substantially in the form of Exhibit F-2.
5.3. OPINION OF SPECIAL COUNSEL
The Administrative Agent shall have received an opinion of
Special Counsel, dated the first Borrowing Date, substantially in the form of
Exhibit G.
5.4. SUBSIDIARY GUARANTY
Each of (a) American Lighting Standards Corporation, (b)
Microflect Company, Inc., and (c) Valmont International Corp. shall have
delivered to the Administrative Agent a guaranty, dated as of the Effective
Date, substantially in the form of Exhibit R (as amended, supplemented or
otherwise modified from time to time, the "SUBSIDIARY GUARANTY").
5.5. FEES AND EXPENSES
All fees payable to the Administrative Agent, the Issuing
Bank, the Swing Line Lender and the Lenders on the first Borrowing Date shall
have been paid, the fees and expenses of Special Counsel in connection with the
preparation, negotiation and closing of the Loan Documents shall have been paid.
91
<PAGE>
6. CONDITIONS OF LENDING - EACH BORROWING DATE
The obligation of each Lender to make any Loan, the Swing Line Lender
to make any Swing Line Loan, and the Issuing Bank to issue any Letter of Credit
on any Borrowing Date shall be subject to the fulfillment of the following
conditions precedent:
6.1. COMPLIANCE
On each Borrowing Date and after giving effect to the Loans to
be made thereon (i) there shall exist no Default, (ii) each of the
representations and warranties contained in each Loan Document shall be true and
correct with the same effect as though such representation and warranty had been
made on such Borrowing Date, except to the extent such representation and
warranty specifically relates to an earlier date, in which case such
representation and warranty shall have been true and correct on and as of such
earlier date, and (iii) each of the Parent Borrower and its Subsidiaries shall
be in compliance with all of the terms, covenants and conditions of each Loan
Document to which it is a party. Each borrowing by any Borrower shall constitute
a certification by such Borrower and, if such Borrower is a Subsidiary Borrower,
the Parent Borrower, and each request by the Parent Borrower for the issuance of
a Letter of Credit shall constitute a certification by the Parent Borrower, as
of such Borrowing Date that each of the foregoing matters is true and correct in
all respects.
6.2. BORROWING REQUEST; LETTER OF CREDIT REQUEST; BID REQUEST
With respect to the Loans to be made, and the Letters of
Credit to be issued, on each Borrowing Date, the Administrative Agent shall have
received, (i) in the case of Revolving Credit Loans or Swing Line Loans, a
Borrowing Request, (ii) in the case of Letters of Credit, a Letter of Credit
Request, and (iii) in the case Bid Loans, a Bid Request and such other documents
required to be delivered pursuant to Section 2.4, in each case duly executed by
the applicable Borrower or, if such Borrower is a Subsidiary Borrower, the
Parent Borrower, on behalf of such Borrower.
6.3. LOAN CLOSINGS
All documents required by the provisions of the Loan Documents
to be executed or delivered to the Administrative Agent, the Issuing Bank, the
Swing Line Lender or any Lender on or before the applicable Borrowing Date shall
have been so executed and delivered on or before such Borrowing Date.
6.4. OTHER DOCUMENTS
Each of the Administrative Agent, the Issuing Bank, the Swing
Line Lender and the Lenders shall have received such other documents, each in
form and substance reasonably satisfactory to it, as it shall reasonably require
in connection with
92
<PAGE>
the making of the Loans and the issuance of the Letters of Credit on such
Borrowing Date.
7. AFFIRMATIVE COVENANTS
The Parent Borrower agrees that, so long as this Agreement is in
effect, any Loan or Reimbursement Obligation remains outstanding, or any other
amount is owing under any Loan Document to any Lender, the Issuing Bank, the
Swing Line Lender or the Administrative Agent, the Parent Borrower shall:
7.1. FINANCIAL STATEMENTS AND INFORMATION
Maintain, and cause each of its Subsidiaries to maintain, a
standard system of accounting in accordance with GAAP, and furnish or cause to
be furnished to the Administrative Agent and each Lender:
(a) COMPLIANCE CERTIFICATE. Within 45 days after the end of
each of the first three fiscal quarters (90 days after the end of the
last fiscal quarter), a Compliance Certificate, certified by a
Financial Officer of the Parent Borrower.
(b) FORM 10K. As soon as available, but in any event within 90
days after the end of each fiscal year of the Parent Borrower, a copy
of the annual audited financial statements of the Parent Borrower and
its Subsidiaries, prepared on a Consolidated basis in accordance with
GAAP, as filed with the SEC. Such financial statements shall be
certified without qualification by the Accountants, which
certification shall (i) state that the audit by such Accountants was
conducted in accordance with generally accepted auditing standards,
(ii) state that such audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in such financial
statements, and (iii) include the opinion of such Accountants that
such financial statements present fairly, in all material respects,
the financial position of the Parent Borrower and its Subsidiaries and
the results of their operations and their cash flows for such fiscal
year in conformity with GAAP, except as otherwise specified in such
opinion.
(c) FORM 10Q. As soon as available, but in any event within 45
days after the end of each fiscal quarter (except the last fiscal
quarter) of each fiscal year of the Parent Borrower, copies of the
unaudited financial statements of the Parent Borrower and its
Subsidiaries, prepared on a Consolidated basis in accordance with
GAAP, as filed with the SEC.
(d) OTHER INFORMATION. Such other information as the
Administrative Agent or any Lender may reasonably request from time to
time.
93
<PAGE>
7.2. CERTIFICATES; OTHER INFORMATION
Furnish to the Administrative Agent and each Lender:
(a) Prompt written notice if: (i) any Indebtedness of the
Parent Borrower or any of its Subsidiaries in an aggregate amount in
excess of $500,000 is declared or shall become due and payable prior
to its stated maturity, or is called and not paid when due, (ii) the
holders of any notes (other than any notes issued hereunder),
certificate, security or other evidence of Indebtedness, or any
obligees with respect to any other Indebtedness of the Parent Borrower
or any of its Subsidiaries, have the right to declare Indebtedness in
an aggregate amount in excess of $500,000 due and payable prior to its
stated maturity, or (iii) there shall occur and be continuing a
Default;
(b) Prompt written notice of: (i) any citation, summons,
subpoena, order to show cause or other document naming the Parent
Borrower or any of its Subsidiaries a party to any proceeding before
any Governmental Authority which could reasonably be expected to have
a Material Adverse Effect or which calls into question the validity or
enforceability of any of the Loan Documents, and include with such
notice a copy of such citation, summons, subpoena, order to show cause
or other document, (ii) any lapse or other termination of any material
license, permit, franchise or other authorization issued to the Parent
Borrower or any of its Subsidiaries by any Person or Governmental
Authority, and (iii) any refusal by any Person or Governmental
Authority to renew or extend any such material license, permit,
franchise or other authorization, which lapse, termination, refusal or
dispute could reasonably be expected to have a Material Adverse
Effect;
(c) Promptly upon becoming available, copies of all (i)
regular, periodic or special reports, schedules and other material
which the Parent Borrower or any of its Subsidiaries may now or
hereafter be required to file with or deliver to any securities
exchange or the SEC, and (ii) annual reports relating to the Parent
Borrower or any of its Subsidiaries;
(d) Prompt written notice in the event that the Parent
Borrower, any of its Subsidiaries or any ERISA Affiliate knows, or has
reason to know, that (i) any Termination Event with respect to a
Pension Plan has occurred or will occur, (ii) any condition exists
with respect to a Pension Plan which presents a material risk of
termination of the Pension Plan, imposition of an excise tax,
requirement to provide security to the Pension Plan or other liability
on the Parent Borrower, any of its Subsidiaries or any ERISA
Affiliate, (iii) the Parent Borrower, any of its Subsidiaries or any
ERISA Affiliate has applied for a waiver of the minimum funding
standard under Section 412 of the Code with respect to a Pension Plan,
(iv) the aggregate amount of the Unfunded Pension Liabilities under
all Pension Plans is in excess of $50,000, (v) the aggregate amount of
Unrecognized Retiree
94
<PAGE>
Welfare Liability under all applicable Employee Benefit Plans is in
excess of $50,000, (vi) the Parent Borrower, any of its Subsidiaries
or any ERISA Affiliate has engaged in a Prohibited Transaction with
respect to an Employee Benefit Plan, (vii) the imposition of any tax
under Section 4980B(a) of the Code or (viii) the assessment of a civil
penalty under Section 502(c) of ERISA, together with a certificate of
a Financial Officer of the Parent Borrower setting forth the details
of such event and the action which the Parent Borrower, such
Subsidiary or such ERISA Affiliate proposes to take with respect
thereto, together with a copy of all notices and filings with respect
thereto.
(e) Prompt written notice in the event that Parent Borrower,
any of its Subsidiaries or any ERISA Affiliate shall receive a demand
letter from the PBGC notifying the Parent Borrower, such Subsidiary or
such ERISA Affiliate of any final decision finding liability and the
date by which such liability must be paid, together with a copy of
such letter and a certificate of a Financial Officer of the Parent
Borrower setting forth the action which the Parent Borrower, such
Subsidiary or such ERISA Affiliate proposes to take with respect
thereto.
(f) Promptly upon the same becoming available, and in any
event by the date such amendment is adopted, a copy of any Pension
Plan amendment that the Parent Borrower, any of its Subsidiaries or
any ERISA Affiliate proposes to adopt which would require the posting
of security under Section 401(a)(29) of the Code, together with a
certificate of a Financial Officer of the Parent Borrower setting
forth the reasons for the adoption of such amendment and the action
which the Parent Borrower, such Subsidiary or such ERISA Affiliate
proposes to take with respect thereto.
(g) As soon as possible and in any event by the tenth day
after any required installment or other payment under Section 412 of
the Code owed to a Pension Plan shall have become due and owing and
remain unpaid a copy of the notice of failure to make required
contributions provided to the PBGC by the Parent Borrower, any of its
Subsidiaries or any ERISA Affiliate under Section 412(n) of the Code,
together with a certificate of a Financial Officer setting forth the
action which the Parent Borrower, such Subsidiary or such ERISA
Affiliate proposes to take with respect thereto.
(h) Such other information as the Administrative Agent or any
Lender shall reasonably request from time to time.
7.3. LEGAL EXISTENCE
Except as may be otherwise permitted by Sections 8.3, 8.4 and
8.5, maintain, and cause each of its Subsidiaries to maintain, its corporate,
partnership or analogous existence, as the case may be, in good standing in the
jurisdiction of its formation and in each other jurisdiction in which the
failure so to do could reasonably be
95
<PAGE>
expected to have a Material Adverse Effect, except that any Subsidiary of the
Parent Borrower (other than an Active Subsidiary Borrower or a Guarantor) may
fail to maintain its corporate, partnership or analogous existence, as the case
may be, in good standing in any jurisdiction at any time, provided that such
failure could not reasonably be expected to have a Material Adverse Effect.
7.4. TAXES
Pay and discharge when due, and cause each of its Subsidiaries
so to do, all Taxes upon or with respect to the Parent Borrower or such
Subsidiary and all Taxes upon the income, profits and Property of the Parent
Borrower and its Subsidiaries, which if unpaid, could reasonably be expected to
have a Material Adverse Effect or become a Lien on Property of the Parent
Borrower or such Subsidiary (other than a Permitted Lien), unless and to the
extent only that such Taxes shall be contested in good faith and by appropriate
proceedings diligently conducted by the Parent Borrower or such Subsidiary and
provided that such reserve or other appropriate provision as shall be required
by the Accountants in accordance with GAAP shall have been made therefor.
7.5. INSURANCE
Maintain, and cause each of its Subsidiaries to maintain, with
financially sound and reputable insurance companies insurance on all its
Property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption
coverage) as are usually insured against in the same general area by companies
engaged in the same or a similar business; and furnish to the Administrative
Agent, upon written request, full information as to the insurance carried.
7.6. PERFORMANCE OF OBLIGATIONS
Pay and discharge when due, and cause each of its Subsidiaries
so to do, all lawful Indebtedness, obligations and claims for labor, materials
and supplies or otherwise which, if unpaid, might (i) have a Material Adverse
Effect or (ii) become a Lien upon Property of the Parent Borrower or any of its
Subsidiaries other than a Permitted Lien, unless and to the extent only that the
validity of such Indebtedness, obligation or claim shall be contested in good
faith and by appropriate proceedings diligently conducted and provided that the
Parent Borrower shall give the Administrative Agent prompt notice of any such
contest and that such reserve or other appropriate provision as shall be
required by the Accountants in accordance with GAAP shall have been made
therefor.
7.7. CONDITION OF PROPERTY
At all times, maintain, protect and keep in good repair,
working order and condition (ordinary wear and tear excepted), and cause each of
its Subsidiaries so to do,
96
<PAGE>
all Property necessary to the operation of the Parent Borrower's or such
Subsidiary's business, except where the failure so to do could not reasonably be
expected to have a Material Adverse Effect.
7.8. OBSERVANCE OF LEGAL REQUIREMENTS
Observe and comply in all respects, and cause each of its
Subsidiaries so to do, with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time hereafter
may be applicable to it, a violation of which could reasonably be expected to
have a Material Adverse Effect, except such thereof as shall be contested in
good faith and by appropriate proceedings diligently conducted by it, provided
that the Parent Borrower shall give the Administrative Agent prompt notice of
such contest and that such reserve or other appropriate provision as shall be
required by the Accountants in accordance with GAAP shall have been made
therefor.
7.9. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS
At all reasonable times, upon reasonable prior notice, permit
representatives of the Administrative Agent, the Issuing Bank, the Swing Line
Lender and each Lender to visit the offices of the Parent Borrower and each of
its Subsidiaries, to examine the books and records thereof and Accountants'
reports relating thereto, and to make copies or extracts therefrom, to discuss
the affairs of the Parent Borrower and each such Subsidiary with the respective
officers thereof, and to examine and inspect the Property of the Parent Borrower
and each such Subsidiary.
7.10. AUTHORIZATIONS
Maintain, and cause each of its Subsidiaries to maintain, in
full force and effect, all material licenses, franchises, permits, licenses,
authorizations and other rights as are necessary for the conduct of its
business.
7.11. FINANCIAL COVENANTS
(a) FIXED CHARGE COVERAGE RATIO. Maintain at all times during
the periods set forth below, a Fixed Charge Coverage Ratio of not less than the
ratios set forth below:
97
<PAGE>
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through June 1.65:1.00
30, 1999
July 1, 1999 through June 30, 1.85:1.00
2000
July 1, 2000 and thereafter 2.00:1.00.
</TABLE>
(b) LEVERAGE RATIO. Maintain at all times a Leverage Ratio of
not more than 2.00:1.00.
7.12. SUBSIDIARIES
(a) Except as may otherwise be permitted by Sections 7.3, 8.3,
8.4 and 8.5, at all times cause each Subsidiary Borrower and each Guarantor to
be a direct or indirect wholly-owned Subsidiary of the Parent Borrower.
(b) On or prior to each date hereafter upon which a Person
shall have become a Material Subsidiary, cause such Subsidiary to become a party
to the Subsidiary Guaranty, in accordance with the terms thereof, on and as of
such date and, in the event that such date shall occur after the first Borrowing
Date, to deliver to the Administrative Agent, simultaneously with the execution
and delivery of the same, (i) a certificate, dated the date such Material
Subsidiary shall have become a party to the Subsidiary Guaranty, executed by
such Material Subsidiary and substantially in the form of, and with
substantially the same attachments as, the certificate which would have been
required under Section 5.1 if such Material Subsidiary had become a party to the
Subsidiary Guaranty on or before the first Borrowing Date, and (ii) if requested
by the Administrative Agent, an opinion of counsel to such Material Subsidiary,
covering the same matters with respect to such Material Subsidiary as were
covered by the opinions delivered pursuant to Section 5.2, in form and substance
reasonably satisfactory to the Administrative Agent.
8. NEGATIVE COVENANTS
The Parent Borrower agrees that, so long as this Agreement is in
effect, any Loan or Reimbursement Obligation remains outstanding, or any other
amount is owing under any Loan Document to any Lender, the Issuing Bank, the
Swing Line Lender or the Administrative Agent, the Parent Borrower shall not,
directly or indirectly:
98
<PAGE>
8.1. INDEBTEDNESS
Create, incur, assume or suffer to exist any liability for
Indebtedness, or permit any of its Subsidiaries so to do, except (i)
Indebtedness due under the Loan Documents, (ii) Indebtedness existing on the
Effective Date as set forth on Schedule 8.1 and refinancings thereof, (iii)
Unrestricted Intercompany Indebtedness, (iv) Other Intercompany Indebtedness,
provided that, immediately after the incurrence of each such Other Intercompany
Indebtedness, the Other Intercompany Basket Amount shall not exceed an amount
equal to 20% of Consolidated Tangible Net Worth, (v) Indebtedness in an
aggregate principal amount not in excess of 5% of Consolidated Tangible Net
Worth at any one time outstanding (a) in respect of Capital Leases, (b) secured
by Liens on Property (including, in the event such Property constitutes capital
stock of a newly acquired Subsidiary of the Parent Borrower, Liens on the
Property of such Subsidiary) acquired by the Parent Borrower or any of its
Subsidiaries after the Effective Date, provided that such Liens are in existence
on the date of such acquisition and were not placed on such Property in
contemplation of such acquisition, and (c) other purchase money Indebtedness,
provided that, in each case under this Section 8.1(v), the Lien securing such
Indebtedness is permitted by Section 8.2, and (vi) other unsecured Indebtedness,
provided that, (a) immediately before and after giving effect to the incurrence
thereof, no Default shall or would exist, and (b) the aggregate outstanding
principal amount of all such Indebtedness incurred by the Subsidiaries of the
Parent Borrower shall not exceed $10,000,000 at any time.
8.2. LIENS
Create, incur, assume or suffer to exist any Lien upon any of
its Property, whether now owned or hereafter acquired, or permit any of its
Subsidiaries so to do, except (i) Liens for Taxes in the ordinary course of
business which are not delinquent or which are being contested in accordance
with Section 7.4, provided that enforcement of such Liens is stayed pending such
contest, (ii) Liens in connection with workers' compensation, unemployment
insurance or other social security obligations (but not ERISA), (iii) deposits
or pledges to secure bids, tenders, contracts (other than contracts for the
payment of Indebtedness), leases, statutory obligations, surety and appeal bonds
and other obligations of like nature arising in the ordinary course of business,
(iv) zoning ordinances, easements, rights of way, minor defects, irregularities,
and other similar restrictions affecting real Property which do not materially
and adversely affect the value of such real Property or materially impair its
use for the operation of the business of the Parent Borrower or such Subsidiary,
(v) Liens arising by operation of law such as mechanics', materialmen's,
carriers', warehousemen's liens incurred in the ordinary course of business
which are being contested in accordance with Section 7.6, (vi) Liens arising out
of judgments or decrees which are being contested in accordance with Section
7.6, provided that enforcement of such Liens is stayed pending such contest,
(vii) statutory Liens in favor of lessors arising in connection with the
Property leased to the Parent Borrower or any of its Subsidiaries, (viii) Liens
under capital leases and Liens on
99
<PAGE>
Property (including, in the event such Property constitutes capital stock of a
newly acquired Subsidiary of the Parent Borrower, Liens on the Property of such
Subsidiary) acquired after the Effective Date and either existing on such
Property when acquired, or created contemporaneously with such acquisition, to
secure the payment or financing of the purchase price thereof, provided that
such Liens attach only to the Property so purchased or acquired and provided
further that the Indebtedness secured by such Liens is permitted by Section
8.1(v), (ix) Liens pursuant to the Synthetic Lease Arrangement, and (x) Liens on
Property of the Parent Borrower and its Subsidiaries existing on the Effective
Date as set forth on Schedule 8.2, as renewed from time to time, but not any
increases in the amounts secured thereby or extensions thereof to additional
Property.
8.3. MERGERS AND CONSOLIDATIONS
Consolidate or merge into or with any Person, or enter into
any binding agreement to do so which is not contingent on obtaining the consent
of the requisite Lenders, or permit any of its Subsidiaries so to do, except:
(a) provided that, immediately before and after giving effect
thereto, no Default shall exist, (i) the Parent Borrower may
consolidate or merge with any direct or indirect wholly-owned
Subsidiary thereof (other than an Active Subsidiary Borrower),
provided that the Parent Borrower shall be the survivor, (ii) any
Active Subsidiary Borrower may consolidate or merge with any direct or
indirect wholly-owned Subsidiary of the Parent Borrower (other than an
Active Subsidiary Borrower), provided that such Active Subsidiary
Borrower shall be the survivor, and (iii) any Active Subsidiary
Borrower may consolidate or merge with any other Active Subsidiary
Borrower which shall be organized under the laws of, and have its
principal office in, the same national jurisdiction as such Active
Subsidiary Borrower, provided that the survivor shall have assumed in
a manner in all respects reasonably satisfactory to the Administrative
Agent all of the other entity's obligations and liabilities under the
Loans Documents, in each case whether fixed, contingent, then existing
or thereafter arising, created, assumed, incurred or acquired, and
whether before or after the occurrence of any Event of Default under
Section 9.1(g) or (h); and
(b) other consolidations and mergers permitted by Sections
8.4(c), 8.4(d), 8.4(e), 8.5(c), 8.5(d) and 8.5(e).
8.4. ACQUISITIONS
Make any Acquisition or enter into any binding agreement to do
so which is not contingent on obtaining the consent of the requisite Lenders, or
permit any of its Subsidiaries so to do, except:
100
<PAGE>
(a) Acquisitions of Investments permitted by Section 8.6;
(b) Acquisitions pursuant to the Synthetic Lease Arrangement;
(c) Unrestricted Intercompany Acquisitions, provided that, in
the event that any such Unrestricted Intercompany Acquisition shall be
effected by or through a consolidation or merger involving the Parent
Borrower or any Active Subsidiary Borrower, then such consolidation or
merger shall be otherwise permitted by Section 8.3(a);
(d) Other Intercompany Acquisitions, provided that (i) each
such Other Intercompany Acquisition shall be otherwise permitted by
Section 8.10, (ii) in the event that any such Other Intercompany
Acquisition shall be effected by or through a consolidation or merger
involving the Parent Borrower or any Active Subsidiary Borrower, then,
in the case of the Parent Borrower, the Parent Borrower shall be the
survivor, and, in the case of such Active Subsidiary Borrower, such
Active Subsidiary Borrower shall be the survivor unless otherwise
permitted by Section 8.3(a), and (iii) to the extent that the
aggregate consideration paid in connection with any such Other
Intercompany Acquisition shall be comprised of one or more
Investments, each such Investment shall be otherwise permitted by
Section 8.6(g) or 8.6(h); and
(e) other Acquisitions by the Parent Borrower or any of its
Subsidiaries, provided that, (i) in the event that any Operating
Entity shall be acquired in connection with any such Acquisition, then
such Operating Entity shall be in, or otherwise constitute, a line of
business which is related or complementary to the line of business of
the Parent Borrower and its Subsidiaries, (ii) in the event that any
such Acquisition shall be effected by or through a consolidation or
merger involving the Parent Borrower or any Active Subsidiary
Borrower, then, in the case of the Parent Borrower, the Parent
Borrower shall be the survivor, and, in the case of such Active
Subsidiary Borrower, such Active Subsidiary Borrower shall be the
survivor unless otherwise permitted by Section 8.3(a), and (iii)
immediately before and after giving effect to each such Acquisition,
no Default shall or would exist, and all of the representations and
warranties contained in Section 4 shall be true and correct as if then
made.
8.5. DISPOSITIONS
Make any Disposition, or permit any of its Subsidiaries so to
do, except:
(a) Dispositions of any Investments permitted under Sections
8.6(a) and 8.6(c);
101
<PAGE>
(b) Dispositions of Property which, in the reasonable opinion
of the Parent Borrower or such Subsidiary, as the case may be, is
obsolete or no longer useful in the conduct of it business;
(c) Unrestricted Intercompany Dispositions, provided that, in
the event that any such Unrestricted Intercompany Disposition shall be
effected by or through a consolidation or merger involving the Parent
Borrower or any Active Subsidiary Borrower, then, in the case of the
Parent Borrower, the Parent Borrower shall be the survivor, and, in
the case of such Active Subsidiary Borrower, such Active Subsidiary
Borrower shall be the survivor unless otherwise permitted by Section
8.3(a);
(d) Other Intercompany Dispositions, provided that (i) each
such Other Intercompany Disposition shall be otherwise permitted by
Section 8.10, (ii) in the event that any such Other Intercompany
Disposition shall be effected by or through a consolidation or merger
involving the Parent Borrower or any Active Subsidiary Borrower, then,
in the case of the Parent Borrower, the Parent Borrower shall be the
survivor, and, in the case of such Active Subsidiary Borrower, such
Active Subsidiary Borrower shall be the survivor unless otherwise
permitted by Section 8.3(a), and (iii) to the extent that the
aggregate consideration paid in connection with any such Other
Intercompany Disposition shall be comprised of one or more
Investments, each such Investment shall be otherwise permitted by
Section 8.6(g) or 8.6(h); and
(e) other Dispositions, provided that, (i) in the event any
such Disposition shall be effected by or through a consolidation or
merger involving the Parent Borrower or any Active Subsidiary
Borrower, then, in the case of the Parent Borrower, the Parent
Borrower shall be the survivor, and, in the case of such Active
Subsidiary Borrower, such Active Subsidiary Borrower shall be the
survivor unless otherwise permitted by Section 8.3(a), (ii)
immediately before and after giving effect to each such Disposition,
no Default shall or would exist, and all of the representations and
warranties contained in Section 4 shall be true and correct as if then
made, and (iii) immediately after giving effect to each such
Disposition, the aggregate fair market value of the Property sold,
assigned, transferred or otherwise disposed of in connection with such
Disposition, when aggregated with the aggregate fair market value of
all Property sold, assigned, transferred or otherwise disposed of in
connection with all other Dispositions made on and after the date
hereof under this Section 8.5(e), shall not exceed an amount equal to
10% of Consolidated Tangible Net Worth.
8.6. INVESTMENTS
At any time, purchase or otherwise acquire, hold or invest in
the Capital Stock of, or any other interest in, any Person, or make any loan or
advance to, or enter into any arrangement for the purpose of providing funds or
credit to, or make any other
102
<PAGE>
investment, whether by way of capital contribution, time deposit or otherwise,
in or with any Person (all of which are sometimes referred to herein as
"INVESTMENTS"), or permit any of its Subsidiaries so to do, except:
(a) Investments in Cash Equivalents;
(b) Investments existing on the Effective Date as set forth on
Schedule 8.6;
(c) normal business banking accounts and short-term
certificates of deposit and time deposits in, or issued by, federally
insured institutions in amounts not exceeding the limits of such
insurance;
(d) Acquisitions permitted by Section 8.3 and 8.4;
(e) Investments in any seller debt incurred in connection with
Dispositions permitted by Section 8.5;
(f) Unrestricted Intercompany Investments;
(g) Other Intercompany Investments made on or after the date
hereof (other than Investments permitted by Section 8.6(b)), provided
that, immediately after giving effect to each such Other Intercompany
Investment, the Other Intercompany Basket Amount shall not exceed an
amount equal to 20% of Consolidated Tangible Net Worth; and
(h) other Investments made on or after the date hereof (other
than Investments permitted by Section 8.6(b)), provided that, (i)
immediately before and after giving effect to each such other
Investment, no Default shall or would exist, and all of the
representations and warranties contained in Section 4 shall be true
and correct as if then made, and (ii) the aggregate consideration paid
for all such other Investments shall not exceed $10,000,000.
8.7. RESTRICTED PAYMENTS
Declare or make any Restricted Payments, or permit any of its
Subsidiaries so to do, except:
(a) Unrestricted Intercompany Payments;
(b) Other Intercompany Restricted Payments made on or after
the date hereof, provided that, immediately after giving effect
thereto, the Other Intercompany Basket Amount shall not exceed an
amount equal to 20% of Consolidated Tangible Net Worth; and
103
<PAGE>
(c) other Restricted Payments made on or after the date
hereof, provided that, (i) immediately before and after giving effect
thereto, no Default shall or would exist, and (ii) the aggregate
amount of all such Restricted Payments received by Persons other than
the Parent Borrower and its Subsidiaries shall not exceed $12,000,000
in any fiscal year.
8.8. BUSINESS CHANGES
Except as may be otherwise permitted by Section 8.3 or 8.4,
materially change the nature of the business of the Parent Borrower and its
Subsidiaries as conducted on the Effective Date.
8.9. AMENDMENTS, ETC.
Enter into or agree to, or permit any of its Subsidiaries so
to do, any amendment, supplement, other modification or waiver of any term or
condition of its Organizational Documents, unless, in each such case, such
amendment, supplement, other modification or waiver would not adversely affect
the Administrative Agent, the Issuing Bank, the Swing Line Lender or any Lender.
8.10. TRANSACTIONS WITH AFFILIATES
Become, or permit any of its Subsidiaries to become, a party
to any transaction with any Affiliate thereof unless the Parent Borrower's
Managing Person shall have determined that the terms and conditions relating
thereto are as favorable to the Parent Borrower or such Subsidiary, as the case
may be, as those which would be obtainable at the time in a comparable
arms-length transaction with a Person other than an Affiliate thereof.
8.11. LIMITATION ON UPSTREAM PAYMENTS BY SUBSIDIARIES
Permit or cause any of its Subsidiaries to enter into or
agree, or otherwise be or become subject, to any agreement, contract or other
arrangement (other than this Agreement) with any Person pursuant to the terms of
which such Subsidiary is or would be prohibited from declaring or making, or
restricted in its ability to declare or make, any Restricted Payment or any loan
or advance to the Parent Borrower or any other Subsidiary thereof or prohibited
from repaying, or restricted in its ability to repay, any loan or advance from
the Parent Borrower or any other Subsidiary thereof.
8.12. PREPAYMENTS OF INDEBTEDNESS
Prepay or obligate itself to prepay, in whole or in part, any
long-term Indebtedness (other than Indebtedness under the Loan Documents), or
permit any of its Subsidiaries so to do, except that the Parent Borrower or any
of its Subsidiaries may refinance any long-term Indebtedness with any other
long-term Indebtedness, provided
104
<PAGE>
that the terms and conditions thereof shall, in the reasonable determination of
the Administrative Agent, be no less favorable to the Parent Borrower or such
Subsidiary, as the case may be, as the long-term Indebtedness so being
refinanced.
8.13. LIMITATION ON NEGATIVE PLEDGES
Enter into any agreement, other than (i) this Agreement or
(ii) any agreement in respect of Indebtedness permitted by Section 8.1(v),
provided that any prohibition or limitation referred to in this Section 8.13
shall only be effective against the assets financed by such agreement, or permit
any of its Subsidiaries so to do, which prohibits or limits the ability of the
Parent Borrower or such Subsidiary to create, incur, assume or suffer to exist
any Lien in favor of the Administrative Agent, the Lenders, the Swing Line
Lender and/or the Issuing Bank upon any of its Property, whether now owned or
hereafter acquired.
9. DEFAULT
9.1. EVENTS OF DEFAULT
The following shall each constitute an "EVENT OF DEFAULT"
hereunder:
(a) The failure of any Borrower to make any payment of
principal with respect to any Loan when due and payable, or the
failure of the Parent Borrower to make any payment with respect to any
Reimbursement Obligation when due and payable; or
(b) The failure of any Credit Party to make any payment of
interest, Fees, expenses or other amounts payable under any Loan
Document or otherwise to the Administrative Agent with respect to the
loan facilities established hereunder within three Business Days of
the date when due and payable; or
(c) The failure of any Credit Party to observe or perform any
covenant or agreement contained in Sections 2.7, 7.3, 7.11, 7.12 or
Section 8 (other than Sections 8.1, 8.2, 8.6 and 8.13); or
(d) The failure of any Credit Party to observe or perform (i)
any term, covenant or agreement contained in Section 8.1, 8.2, 8.6 or
8.13 and such failure shall have continued unremedied for a period of
10 days after such Credit Party shall have become aware thereof, or
(ii) any other term, covenant, or agreement contained in any Loan
Document and such failure shall have continued unremedied for a period
of 30 days after such Credit Party shall have become aware thereof; or
105
<PAGE>
(e) Any representation or warranty made or deemed made by any
Credit Party (or by an officer thereof on its behalf) in any Loan
Document or in any certificate, report, opinion (other than an opinion
of counsel) or other document delivered or to be delivered pursuant
thereto, shall prove to have been incorrect or misleading (whether
because of misstatement or omission) in any material respect when made
or deemed made; or
(f) (i) Liabilities and/or other obligations of the Parent
Borrower (other than its obligations hereunder) or any of its
Subsidiaries, whether as principal, guarantor, surety or other
obligor, for the payment of any Indebtedness in an aggregate amount in
excess of $1,000,000 (A) shall become or shall be declared to be due
and payable prior to the expressed maturity thereof, or (B) shall not
be paid when due or within any grace period for the payment thereof,
or (ii) any holder of any such liability or other obligation shall
have the right to declare such liability or other obligation due and
payable prior to the expressed maturity thereof and the applicable
defaults or events of default giving rise to such right shall then be
continuing; or
(g) Any Credit Party (other than an Inactive Subsidiary
Borrower) shall (i) make an assignment for the benefit of creditors,
(ii) generally not be paying its debts as such debts become due, (iii)
admit in writing its inability to pay its debts as they become due,
(iv) file a voluntary petition in bankruptcy, (v) become insolvent
(however such insolvency shall be evidenced), (vi) file any petition
or answer seeking for itself any reorganization, arrangement,
composition, readjustment of debt, liquidation or dissolution or
similar relief under any present or future statute, law or regulation
of any jurisdiction, (vii) petition or apply to any tribunal for any
receiver, custodian or any trustee for any substantial part of its
Property, (viii) be the subject of any such proceeding filed against
it which remains undismissed for a period of 45 days, (ix) file any
answer admitting or not contesting the material allegations of any
such petition filed against it or any order, judgment or decree
approving such petition in any such proceeding, (x) seek, approve,
consent to, or acquiesce in any such proceeding, or in the appointment
of any trustee, receiver, sequestrator, custodian, liquidator, or
fiscal agent for it, or any substantial part of its Property, or an
order is entered appointing any such trustee, receiver, custodian,
liquidator or fiscal agent and such order remains in effect for 45
days, or (xi) take any formal action for the purpose of effecting any
of the foregoing or looking to the liquidation or dissolution of such
Credit Party (except as may be otherwise expressly permitted herein);
or
(h) An order for relief is entered under the United States
bankruptcy laws or any other decree or order is entered by a court
having jurisdiction (i) adjudging any Credit Party (other than an
Inactive Subsidiary Borrower) bankrupt or insolvent, (ii) approving as
properly filed a petition seeking reorganization,
106
<PAGE>
liquidation, arrangement, adjustment or composition of or in respect
of any Credit Party (other than an Inactive Subsidiary Borrower) under
the United States bankruptcy laws or any other applicable Federal or
state law, (iii) appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of any Credit
Party (other than an Inactive Subsidiary Borrower) or of any
substantial part of the Property thereof, or (iv) ordering the winding
up or liquidation of the affairs of any Credit Party (other than an
Inactive Subsidiary Borrower), and, in each case, such other decree or
order continues unstayed and in effect for a period of 45 days; or
(i) Judgments or decrees against the Parent Borrower or any of
its Subsidiaries aggregating in excess of $500,000 shall remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for
a period of 30 days; or
(j) The occurrence of a Change of Control; or
(k) Any Loan Document shall cease, for any reason, to be in
full force and effect, or any Credit Party shall so assert in writing
or shall disavow any of its obligations thereunder, or any Event of
Default shall have occurred under, and as such term is defined in, any
Loan Document; or
(l) (i) any Termination Event shall occur; (ii) any
Accumulated Funding Deficiency, whether waived, shall exist with
respect to any Pension Plan; (iii) any Person shall engage in any
Prohibited Transaction involving any Employee Benefit Plan; (iv) the
Parent Borrower, any of its Subsidiaries or any ERISA Affiliate shall
fail to pay when due an amount which is payable by it to the PBGC or
to a Pension Plan under Title IV of ERISA; (v) the imposition of any
tax under Section 4980B(a) of the Code; (vi) the assessment of a civil
penalty with respect to any Employee Benefit Plan under Section 502(c)
of ERISA; or (vii) any other event or condition shall occur or exist
with respect to an Employee Benefit Plan which in the case of clauses
(i) through (vii) would, individually or in the aggregate, have a
Material Adverse Effect; or
(m) A default by the Parent Borrower or any of its
Subsidiaries shall have occurred under the Synthetic Lease
Arrangement, and the applicable grace period or cure period, if any,
with respect to such default shall have expired.
9.2. CONTRACT REMEDIES
(a) Upon the occurrence of an Event of Default or at any time
thereafter during the continuance thereof, (i) if it is an Event of Default
specified in Section 9.1(g) or 9.1(h), all Revolving Credit Commitments, the
Swing Line Commitment and the Letter of Credit Commitment shall immediately and
automatically terminate and the Loans, all accrued and unpaid interest thereon,
any Reimbursement Obligations owing or contingently owing in respect of all
outstanding Letters of Credit
107
<PAGE>
and all other amounts owing under the Loan Documents shall immediately become
due and payable, and (ii) if it is any other Event of Default, upon the
direction of the Required Lenders, the Administrative Agent shall (A) by notice
to the Parent Borrower, declare all Revolving Credit Commitments, the Swing Line
Commitment, and the Letter of Credit Commitment to be terminated forthwith,
whereupon such Revolving Credit Commitments, the Swing Line Commitment and the
Letter of Credit Commitment shall immediately terminate, and/or (B) by notice of
default to the Parent Borrower, declare the Loans, all accrued and unpaid
interest thereon, any Reimbursement Obligations owing or contingently owing in
respect of all outstanding Letters of Credit and all other amounts owing under
the Loan Documents to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as otherwise provided in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived. Each Credit Party hereby further expressly waives and
covenants not to assert any appraisement, valuation, stay, extension, redemption
or similar laws, now or at any time hereafter in force which might delay,
prevent or otherwise impede the performance or enforcement of any Loan Document.
(b) In the event that the Revolving Credit Commitments, the
Swing Line Commitment and the Letter of Credit Commitment shall have been
terminated or the Loans, any Reimbursement Obligations owing or contingently
owing in respect of all outstanding Letters of Credit and all other amounts
owing under the Loan Documents shall have been declared due and payable pursuant
to the provisions of this Section, any funds received by the Administrative
Agent, the Issuing Bank, the Swing Line Lender and the Lenders from or on behalf
of the Borrowers shall be remitted to, and applied by, the Administrative Agent
in the following manner and order: (i) first, to the payment of interest on, and
then the principal portion of, any Revolving Credit Loans which the
Administrative Agent may have advanced on behalf of any Lender for which the
Administrative Agent has not then been reimbursed by such Lender or any Credit
Party; (ii) second, to reimburse the Administrative Agent, the Issuing Bank, the
Swing Line Lender for any expenses due from the Credit Parties pursuant to the
provisions of Section 11.5 and the Reimbursement Agreements, (iii) third, to the
payment of the Reimbursement Obligations and the outstanding principal amount of
the Swing Line Loans (together with all interest thereon), (iv) fourth, to the
payment of the Fees, (v) fifth, to the payment of any other fees, expenses or
amounts (other than the principal of and interest on the Loans) payable by the
Credit Parties to the Administrative Agent, the Issuing Bank, the Swing Line
Lender or any of the Lenders under the Loan Documents, (vi) sixth, to the
payment, pro rata according to the Outstanding Percentage of each Lender, of
interest due on the Loans (other than the Swing Line Loans), (vii) seventh, to
the payment, pro rata according to Outstanding Percentage of each Lender, of
principal on the Loans (other than the Swing Line Loans), of such principal, and
(viii) eighth, any remaining funds shall be paid to whomsoever shall be entitled
thereto or as a court of competent jurisdiction shall direct.
108
<PAGE>
10. THE ADMINISTRATIVE AGENT
10.1. APPOINTMENT
Each of the Issuing Bank, the Swing Line Lender and each
Lender hereby irrevocably designates and appoints BNY as the Administrative
Agent of the Issuing Bank, the Swing Line Lender and such Lender under the Loan
Documents and each of the Issuing Bank, the Swing Line Lender and each Lender
hereby irrevocably authorizes the Administrative Agent to take such action on
its behalf under the provisions of the Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to the Administrative
Agent by the terms of the Loan Documents, together with such other powers as are
reasonably incidental thereto. The duties of the Administrative Agent shall be
mechanical and administrative in nature, and, notwithstanding any provision to
the contrary elsewhere in any Loan Document, the Administrative Agent shall not
have any duties or responsibilities other than those expressly set forth
therein, or any fiduciary relationship with, or fiduciary duty to, the Issuing
Bank, the Swing Line Lender or any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the Loan
Documents or otherwise exist against the Administrative Agent.
10.2. DELEGATION OF DUTIES
The Administrative Agent may execute any of its duties under
the Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to rely upon, and shall be fully protected in, and shall not be under
any liability for, relying upon, the advice of counsel concerning all matters
pertaining to such duties.
10.3. EXCULPATORY PROVISIONS
Neither the Administrative Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with the Loan Documents (except the Administrative Agent
for its own gross negligence or willful misconduct), or (ii) responsible in any
manner to the Issuing Bank, the Swing Line Lender or any of the Lenders for any
recitals, statements, representations or warranties made by any Credit Party, or
any officer thereof, contained in the Loan Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent under or in connection with, the Loan Documents or
for the value, validity, effectiveness, genuineness, perfection, enforceability
or sufficiency of any of the Loan Documents or for any failure of any Credit
Party or any other Person to perform its obligations thereunder. The
Administrative Agent shall not be under any obligation to the Issuing Bank, the
Swing Line Lender or any Lender to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, the Loan
Documents, or to inspect the Property, books or records of any Credit Party. The
Issuing Bank, the Swing Line Lender and the Lenders
109
<PAGE>
acknowledge that the Administrative Agent shall not be under any duty to take
any discretionary action permitted under the Loan Documents unless the
Administrative Agent shall be instructed in writing to do so by the Issuing
Bank, the Swing Line Lender and Required Lenders and such instructions shall be
binding on the Issuing Bank, the Swing Line Lender and all Lenders; PROVIDED,
HOWEVER, that the Administrative Agent shall not be required to take any action
which exposes the Administrative Agent to personal liability or is contrary to
law or any provision of the Loan Documents. The Administrative Agent shall not
be under any liability or responsibility whatsoever, as Administrative Agent, to
any Credit Party or any other Person as a consequence of any failure or delay in
performance, or any breach, by the Issuing Bank, the Swing Line Lender or any
Lender of any of its obligations under any of the Loan Documents.
10.4. RELIANCE BY ADMINISTRATIVE AGENT
The Administrative Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, opinion, letter, cablegram, telegram, facsimile, telex
or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by a
proper Person or Persons and upon advice and statements of legal counsel
(including counsel to any Credit Party), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may treat
the Issuing Bank, the Swing Line Lender or each Lender, as the case may be, or
the Person designated in the last notice filed with it under this Section, as
the holder of all of the interests of the Issuing Bank, the Swing Line Lender or
such Lender, as the case may be, in its Loans, the Letters of Credit and the
Reimbursement Obligations, as applicable, until written notice of transfer,
signed by the Issuing Bank, the Swing Line Lender or such Lender (or the Person
designated in the last notice filed with the Administrative Agent) and by the
Person designated in such written notice of transfer, in form and substance
satisfactory to the Administrative Agent, shall have been filed with the
Administrative Agent. The Administrative Agent shall not be under any duty to
examine or pass upon the validity, effectiveness, enforceability or genuineness
of the Loan Documents or any instrument, document or communication furnished
pursuant thereto or in connection therewith, and the Administrative Agent shall
be entitled to assume that the same are valid, effective and genuine, have been
signed or sent by the proper parties and are what they purport to be. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under the Loan Documents unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under the Loan Documents in accordance with a request or direction of
the Required Lenders, and such request or direction and any action taken or
failure to act pursuant thereto shall be binding upon the Issuing Bank, the
Swing Line Lender, all the Lenders and all future holders of the Loans and the
Reimbursement Obligations.
110
<PAGE>
10.5. NOTICE OF DEFAULT
The Administrative Agent shall be deemed not to have knowledge
or notice of the occurrence of any Default unless the Administrative Agent has
received written notice thereof from the Issuing Bank, the Swing Line Lender, a
Lender or any Credit Party. In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall promptly give notice thereof to
the Issuing Bank, the Swing Line Lender, the Lenders and the Parent Borrower.
10.6. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS
Each of the Issuing Bank, the Swing Line Lender and each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by
the Administrative Agent hereinafter, including any review of the affairs of the
Parent Borrower or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Administrative Agent to the Issuing Bank, the
Swing Line Lender or any Lender. Each of the Issuing Bank, the Swing Line Lender
and each Lender represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent, the Issuing
Bank, the Swing Line Lender or any Lender, and based on such documents and
information as it has deemed appropriate made its own evaluation of and
investigation into the business, operations, Property, financial and other
condition and creditworthiness of the Parent Borrower and its Subsidiaries and
made its own decision to enter into this Agreement. Each of the Issuing Bank,
the Swing Line Lender and each Lender also represents that it will,
independently and without reliance upon the Administrative Agent, the Issuing
Bank, the Swing Line Lender or any Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, evaluations and decisions in taking or not taking action under
any Loan Document, and to make such investigation as it deems necessary to
inform itself as to the business, operations, Property, financial and other
condition and creditworthiness of the Parent Borrower and its Subsidiaries.
Except for notices, reports and other documents expressly required to be
furnished to the Issuing Bank, the Swing Line Lender and/or the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide the Issuing Bank, the Swing Line Lender or any
Lender with any credit or other information concerning the business, operations,
Property, financial and other condition or creditworthiness of the Parent
Borrower and its Subsidiaries which at any time may come into the possession of
the Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.7. INDEMNIFICATION
Each Lender agrees to indemnify and hold harmless the
Administrative Agent in its capacity as such (to the extent not promptly
reimbursed by any Credit Party and without limiting the obligation of any Credit
Party to do so), pro rata according to (i)
111
<PAGE>
at any time prior to the Commitment Termination Date, its Commitment Percentage,
and (ii) at all other times, (a) if no Loan or Reimbursement Obligation is
outstanding, its Commitment Percentage, and (b) if any Loan or Reimbursement
Obligation is outstanding, its Outstanding Percentage, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever including any
amounts paid to the Issuing Bank, the Swing Line Lender or any Lender (through
the Administrative Agent) by any Credit Party pursuant to the terms of the Loan
Documents, that are subsequently rescinded or avoided, or must be otherwise
restored or returned) which may at any time (including at any time following the
payment of the Loans or the Reimbursement Obligations) be imposed on, incurred
by or asserted against the Administrative Agent in any way relating to or
arising out of the Loan Documents or any other documents contemplated by or
referred to therein or the transactions contemplated thereby or any action taken
or omitted to be taken by the Administrative Agent under or in connection with
any of the foregoing; PROVIDED, HOWEVER, that no Lender shall be liable to the
Administrative Agent for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent resulting solely from the finally
adjudicated gross negligence or willful misconduct of the Administrative Agent.
Without limitation of the foregoing, each Lender agrees to reimburse each Agent
promptly upon demand for its pro rata share (calculated as set forth in the
first sentence of this Section) of any unpaid fees owing to the Administrative
Agent, and any costs and expenses (including reasonable fees and expenses of
counsel) payable by any Credit Party under Section 11.5, to the extent that the
Administrative Agent has not been paid such fees or has not been reimbursed for
such costs and expenses, by any Credit Party. The failure of any Lender to
reimburse the Administrative Agent promptly upon demand for its pro rata share
(as so calculated) of any amount required to be paid by the Lenders to the
Administrative Agent as provided in this Section shall not relieve any other
Lender of its obligation hereunder to reimburse the Administrative Agent for its
pro rata share (as so calculated) of such amount, but no Lender shall be
responsible for the failure of other Lender to reimburse the Administrative
Agent for such other Lender's pro rata share (as so calculated) of such amount.
The agreements in this Section shall survive the termination of the Revolving
Credit Commitments, the Swing Line Commitment, the Letter of Credit Commitment,
and the payment of all amounts payable under the Loan Documents.
10.8. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY
BNY and its affiliates may make secured or unsecured loans to,
accept deposits from, issue letters of credit for the account of, act as trustee
under indentures of, and generally engage in any kind of business with, the
Parent Borrower or any of its Subsidiaries as though BNY were not Administrative
Agent hereunder and BNY Capital Markets did not arrange the transactions
contemplated hereby. With respect to the Revolving Credit Commitment, Swing Line
Commitment and Letter of Credit Commitment made or renewed by BNY and the Loans
and Reimbursement Obligations
112
<PAGE>
owing to BNY, BNY shall have the same rights and powers under the Loan Documents
as the Issuing Bank, the Swing Line Lender or any Lender and may exercise the
same as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall in each case include BNY.
10.9. SUCCESSOR ADMINISTRATIVE AGENT
If at any time the Administrative Agent deems it advisable, in
its sole discretion, it may submit to the Issuing Bank, the Swing Line Lender
and each of the Lenders a written notice of its resignation as Administrative
Agent under the Loan Documents, such resignation to be effective upon the
earlier of (i) the written acceptance of the duties of the Administrative Agent
under the Loan Documents by a successor Administrative Agent and (ii) on the
30th day after the date of such notice. Upon any such resignation, the Required
Lenders shall have the right to appoint from among the Lenders a successor
Administrative Agent, provided that the Parent Borrower shall have consented
thereto in writing (which consent shall not be unreasonably withheld and shall
not be required if a Default shall have occurred and then be continuing). If no
successor Administrative Agent shall have been so appointed by the Required
Lenders and accepted such appointment in writing within 30 days after the
retiring Administrative Agent's giving of notice of resignation, then the
retiring Administrative Agent may, on behalf of the Issuing Bank, the Swing Line
Lender and the Lenders, appoint a successor Administrative Agent, which
successor Administrative Agent shall be a commercial bank organized under the
laws of the United States or any State thereof and having a combined capital,
surplus, and undivided profits of at least $100,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent's rights, powers,
privileges and duties as Administrative Agent under the Loan Documents shall be
terminated. The Credit Parties, the Issuing Bank, the Swing Line Lender and the
Lenders shall execute such documents as shall be necessary to effect such
appointment. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of the Loan Documents shall inure to its
benefit as to any actions taken or omitted to be taken by it, and any amounts
owing to it, while it was Administrative Agent under the Loan Documents. If at
any time there shall not be a duly appointed and acting Administrative Agent,
the Credit Parties agree to make each payment due under the Loan Documents
directly to the Issuing Bank, the Swing Line Lender and the Lenders entitled
thereto during such time.
11. OTHER PROVISIONS
11.1. AMENDMENTS AND WAIVERS
Except as otherwise provided in Section 10(i) of the
Subsidiary Guaranty, with the written consent of the Required Lenders, the
Administrative Agent and the
113
<PAGE>
appropriate Credit Parties may, from time to time, enter into written
amendments, supplements or modifications of the Loan Documents and, with the
consent of the Required Lenders, the Administrative Agent on behalf of the
Issuing Bank, the Swing Line Lender and the Lenders may execute and deliver to
any such Credit Parties a written instrument waiving or a consent to a departure
from, on such terms and conditions as the Administrative Agent may specify in
such instrument, any of the requirements of the Loan Documents or any Default
and its consequences; PROVIDED, HOWEVER, that:
(a) no such amendment, supplement, modification, waiver or
consent shall, without the consent of all of the Lenders, (i) increase
the Revolving Credit Commitment Amount of any Lender or the Aggregate
Revolving Credit Commitment Amount, (ii) extend the Scheduled
Revolving Credit Commitment Termination Date, (iii) decrease the rate,
or extend the time of payment, of interest of, or change or forgive
the principal amount or extend the time of payment of, any Loan (other
than a Swing Line Loan), or decrease the rate, or extend the time of
payment, of the Facility Fee or the Letter of Credit Commissions, (iv)
change the provisions of Sections 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10,
11.1, 11.6(a) or 11.7, (v) change the definition of "Required
Lenders", or (vi) release any Credit Party from all or substantially
all its obligations under the Subsidiary Guaranty (other than as
provided in Section 10(i) of the Subsidiary Guaranty);
(b) without the written consent of the Issuing Bank, no such
amendment, supplement, modification or waiver shall change the Letter
of Credit Commitment, change the amount or the time of payment of the
Letter of Credit Commissions or change any other term or provision
which relates to the Letter of Credit Commitment or the Letters of
Credit or any other rights of the Issuing Bank under any Loan
Document;
(c) without the written consent of the Administrative Agent,
no such amendment, supplement, modification or waiver shall amend,
modify or waive any provision of Section 10 or otherwise change any of
the rights or obligations of the Administrative Agent hereunder or
under the Loan Documents; and
(d) without the written consent of the Swing Line Lender, no
such amendment, supplement, modification or waiver shall change the
Swing Line Commitment or change any other term or provision that
relates to the Swing Line Commitment or the Swing Line Loans.
Any such amendment, supplement, modification or waiver shall apply equally to
the Administrative Agent, the Swing Line Lender, the Issuing Bank and each of
the Lenders and shall be binding upon the parties to the applicable Loan
Document, the Lenders, the Swing Line Lender, the Issuing Bank, the
Administrative Agent and all future holders of the Loans and the Reimbursement
Obligations. In the case of any waiver, the parties to the applicable Loan
Document, the Issuing Bank, the Lenders, the Swing Line Lender
114
<PAGE>
and the Administrative Agent shall be restored to their former position and
rights hereunder and under the Loan Documents to the extent provided for in such
waiver, and any Default waived shall not extend to any subsequent or other
Default, or impair any right consequent thereon. The Loan Documents may not be
amended orally or by any course of conduct.
11.2. NOTICES
All notices and other communications under the Loan Documents
shall be given to each party hereto, initially, at the following address, and,
thereafter, such other address through which it may from time to time be
accepting notices, as designated by it in writing to the Administrative Agent
and the Parent Borrower:
(a) if to the Parent Borrower or any other Borrower, the
office, branch or affiliate thereof designated as its address for
notices in Exhibit O or the Borrower Addendum, if any, executed and
delivered with respect to such Borrower pursuant to Section 2.12, as
the case may be;
(b) if to any Lender, the Issuing Bank or the Swing Line
Lender, the office, branch, affiliate, or correspondent bank thereof
designated as its address for notices in Exhibit N; and
(c) if to the Administrative Agent, the office, branch,
affiliate, or correspondent bank thereof designated as its address for
notices in Exhibit M.
Such notices and other communications will be effective only if and when given
in writing, and shall be deemed to have been given three days after deposit in
the mail, designated as certified mail, return receipt requested,
postage-prepaid, at the applicable address specified above, or when delivered at
the applicable address specified above, or when sent by telecopy addressed to
the party to which such notice is directed at its address determined as provided
above and receipt is confirmed, except that any notice, request or demand by any
Borrower to or upon the Administrative Agent, the Issuing Bank, the Swing Line
Lender or the Lenders pursuant to Sections 2.3, 2.4, 2.5, 2.6, 2.8 or 3.3 shall
not be effective until received. Any party to a Loan Document may rely on
signatures of the parties thereto which are transmitted by fax or other
electronic means as fully as if originally signed.
11.3. NO WAIVER; CUMULATIVE REMEDIES
No failure to exercise and no delay in exercising, on the part
of the Administrative Agent, the Issuing Bank, the Swing Line Lender or any
Lender, any right, remedy, power or privilege under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges under the
115
<PAGE>
Loan Documents are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
11.4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND CERTAIN
OBLIGATIONS
(a) All representations and warranties made under the Loan
Documents and in any document, certificate or statement delivered pursuant
thereto or in connection therewith shall survive the execution and delivery of
the Loan Documents.
(b) The obligations of the Credit Parties under Sections 3.4,
3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 11.5 and 11.7 shall survive the termination of
the Revolving Credit Commitments, the Swing Line Commitment and the Letter of
Credit Commitment and the payment of the Loans, the Reimbursement Obligations
and all other amounts payable under the Loan Documents.
11.5. EXPENSES
The Parent Borrower agrees, promptly upon presentation of a
statement or invoice therefor, and whether any Loan is made (i) to pay or
reimburse the Administrative Agent and BNY Capital Markets for all their
respective out-of-pocket costs and expenses reasonably incurred in connection
with the development, preparation, execution and syndication of, the Loan
Documents and any amendment, supplement or modification thereto (whether or not
executed or effective), any documents prepared in connection therewith and the
consummation of the transactions contemplated thereby, including the reasonable
fees and disbursements of Special Counsel, (ii) to pay or reimburse the
Administrative Agent, the Issuing Bank, the Swing Line Lender and the Lenders
for all of their respective costs and expenses, including reasonable fees and
disbursements of counsel, incurred in connection with (a) any Default and any
enforcement or collection proceedings resulting therefrom or in connection with
the negotiation of any restructuring or "work-out" (whether consummated or not)
of the obligations of any Credit Party under any of the Loan Documents and (b)
the enforcement of this Section, (iii) to pay, indemnify, and hold each of the
Lenders, the Swing Line Lender, the Issuing Bank and the Administrative Agent
harmless from and against, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, the Loan
Documents and any such other documents, and (iv) to pay, indemnify and hold each
of the Lenders, the Swing Line Lender, the Issuing Bank and the Administrative
Agent and each of their respective affiliates, officers, directors and employees
harmless from and against any and all other liabilities, obligations, claims,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including reasonable counsel
fees and disbursements) with respect to the enforcement and performance of the
Loan Documents, the use of the
116
<PAGE>
proceeds of the Loans and the Letters of Credit and the enforcement and
performance of the provisions of any subordination agreement involving the
Administrative Agent, the Issuing Bank, the Swing Line Lender and the Lenders
(all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"), and, if and to
the extent that the foregoing indemnity may be unenforceable for any reason, the
Parent Borrower agrees to make the maximum payment not prohibited under
applicable law; PROVIDED, HOWEVER, that the Parent Borrower shall have no
obligation to pay Indemnified Liabilities to the Administrative Agent, the
Issuing Bank, the Swing Line Lender or any Lender, as the case may be, arising
from the finally adjudicated gross negligence or willful misconduct of such
Agent or such Lender, as the case may be, or claims between one indemnified
party and another indemnified party. The agreements in this Section shall
survive the termination of the Revolving Credit Commitments, the Swing Line
Commitment and the Letter of Credit Commitment and the payment of all amounts
payable under the Loan Documents.
11.6. ASSIGNMENTS AND PARTICIPATIONS
(a) Except as may otherwise be permitted by Sections 7.3, 8.3,
8.4 and 8.5, (i) the Loan Documents shall be binding upon and inure to the
benefit of the Credit Parties, the Lenders, the Swing Line Lender, the Issuing
Bank, the Administrative Agent, all future holders of the Loans and the
Reimbursement Obligations, and their respective successors and permitted
assigns, and (ii) no Credit Party may assign, delegate or transfer any of its
rights or obligations under the Loan Documents without the prior written consent
of the Administrative Agent, the Issuing Bank, the Swing Line Lender and each
Lender.
(b) In addition to its rights under Section 11.6(e), each
Lender shall have the right to sell, assign, transfer or negotiate (each an
"ASSIGNMENT") one hundred percent, or any lesser percentage, of its rights and
obligations under the Loan Documents to any subsidiary or affiliate of such
Lender, to any other Lender, or to any Eligible Assignee, provided that (i) each
such Assignment shall be of a constant, and not a varying, percentage of all of
the assignor Lender's rights and obligations under the Loan Documents, (ii) the
Revolving Credit Commitment Amount of the Revolving Credit Commitment assigned
shall be not less than $5,000,000, or the full Revolving Credit Commitment
Amount of such assignor Lender's Revolving Credit Commitment, (iii) the Parent
Borrower, the Swing Line Lender, the Issuing Bank and the Administrative Agent
shall have consented thereto in writing (which consents shall not be
unreasonably withheld), PROVIDED, HOWEVER, that such consents shall not be
required, (A) in the case of the Swing Line Lender, the Issuing Bank and the
Administrative Agent, if such assignee is another Lender, and (B) in the case of
the Parent Borrower, if a Default shall have occurred and then be continuing or
such assignee is a subsidiary or affiliate of another Lender, and (iv) the
assignor Lender and such assignee shall deliver to the Administrative Agent
three copies of an Assignment and Acceptance Agreement executed by each of them,
along with an assignment fee in the sum of $3,500 for the account of the
Administrative Agent. Upon receipt of such number of executed copies of each
such
117
<PAGE>
Assignment and Acceptance Agreement, together with the assignment fee therefor
and the Parent Borrower's, the Swing Line Lender's, the Issuing Bank's and the
Administrative Agent's consents to such Assignment, if required, the
Administrative Agent shall record the same and execute not less than two copies
of such Assignment and Acceptance Agreement in the appropriate place, deliver
one such copy to the assignor and one such copy to the assignee, and deliver one
photocopy thereof, as executed, to the Parent Borrower, the Swing Line Lender
and the Issuing Bank. From and after the effective date specified in such
Assignment and Acceptance Agreement, the assignee thereunder shall be a party
hereto and shall for all purposes of this Agreement and the other Loan Documents
be deemed a "Lender" and, to the extent provided in such Assignment and
Acceptance Agreement, the assignor Lender thereunder shall be released from its
obligations under this Agreement and the other Loan Documents. The
Administrative Agent shall be entitled to rely upon the representations and
warranties made by the assignee under each Assignment and Acceptance Agreement.
(c) In addition to the participations provided for in Section
11.10(a), each Lender may grant participations in all or any part of its rights
under the Loan Documents to one or more Eligible Assignees, provided that (i)
such Lender's obligations under this Agreement and the other Loan Documents
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties to this Agreement and the other Loan Documents for the performance
of such obligations, (iii) the Credit Parties, the Administrative Agent, the
Issuing Bank, the Swing Line Lender and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no
sub-participations shall be permitted, (v) neither the granting nor the offering
of such participation would require that any additional loss, cost or expense be
borne by any Borrower at any time or would require any registration or
qualification under any applicable federal or state securities laws, and (vi)
the voting rights of any holder of any participation shall be limited to the
voting rights of such Lender under Sections 11.1(a), (b), (c) and (d).
(d) No Lender shall, as between and among the Credit Parties,
the Administrative Agent, the Issuing Bank, the Swing Line Lender and such
Lender, as the case may be, be relieved of any of its obligations under the Loan
Documents as a result of any Assignment or the granting of any participation in
all or any part of its rights under the Loan Documents, except that it shall be
relieved of its obligations to the extent of any such Assignment of all or any
part of its rights and obligations under the Loan Documents pursuant to Section
11.6(b).
(e) Subject to Section 11.6(d), any Lender may at any time or
from time to time assign all or any portion of its rights under the Loan
Documents to a Federal Reserve Bank, provided that any such assignment shall not
release such assignor from its obligations thereunder.
118
<PAGE>
11.7. INDEMNITY
The Parent Borrower agrees to defend, protect, indemnify, and
hold harmless the Administrative Agent, BNY Capital Markets, the Issuing Bank,
the Swing Line Lender and each Lender, each of their respective affiliates and
each of the respective officers, directors, employees and agents of each of the
foregoing (each an "INDEMNIFIED PERSON") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the reasonable fees and disbursements of counsel to such Indemnified
Persons in connection with any investigative, administrative or judicial
proceeding, whether direct, indirect or consequential and whether based on any
federal or state laws or other statutory regulations of any jurisdiction,
including securities and commercial laws and regulations, under common law or at
equitable cause, or on contract or otherwise, including any liabilities and
costs under federal, state or local health or safety laws or environmental laws,
regulations, or common law principles, arising from or in connection with the
past, present or future operations of the Parent Borrower, any other Credit
Party, or their respective predecessors in interest, or the past, present or
future environmental condition of the Property of the Parent Borrower or any of
its Subsidiaries, the presence of asbestos-containing materials at any such
Property, or the release or threatened release of any hazardous substance into
the environment from any such Property) in any manner relating to or arising out
of the Loan Documents, any commitment letter or fee letter executed and
delivered by the Parent Borrower or any of its Subsidiaries and/or the
Administrative Agent, the Issuing Bank or the Swing Line Lender, the
capitalization of the Parent Borrower or any of its Subsidiaries, the Revolving
Credit Commitments, the Swing Line Commitment or the Letter of Credit
Commitment, the making of, management of and participation in the Loans or the
Reimbursement Obligations, or the use or intended use of the proceeds of the
Loans or the Letters of Credit hereunder, provided that the Parent Borrower
shall have no obligation under this Section to an Indemnified Person with
respect to any of the foregoing to the extent found in a final judgment of a
court having jurisdiction to have resulted primarily out of the gross negligence
or wilful misconduct of such Indemnified Person or arising solely from claims
between one such Indemnified Person and another such Indemnified Person. The
indemnity set forth herein shall be in addition to any other obligations or
liabilities of the Parent Borrower to each Indemnified Person under the Loan
Documents or at common law or otherwise, and shall survive any termination of
the Loan Documents, the expiration of the Revolving Credit Commitments, the
Swing Line Commitment and the Letter of Credit Commitment and the payment of all
Indebtedness under the Loan Documents.
11.8. LIMITATION OF LIABILITY
No claim may be made by the Parent Borrower, any of its
Subsidiaries, any Lender, the Swing Line Lender, the Issuing Bank or other
Person against the Administrative Agent, any Lender, the Swing Line Lender, the
Issuing Bank or any
119
<PAGE>
directors, officers, employees, or agents of any of them for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by any Loan Document, or any act, omission or event
occurring in connection therewith, and each of the Parent Borrower, its
Subsidiaries, each Lender, the Swing Line Lender, the Issuing Bank and each such
other Person hereby waives, releases and agrees not to sue upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor.
11.9. COUNTERPARTS
This Agreement may be executed by one or more of the parties
thereto on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same document. It shall
not be necessary in making proof of any Loan Document to produce or account for
more than one counterpart signed by the party to be charged. A counterpart of
any Loan Document or to any document evidencing, and of any an amendment,
modification, consent or waiver to or of any Loan Document transmitted by
telecopy shall be deemed to be an originally executed counterpart. A set of the
copies of the Loan Documents signed by all the parties thereto shall be
deposited with each of the Parent Borrower and the Administrative Agent. Any
party to a Loan Document may rely upon the signatures of any other party thereto
which are transmitted by telecopy or other electronic means to the same extent
as if originally signed.
11.10. ADJUSTMENTS; SET-OFF
(a) If any Lender, the Swing Line Lender or the Issuing Bank
shall obtain any payment (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) on account of its Loans or Reimbursement
Obligations in excess of its Outstanding Percentage of payments then due and
payable on account of the Loans or Reimbursement Obligations received by all the
Lenders, the Swing Line Lender and the Issuing Bank, such Lender, the Swing Line
Lender or the Issuing Bank, as the case may be, shall forthwith purchase,
without recourse, for cash, from the other Lenders, the Swing Line Lender and
the Issuing Bank such participations in their Loans and Reimbursement
Obligations as shall be necessary to cause such purchaser to share such excess
payment with each of them according to their Outstanding Percentages, PROVIDED,
HOWEVER, that if all or any portion of such excess payment is thereafter
recovered from such purchaser, such purchase shall be rescinded and the related
seller shall repay to such purchaser the purchase price to the extent of such
recovery, together with an amount equal to such seller's pro rata share
(according to the proportion of (i) the amount of all other related required
repayments to (ii) the total amount so recovered from the purchaser) of any
interest or other amount paid or payable by the purchaser in respect of the
total amount so recovered.
120
<PAGE>
(b) In addition to any rights and remedies of each Lender, the
Swing Line Lender and the Issuing Bank provided by law, upon the occurrence of
an Event of Default and acceleration of the Loans and the Reimbursement
Obligations, or at any time upon the occurrence and during the continuance of an
Event of Default under Section 9.1(a) or (b), each Lender, the Swing Line Lender
and the Issuing Bank shall have the right, without prior notice to any Credit
Party, any such notice being expressly waived by each Credit Party to the extent
permitted by applicable law, to set-off and apply against any indebtedness or
other liability, whether matured or unmatured, of any Credit Party to such
Lender, the Swing Line Lender or the Issuing Bank arising under the Loan
Documents, any amount owing from such Lender, the Swing Line Lender or the
Issuing Bank to such Credit Party. To the extent permitted by applicable law,
the aforesaid right of set-off may be exercised by such Lender, the Swing Line
Lender or the Issuing Bank against any Credit Party or against any trustee in
bankruptcy, custodian, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor of any Credit
Party, or against anyone else claiming through or against any Credit Party or
such trustee in bankruptcy, custodian, debtor in possession, assignee for the
benefit of creditors, receivers, or execution, judgment or attachment creditors,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender, the Swing Line Lender or the Issuing Bank prior to the
making, filing or issuance of, service upon such Lender, the Swing Line Lender
or the Issuing Bank of, or notice to such Lender, the Swing Line Lender or the
Issuing Bank of, any petition, assignment for the benefit of creditors,
appointment or application for the appointment of a receiver, or issuance of
execution, subpoena, order or warrant. Each Lender, the Swing Line Lender and
the Issuing Bank agrees promptly to notify the Parent Borrower and the
Administrative Agent after each such set-off and application made by such
Lender, the Swing Line Lender or the Issuing Bank, as the case may be, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
11.11. CONSTRUCTION
Each party to a Loan Document represents that it has been
represented by counsel in connection with the Loan Documents and the
transactions contemplated thereby and that the principle that agreements are to
be construed against the party drafting the same shall be inapplicable.
11.12. GOVERNING LAW
The Loan Documents and the rights and obligations of the
parties thereunder shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York, without regard to
principles of conflict of laws, but including Section 5-1401 of the General
Obligations Law.
121
<PAGE>
11.13. JUDGMENT CURRENCY
(a) Each Credit Party's obligations under the Loan Documents
to make payments in the applicable Currency (the "OBLIGATION CURRENCY") shall
not be discharged or satisfied by any tender or recovery pursuant to any
judgment expressed in or converted into any currency other than the Obligation
Currency, except to the extent that, on the Business Day immediately following
the date of such tender or recovery, the Administrative Agent, the Issuing Bank,
the Swing Line Lender or the applicable Lender, as the case may be, may, in
accordance with normal banking procedures, purchase the Obligation Currency with
such other currency. If for the purpose of obtaining or enforcing judgment
against any Credit Party in any court or in any jurisdiction, it becomes
necessary to convert into any currency other than the Obligation Currency (such
other currency being hereinafter referred to as the "JUDGMENT CURRENCY") an
amount due in the Obligation Currency, the conversion shall be made at the rate
of exchange at which, in accordance with normal banking procedures in the
relevant jurisdiction, the Obligation Currency could be purchased with the
Judgment Currency as of the day immediately preceding the day on which the
judgment is given (such Business Day being hereinafter referred to as the
"JUDGMENT CURRENCY CONVERSION DATE").
(b) If the amount of Obligation Currency purchased pursuant to
the last sentence of Section 11.14(a) is less than the sum originally due in the
Obligation Currency, the applicable Credit Party covenants and agrees to
indemnify the applicable recipient against such loss, and if the Obligation
Currency so purchased exceeds the sum originally due to such recipient, such
recipient agrees to remit to the applicable Credit Party such excess.
11.14. INTERNATIONAL BANKING FACILITIES
(a) The Parent Borrower and the other Credit Parties
acknowledge that some or all of the Lenders may, in connection with the Loan
Documents, utilize an International banking facility (as defined in Regulation
D).
(b) Each Credit Party which is an entity located outside the
United States (i) understands that it is the policy of the Board of Governors of
the Federal Reserve System that deposits received by International banking
facilities may be used only to support the non-U.S. operations of a depositor
(or its foreign affiliates) located outside the United States and that
extensions of credit by International banking facilities may be used only to
finance the non-U.S. operations of a customer (or its foreign affiliates)
located outside the United States, and (ii) acknowledges that the proceeds of
its borrowings hereunder from an international banking facility will be used
solely to finance its operations outside the United States, or that of its
foreign affiliates.
122
<PAGE>
11.15. HEADINGS DESCRIPTIVE
Section headings have been inserted in the Loan Documents for
convenience only and shall not be construed to be a part thereof.
11.16. SEVERABILITY
Every provision of the Loan Documents is intended to be
severable, and if any term or provision thereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of the
remaining provisions thereof shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not affect
the validity, legality or enforceability of any such term or provision in any
other jurisdiction.
11.17. INTEGRATION
All exhibits to a Loan Document shall be deemed to be a part
thereof. Except for agreements between the Administrative Agent and the Parent
Borrower with respect to certain fees, the Loan Documents embody the entire
agreement and understanding among the Credit Parties, the Administrative Agent,
the Issuing Bank, the Swing Line Lender and the Lenders with respect to the
subject matter thereof and supersede all prior agreements and understandings
among the Credit Parties, the Administrative Agent, the Issuing Bank, the Swing
Line Lender and the Lenders with respect to the subject matter thereof.
11.18. CONSENT TO JURISDICTION
Each party to a Loan Document hereby irrevocably submits to
the jurisdiction of any New York State or Federal court sitting in the City of
New York over any suit, action or proceeding arising out of or relating to the
Loan Documents. Each party to a Loan Document hereby irrevocably waives, to the
fullest extent permitted or not prohibited by law, any objection which it may
now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in such a court and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
Each Credit Party hereby agrees that a final judgment in any such suit, action
or proceeding brought in such a court, after all appropriate appeals, shall be
conclusive and binding upon it.
11.19. SERVICE OF PROCESS
Each party to a Loan Document hereby irrevocably consents to
the service of process in any suit, action or proceeding by sending the same by
first class mail, return receipt requested or by overnight courier service, to
the address of such party set forth in Section 11.2 of the applicable Loan
Document executed by such party. Each party to a Loan Document hereby agrees
that any such service (i) shall be deemed in every respect
123
<PAGE>
effective service of process upon it in any such suit, action, or proceeding,
and (ii) shall to the fullest extent enforceable by law, be taken and held to be
valid personal service upon and personal delivery to it.
11.20. NO LIMITATION ON SERVICE OR SUIT
Nothing in the Loan Documents or any modification, waiver,
consent or amendment thereto shall affect the right of either Agent or any
Lender to serve process in any manner permitted by law or limit the right of the
Administrative Agent, the Issuing Bank, the Swing Line Lender or any Lender to
bring proceedings against any Credit Party in the courts of any jurisdiction or
jurisdictions in which such Credit Party may be served.
11.21. WAIVER OF TRIAL BY JURY
EACH OF THE ADMINISTRATIVE AGENT, THE ISSUING BANK, THE SWING
LINE LENDER, THE LENDERS AND THE CREDIT PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREIN. FURTHER, EACH CREDIT PARTY HEREBY
CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE ADMINISTRATIVE AGENT, THE
ISSUING BANK, THE SWING LINE LENDER OR THE LENDERS, OR COUNSEL TO THE
ADMINISTRATIVE AGENT, THE ISSUING BANK, THE SWING LINE LENDER OR THE LENDERS,
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE ADMINISTRATIVE AGENT, THE
ISSUING BANK, THE SWING LINE LENDER OR THE LENDERS WOULD NOT, IN THE EVENT OF
SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
EACH CREDIT PARTY ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT, THE ISSUING BANK,
THE SWING LINE LENDER AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.
11.22. PARENT BORROWER AS AGENT FOR SUBSIDIARY BORROWERS
Each Subsidiary Borrower hereby irrevocably designates and
appoints the Parent Borrower as its agent under the Loan Documents and such
Subsidiary Borrower hereby irrevocably authorizes the Parent Borrower to take
such action on its behalf under the provisions of the Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Parent Borrower by the terms of the Loan Documents, together with such other
powers as are reasonably incidental thereto.
124
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
VALMONT INDUSTRIES, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
125
<PAGE>
THE BANK OF NEW YORK,
Individually, as
Administrative Agent, as
Issuing Bank and as Swing
Line Lender
By:
---------------------------
Name:
-------------------------
Title:
------------------------
126
<PAGE>
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK
B.A, "RABOBANK NEDERLAND", NEW
YORK BRANCH
By:
---------------------------
Name:
-------------------------
Title:
------------------------
127
<PAGE>
CREDIT LYONNAIS CHICAGO BRANCH
By:
---------------------------
Name:
-------------------------
Title:
------------------------
128
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
129
<PAGE>
THE BANK OF NOVA SCOTIA
By:
---------------------------
Name:
-------------------------
Title:
------------------------
130
<PAGE>
U.S. BANK NATIONAL ASSOCIATION
d/b/a FIRST BANK, N.A.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
131
<PAGE>
WACHOVIA BANK, N.A.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
132
<PAGE>
VALMONT INDUSTRIES, INC.
AMENDMENT NO. 1
TO CREDIT AGREEMENT
AMENDMENT NO. 1 (this "AMENDMENT"), dated as of April 15, 1998, to the
Credit Agreement, dated as of October 7, 1997, by and among VALMONT INDUSTRIES,
INC., a Delaware corporation (the "PARENT BORROWER"), the Subsidiary Borrowers
party thereto, the Lenders party hereto, and The Bank of New York, as Issuing
Bank, as Swing Line Lender and as Administrative Agent for the Lenders, the
Issuing Bank and the Swing Line Lender (in such capacity, the "ADMINISTRATIVE
AGENT")(the "CREDIT AGREEMENT").
RECITALS
I. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Credit Agreement.
II. The Parent Borrower has requested that the Credit Agreement be
amended to add the Parent Borrower as a French Borrower upon the terms and
conditions contained herein, and the Administrative Agent and the Lenders are
willing to so agree.
Accordingly, in consideration of the Recitals and the covenants and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
12. SECTION 1.1 OF THE CREDIT AGREEMENT IS HEREBY AMENDED TO AMEND AND
RESTATE IN ITS ENTIRETY THE DEFINITION OF "FRENCH BORROWER" AS FOLLOWS:
"FRENCH BORROWER": (i) the Parent Borrower or (ii) any other
Borrower which is organized under the laws of, and has its principal
office in, France.
13. SECTION 3.9 OF THE CREDIT AGREEMENT IS HEREBY AMENDED TO AMEND AND
RESTATE IN ITS ENTIRETY SUBSECTION (D) THEREOF AS FOLLOWS:
(d) EXCEPTION FOR EXISTING TAXES. No amount shall be required
to be paid to any Indemnified Tax Person under Section 3.9(a) or (b)
with respect to any Indemnified Tax to the extent that such Indemnified
Tax would have been required to have been paid under any law, rule,
regulation, order, directive, treaty or guideline in effect on (i) the
date of the applicable Bid, in the case of any Bid Loan, (ii) the date
of the applicable Borrowing Request, in the case of any Swing Line
Loan, and (iii) the Relevant Date, in all other cases, except in each
such case to the extent that such Indemnified Tax shall be attributable
to any sum paid or
133
<PAGE>
payable by any Credit Party under the Loan Documents in respect of any
Loan denominated in a Currency other than the Currency of the
jurisdiction in which the applicable Borrower has been organized and in
which it has its principal office.
14. ON THE DATE HEREOF, EACH CREDIT PARTY HEREBY (A) REAFFIRMS AND ADMITS
THE VALIDITY AND ENFORCEABILITY OF THE LOAN DOCUMENTS (AS AMENDED BY
THIS AMENDMENT) AND ALL OF ITS OBLIGATIONS THEREUNDER, (B) AGREES AND
ADMITS THAT IT HAS NO DEFENSES TO OR OFFSETS AGAINST ANY SUCH
OBLIGATION, AND (C) REPRESENTS AND WARRANTS THAT, IMMEDIATELY BEFORE
AND AFTER GIVING EFFECT TO THIS AMENDMENT, NO DEFAULT OR EVENT OF
DEFAULT HAS OCCURRED AND IS CONTINUING AND EACH OF THE REPRESENTATIONS
AND WARRANTIES MADE BY IT IN THE LOAN DOCUMENTS (AS MODIFIED BY THIS
AMENDMENT) TO WHICH IT IS A PARTY IS TRUE AND CORRECT WITH THE SAME
EFFECT AS THOUGH SUCH REPRESENTATION AND WARRANTY HAD BEEN MADE ON THE
DATE HEREOF.
15. IN ALL OTHER RESPECTS, THE LOAN DOCUMENTS SHALL REMAIN IN FULL FORCE
AND EFFECT, AND NO MODIFICATION IN RESPECT OF ANY TERM OR CONDITION OF
ANY LOAN DOCUMENT CONTAINED HEREIN SHALL BE DEEMED TO BE A MODIFICATION
IN RESPECT OF ANY OTHER TERM OR CONDITION CONTAINED IN ANY LOAN
DOCUMENT.
16. THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS ALL OF
WHICH, TAKEN TOGETHER, SHALL CONSTITUTE ONE AMENDMENT. IN MAKING PROOF
OF THIS AMENDMENT, IT SHALL ONLY BE NECESSARY TO PRODUCE THE
COUNTERPART EXECUTED AND DELIVERED BY THE PARTY TO BE CHARGED.
17. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS, BUT INCLUDING SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW.
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
executed on its behalf.
134
<PAGE>
VALMONT INDUSTRIES, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
THE BANK OF NEW YORK,
Individually, as
Administrative Agent, as
Issuing Bank and as Swing Line
Lender
By:
---------------------------
Name:
-------------------------
Title:
------------------------
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK
B.A, "RABOBANK NEDERLAND", NEW
YORK BRANCH
By:
---------------------------
Name:
-------------------------
Title:
------------------------
By:
---------------------------
Name:
-------------------------
Title:
------------------------
CREDIT LYONNAIS CHICAGO BRANCH
By:
---------------------------
Name:
-------------------------
Title:
------------------------
135
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
THE BANK OF NOVA SCOTIA
By:
---------------------------
Name:
-------------------------
Title:
------------------------
U.S. BANK NATIONAL ASSOCIATION
d/b/a FIRST BANK, N.A.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
WACHOVIA BANK, N.A.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
136
<PAGE>
AGREED AND CONSENTED TO:
AMERICAN LIGHTING STANDARDS
CORPORATION
By:
---------------------------
Name:
-------------------------
Title:
------------------------
MICROFLECT COMPANY, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
VALMONT INTERNATIONAL CORP.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
137
<PAGE>
AMENDMENT NO. 2
AMENDMENT NO. 2 (this "AMENDMENT"), dated as of July 24, 1998, to the
Credit Agreement, dated as of October 7, 1997, by and among Valmont Industries,
Inc., the Subsidiary Borrowers party thereto, the Lenders party thereto and The
Bank of New York, as Issuing Bank, as Swing Line Lender and as Administrative
Agent (as amended, the "AGREEMENT").
RECITALS
I. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Agreement.
II. The Parent Borrower has requested that the Administrative Agent
agree to amend the Agreement upon the terms and conditions contained herein, and
the Administrative Agent is willing so to agree.
Accordingly, in consideration of the Recitals and the terms and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parent Borrower
and the Administrative Agent hereby agree as follows:
18. THE DEFINITION OF "CONSOLIDATED FIXED CHARGES" CONTAINED IN SECTION 1.1
OF THE AGREEMENT IS AMENDED BY AMENDING AND RESTATING CLAUSE (III) OF
SUCH DEFINITION IN ITS ENTIRETY AS FOLLOWS:
(iii) all Restricted Payments made pursuant to Section 8.7(c)(ii) in
cash during such period by the Parent Borrower and its Subsidiaries,
determined on a Consolidated basis in accordance with GAAP.
19. SECTION 8.7 OF THE AGREEMENT IS AMENDED BY (A) DELETING THE WORD "AND"
AT THE END OF CLAUSE (B) OF SUCH SECTION, (B) INSERTING THE WORD "AND"
IMMEDIATELY AFTER THE WORD "YEAR" IN CLAUSE (C) OF SUCH SECTION AND (C)
ADDING A NEW CLAUSE (D) TO SUCH SECTION AS FOLLOWS:
(d) other Restricted Payments made on or before July
31, 1999 in connection with the redemption, retirement, sinking fund or
similar payment, purchase or other acquisition of shares of the Parent
Borrower's common stock, provided that, (i) immediately before and
after giving effect thereto, no Default shall or would exist, and (ii)
the aggregate amount of all such Restricted Payments referred to in
this clause (d) shall not exceed $54,000,000.
138
<PAGE>
20. PARAGRAPHS 1 AND 2 OF THIS AMENDMENT SHALL NOT BE EFFECTIVE UNTIL SUCH
TIME AS THE REQUIRED LENDERS SHALL HAVE CONSENTED IN WRITING TO THIS
AMENDMENT.
21. THE PARENT BORROWER HEREBY (A) REAFFIRMS AND ADMITS THE VALIDITY AND
ENFORCEABILITY OF EACH LOAN DOCUMENT AND ALL OF THE OBLIGATIONS OF EACH
CREDIT PARTY THEREUNDER, (B) AGREES AND ADMITS THAT NO CREDIT PARTY HAS
ANY DEFENSES TO OR OFFSETS AGAINST ANY SUCH OBLIGATION AND (C)
CERTIFIES THAT, IMMEDIATELY AFTER GIVING EFFECT TO PARAGRAPHS 1 AND 2
OF THIS AMENDMENT, (I) NO DEFAULT SHALL EXIST AND (II) EACH OF THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN EACH LOAN DOCUMENT SHALL BE
TRUE AND CORRECT WITH THE SAME EFFECT AS THOUGH SUCH REPRESENTATION AND
WARRANTY HAD BEEN MADE ON SUCH BORROWING DATE, EXCEPT TO THE EXTENT
SUCH REPRESENTATION AND WARRANTY SPECIFICALLY RELATES TO AN EARLIER
DATE, IN WHICH CASE SUCH REPRESENTATION AND WARRANTY SHALL HAVE BEEN
TRUE AND CORRECT ON AND AS OF SUCH EARLIER DATE.
22. IN ALL OTHER RESPECTS, THE LOAN DOCUMENTS SHALL REMAIN IN FULL FORCE
AND EFFECT, AND NO AMENDMENT IN RESPECT OF ANY TERM OR CONDITION OF ANY
LOAN DOCUMENT SHALL BE DEEMED TO BE AN AMENDMENT IN RESPECT OF ANY
OTHER TERM OR CONDITION CONTAINED IN ANY LOAN DOCUMENT.
23. THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS ALL OF
WHICH, TAKEN TOGETHER, SHALL CONSTITUTE ONE AGREEMENT. IN MAKING PROOF
OF THIS AMENDMENT, IT SHALL ONLY BE NECESSARY TO PRODUCE THE
COUNTERPART EXECUTED AND DELIVERED BY THE PARTY TO BE CHARGED.
24. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED TO
BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCEABLE IN ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
139
<PAGE>
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
executed on its behalf.
VALMONT INDUSTRIES, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
THE BANK OF NEW YORK,
individually, as Issuing Bank,
as Swing Line Lender and as as
Administrative Agent
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Consented to and agreed:
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK B.A,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
140
<PAGE>
VALMONT INDUSTRIES, INC.
CREDIT LYONNAIS CHICAGO BRANCH
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
THE BANK OF NOVA SCOTIA
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
U.S. BANK NATIONAL ASSOCIATION
d/b/a FIRST BANK, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
WACHOVIA BANK, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
141
<PAGE>
VALMONT INDUSTRIES, INC.
AMERICAN LIGHTING STANDARDS
CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
MICROFLECT COMPANY, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
VALMONT INTERNATIONAL CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
142
<PAGE>
VALMONT INDUSTRIES, INC.
AMENDMENT NO. 3
AMENDMENT NO. 3 (this "AMENDMENT"), dated as of February 5, 1999, to
the Credit Agreement, dated as of October 7, 1997, by and among Valmont
Industries, Inc., the Subsidiary Borrowers party thereto, the Lenders party
thereto and The Bank of New York, as Issuing Bank, as Swing Line Lender and as
Administrative Agent (as amended, the "AGREEMENT").
RECITALS
III. Capitalized terms used herein which are not otherwise defined
herein shall have the respective meanings ascribed thereto in the Agreement.
IV. The Parent Borrower has requested that the Administrative Agent
agree to amend the Agreement upon the terms and conditions contained herein, and
the Administrative Agent is willing so to agree.
Accordingly, in consideration of the Recitals and the terms and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Parent Borrower
and the Administrative Agent hereby agree as follows:
25. SECTION 8.7 OF THE AGREEMENT IS AMENDED BY (A) DELETING THE WORD "AND"
AT THE END OF CLAUSE (C) OF SUCH SECTION, (B) INSERTING THE WORD "AND"
IMMEDIATELY AFTER THE AMOUNT "$54,000,000" IN CLAUSE (D) OF SUCH
SECTION AND (C) ADDING A NEW CLAUSE (E) TO SUCH SECTION AS FOLLOWS:
(e) other Restricted Payments made in connection with
the redemption, retirement, sinking fund or similar payment, purchase
or other acquisition of shares of the Parent Borrower's common stock,
provided that, (i) immediately before and after giving effect thereto,
no Default shall or would exist, and (ii) the aggregate amount of
shares of the Parent Borrower's common stock subject to all such
redemptions, retirements, sinking fund or similar payments, purchases
and other acquisitions referred to in this clause (e) shall not exceed
2,277,840.
26. PARAGRAPH 1 OF THIS AMENDMENT SHALL NOT BE EFFECTIVE UNTIL SUCH TIME AS
THE REQUIRED LENDERS SHALL HAVE CONSENTED IN WRITING TO THIS AMENDMENT.
27. THE PARENT BORROWER HEREBY (A) REAFFIRMS AND ADMITS THE VALIDITY AND
ENFORCEABILITY OF EACH LOAN DOCUMENT AND ALL OF THE OBLIGATIONS OF EACH
CREDIT PARTY THEREUNDER, (B) AGREES AND ADMITS THAT NO CREDIT PARTY HAS
ANY DEFENSES TO OR
143
<PAGE>
OFFSETS AGAINST ANY SUCH OBLIGATION AND (C) CERTIFIES THAT, IMMEDIATELY
AFTER GIVING EFFECT TO PARAGRAPH 1 OF THIS AMENDMENT, (I) NO DEFAULT
SHALL EXIST AND (II) EACH OF THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN EACH LOAN DOCUMENT SHALL BE TRUE AND CORRECT WITH THE SAME
EFFECT AS THOUGH SUCH REPRESENTATION AND WARRANTY HAD BEEN MADE ON SUCH
BORROWING DATE, EXCEPT TO THE EXTENT SUCH REPRESENTATION AND WARRANTY
SPECIFICALLY RELATES TO AN EARLIER DATE, IN WHICH CASE SUCH
REPRESENTATION AND WARRANTY SHALL HAVE BEEN TRUE AND CORRECT ON AND AS
OF SUCH EARLIER DATE.
28. IN ALL OTHER RESPECTS, THE LOAN DOCUMENTS SHALL REMAIN IN FULL FORCE
AND EFFECT, AND NO AMENDMENT IN RESPECT OF ANY TERM OR CONDITION OF ANY
LOAN DOCUMENT SHALL BE DEEMED TO BE AN AMENDMENT IN RESPECT OF ANY
OTHER TERM OR CONDITION CONTAINED IN ANY LOAN DOCUMENT.
29. THIS AMENDMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS ALL OF
WHICH, TAKEN TOGETHER, SHALL CONSTITUTE ONE AGREEMENT. IN MAKING PROOF
OF THIS AMENDMENT, IT SHALL ONLY BE NECESSARY TO PRODUCE THE
COUNTERPART EXECUTED AND DELIVERED BY THE PARTY TO BE CHARGED.
30. THIS AMENDMENT SHALL BE EFFECTIVE AS OF FEBRUARY 5, 1999.
31. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED TO
BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCEABLE IN ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF
LAWS.
144
<PAGE>
VALMONT INDUSTRIES, INC.
VALMONT INDUSTRIES, INC.
AMENDMENT NO. 3
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
executed on its behalf.
VALMONT INDUSTRIES, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
THE BANK OF NEW YORK,
individually, as Issuing Bank,
as Swing Line Lender and as as
Administrative Agent
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Consented to and agreed:
COOPERATIEVE CENTRALE
RAIFFEISEN - BOERENLEENBANK B.A,
"RABOBANK NEDERLAND", NEW YORK
BRANCH
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
145
<PAGE>
VALMONT INDUSTRIES, INC.
VALMONT INDUSTRIES, INC.
AMENDMENT NO. 3
CREDIT LYONNAIS CHICAGO BRANCH
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
THE BANK OF NOVA SCOTIA
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
U.S. BANK NATIONAL ASSOCIATION
d/b/a FIRST BANK, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
WACHOVIA BANK, N.A.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
146
<PAGE>
VALMONT INDUSTRIES, INC.
VALMONT INDUSTRIES, INC.
AMENDMENT NO. 3
AMERICAN LIGHTING STANDARDS
CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
MICROFLECT COMPANY, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
VALMONT INTERNATIONAL CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
147
<PAGE>
Exhibit 13
Valmont 1998 Annual Report
Text Only for SCC
148
<PAGE>
(FRONT COVER)
Irrigation
Industry
Infrastructure
Image
Street light/traffic light combination pole
Valmont Logo
1998 Annual Report
Image
Linear irrigator
149
<PAGE>
(INSIDE FRONT COVER)
Contents
1 FINANCIAL HIGHLIGHTS
2 LETTER TO FELLOW SHAREHOLDERS
5 TOTAL VALUE IMPACT
6 AT A GLANCE
8 WHERE WE ARE
10 IRRIGATION
14 INFRASTRUCTURE
18 INDUSTRY
22 VALUE OF VALMONT
24 STRATEGIES FOR GROWTH
24 EXPANDING AROUND THE WORLD
25 HOW VALMONT GOES TO MARKET
25 PILLARS FOR ECONOMIC GROWTH
28 FINANCIAL OBJECTIVES AND RESULTS
29 MANAGEMENT'S DISCUSSION & ANALYSIS
34 SELECTED 11-YEAR FINANCIAL DATA
36 CONSOLIDATED STATEMENTS OF OPERATIONS
37 CONSOLIDATED BALANCE SHEETS
38 CONSOLIDATED STATEMENTS OF CASH FLOWS
39 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
45 BUSINESS SEGMENT INFORMATION
46 QUARTERLY FINANCIAL DATA
47 INDEPENDENT AUDITORS' REPORT
47 REPORT OF MANAGEMENT
48 OFFICERS AND MANAGEMENT
48 SHAREHOLDER INFORMATION
49 BOARD OF DIRECTORS
Management's Discussion and Analysis contains forward looking statements which
reflect management's current view and estimates of future economic and market
circumstances, industry conditions, company performance and financial results.
The statements are based on many assumptions and factors including operating
efficiencies, availability and price of raw materials, availability and market
acceptance of new products, product pricing, domestic and international
competitive environments, actions and policy changes of domestic and
international governments, and other risks described from time to time in
Valmont's reports to the Securities and Exchange Commission. Any changes in such
assumptions or factors could produce significantly different results.
150
<PAGE>
PAGE 1
FINANCIAL HIGHLIGHTS
[DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS]
OPERATING RESULTS AND RATIOS ARE BEFORE 1996 ASSET VALUATION CHARGE.
<TABLE>
<CAPTION>
OPERATING RESULTS 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $606.3 $622.5 $644.5
Net earnings 27.6 37.5 31.3
Diluted earnings per share 1.02 1.33 1.12
Dividends per share 0.25125 0.21875 0.1875
FINANCIAL POSITION
Shareholders' equity $175.9 $207.1 $175.2
Shareholders' equity per share 7.12 7.49 6.41
Long-term debt as a % of invested capital 30.3% 10.4% 12.1%
OPERATING RATIOS
Gross profit as a % of net sales 25.2% 27.2% 26.7%
Operating income as a % of net sales 7.9% 10.0% 8.1%
Net earnings as a % of net sales 4.6% 6.0% 4.9%
Return on beginning equity 13.3% 21.4% 19.7%
Return on invested capital 10.3% 15.4% 14.7%
YEAR-END DATA
Shares outstanding (000) 24,721 27,641 27,330
Approximate number of shareholders 5,500 5,400 4,400
Number of employees 3,869 3,751 4,868
</TABLE>
Graph
<TABLE>
<CAPTION>
NET SALES
- ---------
<S> <C>
1994 $502
1995 $545
1996 $645
1997 $623
1998 $606
</TABLE>
Graph
<TABLE>
<CAPTION>
DILUTED EARNINGS PER SHARE
- --------------------------
<S> <C>
1994 $.69
1995 $.90
1996 $1.12
1997 $1.33
1998 $1.02
</TABLE>
Graph
<TABLE>
<CAPTION>
Return on invested capital
- --------------------------
<S> <C>
1994 10.7%
1995 13.0%
1996 14.7%
1997 15.4%
1998 10.3%
</TABLE>
151
<PAGE>
PAGE 2
Letter to fellow shareholders
Photo Man with elbow on table.
Caption: MOGENS C. BAY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
In last year's annual report I predicted that 1998 would be yet another record
year for your company. I was wrong! 1998 was a reminder that some of our
businesses are cyclical and when they hit a down cycle, earnings and sales
growth targets will not be met. It also proved to us, however, that our
diversification efforts are paying off. We had strong performance in our
coatings businesses, a good year in our European lighting and traffic pole
businesses and another year of sales growth in our international irrigation
business lead by a banner year in Brazil. Despite having a difficult first half
in the North American pole businesses, a soft second half in the North American
irrigation business, and a lackluster year in our wireless communication
business worldwide, we still delivered the third highest earnings in the
company's history.
In 1998, we met two of our three financial objectives. Our after-tax return on
invested capital was 10.3%, exceeding our target of 10%. Our debt to total
invested capital at 30% remained well under our comfort level of 40%. This,
despite spending over $50 million buying back Valmont stock, illustrates our
businesses' ability to generate cash. But our most important objective, earnings
per share growth, was not met in 1998, as our earnings dropped 23%. I must
emphasize that our earnings growth target is a "trendline" target and that
Valmont's earnings per share have grown 14% compounded annually over the past
five years. That is a healthy performance for any manufacturing company.
Whenever we experience a bump in the road, as we did in 1998, it makes us sit
back and re-evaluate the underlying drivers of our businesses. We need to be
comfortable that this truly is just a bump in the road and not an early sign
that we might be heading down a rocky road.
When we examine the long-term factors that relate to Valmont's irrigation
business, this year's events highlight what we know about population increases
and dietary improvement. Increased population and economic improvement spark the
demand for more and better food. For example, the Asian region experienced
increased prosperity and growth until the summer of 1997, and until then they
did what was expected--increased imports of grain and meat to improve their
diets.
152
<PAGE>
PAGE 3
The Asian financial crisis slowed that trend, but the long-term outlook remains
in place. To increase food production with limited water and land resources
farmers must become ever more efficient. Mechanized irrigation is one of the
best ways to improve farmers' efficiency.
Our infrastructure businesses also have strong fundamentals. Whether it is more
lighting or better signs and signals, the underlying desire for increased
highway safety and less traffic congestion drive the demand for Valmont's pole
products. And, to increase capacity and service reliability in the electric
utility industry, it will take the type of high quality steel-engineered
transmission and distribution poles that are Valmont's hallmark.
Graph
<TABLE>
<CAPTION>
DILUTED EARNINGS PER SHARE
Actual 15% Target
- ------ ----------
<S> <C> <C>
1993 $0.54 $0.54
1994 $0.69 $0 62
1995 $0.90 $0.71
1996 $1.12 $0.82
1997 $1.33 $0.94
1998 $1.02 $1.09
</TABLE>
Valmont's compounded annual earnings growth rate over the last five years is 14
percent.
The wireless communication industry is yet another good example of why we
reiterate that, in spite of short-term market dynamics, the long-term drivers in
our businesses are strong. When you weigh the rapid growth of the wireless
communication industry in the U.S. and around the world and see how well the
technology has been accepted, you cannot help but be enthused about the
long-term outlook for this popular and convenient technology. The next level of
growth for this industry should come from improved service and global expansion.
In order to achieve better levels of service, wireless providers will need more
towers, poles, and components to expand their networks.
153
<PAGE>
PAGE 4
A `Thank You' to the Valmont Team
Whenever an organization is faced with less favorable market conditions than you
had planned, it must contend with greater levels of stress. Cost containment and
downsizing become necessary to protect the corporation's earnings to the fullest
extent possible. Yet, customers continue to deserve exceptional service even
when fewer resources are available. The Valmont team has met this challenge
admirably, working long hours and finding more efficient ways to get the job
done. I thank them for a great effort under difficult circumstances.
"We are confident that we are focused on the right businesses: water management
for agriculture and engineered structures and services for infrastructure
development."
In closing, while we are not satisfied with the operating results for 1998, we
are confident that we are focused on the right businesses: water management for
agriculture and engineered structures and services for infrastructure
development. Business conditions could have been better in 1998, however, the
long-term drivers for all of our businesses are positive. We intend to
vigilantly pursue every opportunity to grow our core businesses while building
shareholder value.
Signature
/s/ Mogens C. Bay
- ------------------------------------
Mogens C. Bay
Chairman and Chief Executive Officer
154
<PAGE>
PAGE 5
TOTAL VALUE IMPACT
"TVI motivates managers to think like shareholders."
Total Value Impact (TVI) is more than a concept at Valmont. In 1994,
TVI--Valmont's unique formulation and application of the business philosophy of
value-added metrics-became the principal tool used in aligning shareholder and
management interests. TVI is a measurement designed to enhance shareholder
value. Simply put, it is Valmont's net operating profit after taxes minus a
10 percent charge for the capital employed.
TVI has placed the efficient management of capital squarely in the limelight for
Valmont managers, encouraging them to understand and measure the elements that
enhance long-term TVI growth and shareholder value. These elements include the
level of margins necessary to earn more than the cost of capital, the amount of
capital needed to generate each dollar of sales, and other standard measures
such as revenue growth, operating profit margin and invested capital turnover.
Because TVI drives Valmont's management compensation bonus plan, results are
immediate. Under the Valmont plan, managers who exceed their target TVI can
increase their bonuses while managers who fall short do not receive any bonus.
The TVI process motivates managers to think like shareholders.
Valmont's long history of financial stability and accountability has become
increasingly important to our customers, shareholders and employees. It is our
goal that each of these constituents continues to receive the value they have
come to expect from Valmont. Our annual financial goals are to grow trendline
earnings by 15 percent per year, maintain long-term debt at less than 40 percent
of invested capital, and achieve a minimum 10 percent after tax return on
invested capital.
155
<PAGE>
PAGE 6
AT A GLANCE
Infrastructure
Image
Street light/traffic light combination pole
STREET & AREA LIGHTING
Valmont is the world leader in the manufacture of steel and aluminum lighting
and traffic control structures. Valmont's specialized sports lighting structures
for stadiums and sports centers can be found in locations around the world.
Image
Communication pole
Image
Communication tower
COMMUNICATION POLES & TOWERS
Valmont produces wireless communication structures and components, including
poles and self-supporting towers configured to customer specifications. "Tree
poles" and other camouflaged products are designed to blend in with the
surrounding environment.
Image
Electrical poles
UTILITY STRUCTURES
For the utility industry, Valmont manufactures poles and structures for
electrical transmission and distribution, as well as low-profile substation
structures.
156
<PAGE>
PAGE 7
Irrigation
Image
Linear irrigator
CENTER PIVOT & LINEAR MOVE EQUIPMENT
From a fixed point in the field, Valmont's Valley-Registered Trademark-
Center Pivot mechanized irrigation equipment rotates in a circular path
around the field, evenly distributing water, fertilizer and chemicals. Valley
Linear/Universal Linear equipment is designed for long, rectangular or
L-shaped fields.
Image
Water droplet
WATER RE-USE
Through its Cascade Earth Sciences subsidiary, Valmont offers environmental
engineering expertise for soil and water resource management and land
application of treated wastewater using mechanized irrigation equipment.
Industry
Image
Galvanized tubing
COATINGS
Valmont's Coatings Division applies high-quality, galvanized and powder coatings
to products and components manufactured by Valmont as well as by other
companies.
Image
Nine stacked pipes
INDUSTRIAL PRODUCTS
Valmont's Industrial Products Division manufactures standard and customized
steel tubing for agriculture and general industry, and precision telescopic
covers and conveyors for the machine tool industry. Valmont distributes fastener
products for industrial applications and is a leading supplier to the pressure
vessel and heat recovery steam generator industries, manufacturing rolled and
welded steel cylinders.
157
<PAGE>
PAGE 8
WHERE WE ARE
Map illustration
St. Hubert, Quebec, Canada
MANUFACTURING FACILITY: STEEL AND ALUMINUM POLES
Long Beach, California, USA
GALVANIZING
Elkhart, Indiana, USA
MANUFACTURING FACILITY: STEEL AND ALUMINUM POLES
Omaha, Nebraska, USA
Corporate Headquarters
Valley, Nebraska, USA
MANUFACTURING FACILITY: IRRIGATION EQUIPMENT, STEEL POLES, TUBING, GALVANIZING
West Point, Nebraska, USA
GALVANIZING
Tulsa, Oklahoma, USA
MANUFACTURING FACILITY: STEEL POLES, ROLLED AND WELDED STEEL CYLINDERS,
GALVANIZING
Albany, Oregon, USA
HEADQUARTERS, CASCADE EARTH SCIENCES, ENVIRONMENTAL ENGINEERING, EARTH SCIENCES,
WATER AND SOIL MANAGEMENT
Salem, Oregon, USA
MANUFACTURING FACILITY: WIRELESS COMMUNICATION STRUCTURES, PASSIVE REPEATERS,
WAVE GUIDE AND ANTENNA SUPPORTING SYSTEMS, FASTENERS
Tualatin, Oregon, USA
GALVANIZING
Brenham, Texas, USA
MANUFACTURING FACILITY: STEEL POLES
Gunnison, Utah, USA
MANUFACTURING FACILITY: COMPOSITE POLES
Lindon, Utah, USA
GALVANIZING
158
<PAGE>
PAGE 9
Map illustration
Uberaba, Brazil
MANUFACTURING FACILITY: IRRIGATION EQUIPMENT, COMMUNICATION TOWERS
Shanghai, China
MANUFACTURING FACILITY: STEEL POLES
Charmeil, France
MANUFACTURING FACILITY: STEEL POLES
Creuzier-le-Neuf, France
MANUFACTURING FACILITY: INDUSTRIAL COVERS AND CONVEYERS
Lempdes, France
MANUFACTURING FACILITY: STEEL COMMUNICATION TOWERS
Rive-de-Gier, France
MANUFACTURING FACILITY: ALUMINUM POLES
Gelsenkirchen, Germany
MANUFACTURING FACILITY: STEEL POLES
Maarheeze, The Netherlands
MANUFACTURING FACILITY: STEEL POLES
Siedlce, Poland
MANUFACTURING FACILITY: STEEL POLES
Madrid, Spain
MANUFACTURING FACILITY: IRRIGATION EQUIPMENT
Valmont is an international manufacturing company with operations around the
world. Valmont designs and manufactures mechanized irrigation equipment to
enhance food production through efficient water management, as well as poles,
towers and structures for lighting, utility and communication applications, and
custom coating and fabricated products for various industrial uses. Valmont
operates 21 manufacturing plants, located on four continents, and markets its
products in more than 100 countries.
159
<PAGE>
PAGE 10
Photo Man under linear irrigator Caption: Don Worden, along with sons Tom and
Brian, farm 4,000 acres in Washington's southern basin using the Valley(R)
pivots he purchased more than 20 years ago.
160
<PAGE>
PAGE 11
IRRIGATION
"Value for the money we spent."
"Washington state's southern basin gets, on average, just seven inches of
rainfall per year. And because the soil is fairly fine, it doesn't hold the
moisture that a heavier clay-type soil does. So in 1975, I decided to install
center pivots on my farm. I talked to the various pivot manufacturers that were
around at that time, and the one that made the biggest impression was Valley.
"I was looking to place about 32 pivots on about 4,000 acres, and the Valley
dealer, Bert Benton in Pasco, gave me good advice and a package deal. They
weren't the least expensive systems, but I felt good about dealing with Bert and
so did my banker. We've never had a moment of regret. We felt like Valley was a
better product-sturdy, galvanized and built to last.
"And last they have. Some of our neighbors bought other brands and they have
all been replaced by now--so we know we got good value from Valley. Sure
we've had to do a little preventive maintenance over the years--and Bert has
always been there to help. More than twenty years later, the pivots are
working as well as ever-and we're still talking with the same people we
bought them from. That means a lot to us."
161
<PAGE>
PAGE 12
IRRIGATION
WATER: ONE OF OUR MOST VALUABLE RESOURCES
Of all the water on earth, only a fraction of one percent is available for human
use. Next to air and sunlight, water is our most valuable resource-and the one
that is most at risk. Today, more than 1 billion people lack an assured supply
of good quality water, (1) and in the next decade the number of countries facing
severe water shortages is very likely to increase dramatically.
AGRICULTURAL WATER ISSUES
Advanced irrigation methods provide a solution to water demand and food supply
problems. It is a well-documented fact that irrigated land is more than twice as
productive as rain-fed cropland. In the developed world, studies show that
irrigation increases yields 50 to 200 percent for most crops. In developing
countries, irrigation increases yields for most crops by 100 to 400 percent-yet
only about 20 percent of the arable land there is irrigated. Worldwide, only 16
percent of the world's croplands are irrigated, yet these irrigated acres yield
some 36 percent of the global harvest. A World Bank study estimates that
irrigation could be extended over an additional 270 million acres of land in
developing countries, producing enough food each year to feed 1.5 to 2 billion
people.
Over the next 30 years, experts predict that the current level of food
production must double in order to meet the demands of a growing population and
improving diets. This increase in production, however, depends on more efficient
methods of water management. Many opportunities exist to improve the efficiency
of water used in irrigation--and Valmont is best positioned to lead the way.
More than half of the future gains in crop production are expected to come from
irrigated land. This represents a tremendous growth opportunity for companies
like Valmont to lead the charge in demonstrating to growers the value of
mechanized irrigation. Valmont is working to provide them with the tools
necessary to successfully increase production to meet world agriculture needs.
WATER MANAGEMENT: OUR MOST IMPORTANT ROLE
Modern mechanized irrigation equipment, such as that designed and manufactured
by Valmont, uses up to 50 percent less water and 75 percent less labor than
traditional irrigation methods. This equipment also provides superior farm
management tools. By replacing flood irrigation methods--which often perform
poorly and waste as much as 50 percent of the total water pumped before it
reaches the intended crop--producers can increase yields while conserving
valuable soil and water resources.
Technologies such as those supplied by Valmont--including low pressure
irrigation methods, efficient sprinklers, volume control and better
irrigation scheduling--are effective in reducing water and energy use, and
they are essential in countries where water management is a critical issue.
Since agriculture is responsible for some 67 percent of global fresh water
use, the potential for water savings through greater efficiency in irrigation
is enormous. This translates into a significant potential demand for
Valley-Registered Trademark- irrigation products.
Photo
Arial view of center pivot irrigation
Caption: IRRIGATED LAND IS MORE THAN TWICE AS PRODUCTIVE AS RAIN FED CROPLAND.
(1) Food and Agriculture Organization of the United Nations; www.fao.org.
162
<PAGE>
PAGE 13
LEADING THE WAY WITH INFORMATION-BASED PRECISION IRRIGATION PRODUCTS
At Valmont, we understand that our business depends on being good stewards of
land and water. As more precision farming methods are adopted, it is necessary
to provide irrigation equipment controls and software that are custom-designed
for specific crops, varying terrain, water and soil types. Information-based
technology is becoming more important as growers adopt more precise methods of
farming. We are committed to leading the way with irrigation products that
utilize advanced technology and are designed to facilitate water management. In
this arena, Valmont has entered into strategic alliances with leading
engineering and electronic design firms in order to develop innovations in
software, electronics and controls that will lead to technological advances in
precision farming.
Photo
Linear irrigator
Caption: Precision application puts water in the crop root zone, eliminating
runoff and reducing evaporation losses.
Additionally, Valmont is pioneering research in new control and electronic
technologies that will, in the future, help producers analyze weather, soil, and
crop yield conditions to apply optimal water and chemical amounts. As a leader
in these technologies, Valmont is helping producers to use resources more
efficiently and move from uniform water and chemical application to non-uniform,
precision application--applying the right amount of water and chemicals where
needed, not necessarily evenly over the entire field.
INNOVATIVE WASTEWATER MANAGEMENT PROCESSES ARE THE WAY OF THE FUTURE
As the leading manufacturer of mechanized irrigation equipment, Valmont takes
seriously its role in water management issues. In the area of wastewater
management, research is providing information about how to re-use treated
wastewater for irrigation purposes. Valmont is at the forefront of this research
and is positioned to be a leader in providing this technology.
For nearly 20 years, Valmont has teamed with the city of Tallahassee,
Florida, in a working farm research program to study the effectiveness of
irrigating farm crops with treated wastewater. Today, with 13
Valley-Registered Trademark- center pivots, the city of Tallahassee recycles
100 percent of its effluents over 1,800 acres of crop land. The U.S.
Environmental Protection Agency, which along with the state agency
establishes strict guidelines on the application of wastewater to cropland,
calls the project an example of "a state-of-the-art" recycling program that
contributes to agricultural resources and pollution prevention.
At Valmont, we believe that wastewater management is a key to improved water
stewardship worldwide. In 1998, we acquired Cascade Earth Sciences, Ltd.
("CES"), of Albany, Oregon, a firm that specializes in the land application of
wastewater.
CES is staffed with talented geologists, soil scientists, environmental
technicians, and civil, environmental and agricultural engineers. Their
expertise gives us the ability to conduct a thorough analysis of soil
fertility, wastewater nutrient value, and crop agronomic characteristics to
determine the best solutions to wastewater management needs. And, by
combining Valley-Registered Trademark- center pivot or linear move machines
with wastewater application equipment, we can assure precision and uniformity
in the land application of recycled wastewater. The acquisition of CES
provides the growth opportunity for Valmont to provide industrial, municipal
and agricultural generators of wastewater with turn-key solutions for
wastewater management issues.
Photo
Man standing at back of truck
Caption: Computerized control mechanisms help manage electricity loads and
maximize water use, allowing producers to tailor water rates for each part of
the field.
163
<PAGE>
PAGE 14
Photo Man standing under power pole Caption: Tim Johnson is Director of
Purchasing for Hawaiian Electric Company, a utility that provides electricity
to 98 percent of the state of Hawaii.
164
<PAGE>
PAGE 15
INFRASTRUCTURE
"This is what strategic partnership is all about ..."
"Every company looks for ways to maintain quality but reduce costs--and we're
not any different. Our challenge, however, is to do both and increase the
standardization of the poles we purchase to transmit our power. That may not
sound like a huge task, but consider that we operate in a hot, humid,
mountainous environment where the spans are long, loads are heavy, and
termites and moisture take their toll on wood poles.
"Our specifications are that new poles be made of galvanized steel and although
they may contain differing amounts of steel--because of varying load
requirements--they all have common components within a family of poles. We have
always worked successfully with Valmont, so when we looked for a strategic
partner, it made sense to work with someone who understands our challenges.
"There are a lot of synergies between our organization and Valmont's, especially
in the design and manufacturing stages. We do the initial research--collect
information about the terrain, determine the necessary spacing and weights to
correspond with height and load requirements, and we share all of that with
Valmont. Their engineers and ours work together to come up with a design. Then
Valmont manufactures the poles and delivers them to us.
"Although we try to avoid timeline-critical projects, we've had a few of them,
and Valmont has risen to the task every time. They've arranged for expedited
manufacturing and delivery and are helping us figure out how to eliminate future
emergencies. This is what a strategic partnership is all about--working together
to solve problems and get the job done right--on time and whenever possible,
under budget."
165
<PAGE>
PAGE 16
INFRASTRUCTURE
Keeping pace with global infrastructure development
In the coming years, infrastructure expansion is expected to increase in
developing nations to meet the demands of newly liberated economies and growing
populations. Industrialized nations, in a quest to increase public safety and
provide the additional services required in a competitive environment, will seek
to add to and upgrade existing infrastructure with durable, long-lasting and
more cost-effective products. Valmont continues to invest in new technology that
allows us to maintain our leadership positions by improving our pole products
and manufacturing processes. Valmont's capabilities to design and manufacture
high quality steel and aluminum poles and towers for lighting, traffic, utility
and communication applications are aligned with these trends.
Electric utility industry: change creates opportunities
Shifting political and economic issues are bringing about change to the energy
industry in nearly every part of the world. With the opening of economic markets
worldwide, countries in Europe, Asia and South America have begun efforts to
privatize and deregulate their national electric systems. In the United States,
many states have enacted legislation to promote electric utility competition.
Isolated power grids that previously supplied electricity to an insular customer
base will be interconnected to allow consumers to choose their energy suppliers.
The wave of deregulation and increased competition that is sweeping the world's
energy markets will translate into lower prices and increased services for
consumers. Electric utilities, in order to maintain a competitive edge, must
implement more cost-effective ways of doing business.
Valmont manufactures high quality transmission structures, distribution poles
and substations for the electric utility industry-products for which there will
be increased demand as power grids are expanded. In an effort to become more
cost-effective, many utilities and energy providers are replacing wooden poles
with lighter weight, easier-to-install steel poles that are impervious to
termites and wood rot. Steel poles last years longer than wooden poles, and can
result in lower total installed costs.
Additionally, as worldwide economic and population growth translates into
increased housing and commercial development, additional power capacity is
needed. Valmont is forming strategic alliances with both in the U.S.
and abroad to meet the demand for poles and transmission structures. By working
in partnership with our customers, we are able to identify more efficient
designs and build products to meet each customer's individual needs and
specifications.
To assist our strategic partners and other customers in lowering costs, Valmont
also provides a variety of coatings and finishes to poles in order to meet the
various challenges of climate, terrain and the aesthetic needs of our customers.
Photo
View of power poles from harvested corn field
Caption: TO BECOME MORE COST-EFFECTIVE, MANY UTILITIES ARE REPLACING WOODEN
POLES WITH LIGHTER WEIGHT AND EASIER-TO-INSTALL STEEL POLES.
166
<PAGE>
PAGE 17
Lighting the way with safer roadways and population centers
Another aspect of a growing population base worldwide is the need for more roads
and highways. Consumer safety is a top priority for governments and business
owners alike. People prefer well-lit parking lots; safely lit streets, freeways
and roads; and traffic signals and signs that provide for a smooth flow of
traffic. In the U.S., Congress passed the federal highway bill in June of 1998
which provides $204 billion over six years to upgrade the nation's
transportation infrastructure. With funding earmarked for both roadway and mass
transit enhancements, lighting poles and traffic structures such as those
manufactured by Valmont are in greater demand.
Photo
Target parking lot
Caption: CONSUMER SAFETY IS A TOP PRIORITY-AND MORE RETAILERS ARE RECOGNIZING
THE LINK BETWEEN WELL-LIT PARKING LOTS AND SALES.
Anywhere, any time communications: a world of opportunity
In Europe, where tourism is a major industry, spending on infrastructure is also
increasing. Custom-designed fluted and decorative poles are particularly popular
in European tourist areas. Additionally, sports stadiums and event facilities
are being constructed that require specialized, highly engineered lighting
structures. In other parts of the world, demand for lighting products is also
high. Valmont has located manufacturing facilities throughout Europe, and in
China, to meet the growing demand for lighting structures worldwide.
Worldwide, mobile wireless infrastructure development slowed in 1998. However,
indications are that due to continued advances and capabilities in digital
technologies, the wireless segment of the communication industry will soon see
renewed opportunities for growth.
Some experts predict that within the near future, the wireless phone will also
become the home phone in parts of the developing world. This trend will be
especially evident in nations that choose to meet customer demands by forgoing
the installation of wired lines in favor of newer, less-costly wireless
solutions. Privatization of state-owned telecommunications providers in Europe
and Asia is also encouraging wireless investment and cellular subscriber growth.
As a leading provider of self-supporting communication towers and monopoles,
Valmont is poised to benefit from growth in this industry. Camouflaged
structures--designed to blend into the environment--and combination poles
that can be used for both lighting and wireless communications, are becoming
more popular. Valmont has invested in the technology to provide these
custom-designed products quickly and cost effectively. To complement our
communication tower and pole business, we also manufacture and install
component products such as waveguide support systems, antenna supports and
rooftop mounting systems.
Photo
Cactus
Caption: CAMOUFLAGED COMMUNICATION POLES BLEND INTO THE ENVIRONMENT.
Photo
Street light/traffic light combination pole
Caption: THE U.S. FEDERAL HIGHWAY BILL, PASSED IN 1998, PROVIDES FUNDING TO
UPGRADE THE NATION'S TRANSPORTATION INFRASTRUCTURE. ADDITIONAL TRAFFIC
SIGNALS AND SIGNS WILL HELP EASE TRAFFIC CONGESTION AND INCREASE SAFETY.
167
<PAGE>
PAGE 18
Photo
Man standing under netting/flag pole
Caption: DR. LEE SIMMONS IS DIRECTOR OF OMAHA'S HENRY DOORLY ZOO, WHICH RANKS
AMONG THE TOP FIVE ZOOS IN THE WORLD.
168
<PAGE>
PAGE 19
Industry
"A flag that is visible for miles around."
"We wanted to make it easy for visitors to find our new Safari Park.
Unfortunately, Mother Nature put a hill between us and Interstate 80, so our
flagpole would have to be 160 feet high.
"There were a couple of other items on our wish list, too. We wanted the pole to
be the sole support for our aviary netting and to sustain winches and cables
that would allow us to lower the netting to catch a bird. We also wanted to
implant a photovoltaic sensor inside the pole to automatically furl and unfurl a
25 X 48-foot flag at dawn, dusk and during bad weather. Naturally, we wanted
this all in place by opening day which was less than six weeks away.
"Everyone was skeptical at first. But the people at Valmont pulled out all the
stops and put me in touch with engineer Carl Macchietto. Keep in mind that this
was a totally unique concept...a 16-story, freestanding pole that not only
supports an aviary but also accommodates some pretty sophisticated mechanics. A
prototype did not exist.
"After we finalized the design, it was less than a month before the pole was
installed--just hours before we were hit with 108 miles-per-hour winds. The pole
swayed in the wind just like you would expect, but it proved to be absolutely
sound. It's an amazing feat of engineering and it meets all of our goals."
169
<PAGE>
PAGE 20
INDUSTRY
Leveraging our strength: quality products for industry
A key Valmont strategy is to leverage our manufacturing strengths. As a result
we have become a leading supplier of steel tubing, rolled cylinders, fasteners,
precision telescopic covers, and custom-finish coatings for industrial use.
Industrial products: adding value for industrial customers
Valmont has been manufacturing tubing for industrial use--from
small-diameter/heavy wall to large-diameter/light wall--for more than 40 years.
Our high-speed manufacturing equipment can produce custom-engineered tubing in a
wide variety of shapes and sizes built to exacting tolerances.
In addition to our internal customers--Valmont's Irrigation and Infrastructure
Divisions--our Industrial Products Division provides products and services to a
wide variety of customers. We provide standard and custom steel tubing products
for use in the manufacture of agricultural equipment, truck and automotive
equipment, fire-protection sprinkler applications, fire extinguishers, heat
exchangers, and other general fabrication uses. These include structural tubing
for the construction industry in squares or rectangles, designed to meet
industry physical strength and dimensional requirements.
Additionally, the division is a leading supplier of ASME-certified rolled and
welded cylinders for use in the manufacture of pressure vessels, boilers and
heat recovery steam generators. Industrial fasteners are supplied for Valmont's
internal divisions, and for other original equipment manufacturers across the
Midwestern and Pacific Northwestern United States. The division also works
closely with machine tool manufacturers in Europe in the design and manufacture
of auxiliary machine tool equipment such as telescopic covers and conveyors.
The Industrial Products Division is focused on adding value to all of its
product lines by providing customers with additional fabrication and engineering
services keyed to their specific needs. Given the increasing trend throughout
the industrial manufacturing market to outsource many of the services provided
by Valmont's Industrial Products Division, we expect substantial growth as this
division continues to meet the new expectations and requirements of customers.
Photo
Pneumatic transportation system
Caption: VALMONT'S INDUSTRIAL PRODUCTS DIVISION SUPPLIES THIN WALL TUBING USED
IN PNEUMATIC TRANSPORTATION SYSTEMS THAT MOVE ITEMS AT SPEEDS OF UP TO 25 FEET
PER SECOND.
170
<PAGE>
PAGE 21
Coatings: custom protective finishes for industry
Since the mid 1960's our manufacturing capabilities have included a hot-dip
galvanizing process that coats steel products with a protective zinc coating.
Leveraging on this core strength, we formed a separate Coatings Division to
provide custom-finish coatings for products and components manufactured by other
companies in addition to our own.
The galvanizing process helps protect steel against corrosion. Corrosion is
estimated to cost the U.S. economy more than $200 billion annually--4.2% of the
U.S. gross domestic product. This cost is dramatically reduced when steel is
protected through the galvanizing process, which generally lengthens the life of
steel by a factor of at least five.
By protecting steel from corrosion, new uses for steel are possible, and we
expect the demand for galvanizing to increase. For example, telephone poles
traditionally built out of wood can now be built at a competitive cost using
galvanized poles. In many world areas where deforestation is a problem and
natural habitats need to be protected, galvanized steel provides practical
alternatives to the harvesting of wood for poles.
The opportunities for the future growth of our Coatings Division are many.
Today, our Valley, Nebraska plant is the largest galvanizing facility in North
America, and we are among the country's largest custom galvanizers. Our Coatings
Division is our fastest growing business. During 1998, we acquired four
galvanizing operations--in Utah, Oregon, Oklahoma and California--which serve to
fulfill our internal needs as well as help meet the growing external demand for
galvanizing as a protective coating.
Also during 1998, Valmont became the first U.S. galvanizer with multiple plants
to achieve ISO 9002 certification. This international certification ensures
customers of our commitment to quality standards worldwide--an important
competitive advantage.
Photo
End view of round and square tubing
Caption: VALMONT MANUFACTURES ROUND AND SQUARE, LARGE AND SMALL DIAMETER
MECHANICAL TUBING FROM THE LIGHTEST TO THE HEAVIEST WALLS IN THE INDUSTRY.
Photo
Hot dipping pole
Caption: HOT DIP GALVANIZING OF STEEL PRODUCTS FORMS A LONG- LASTING, PROTECTIVE
COATING AGAINST CORROSION.
171
<PAGE>
PAGE 22
Photo
Man standing under street light
Caption: HUUB SMEETS IS DIRECTOR OF THE DEPARTMENT OF URBAN PLANNING AND
DEVELOPMENT FOR THE CITY OF MAASTRICHT IN THE NETHERLANDS.
172
<PAGE>
PAGE 23
THE VALUE OF VALMONT
"Resplendent past, bright future."
"Our city is very progressive. Located in the southern part of Holland, we think
of Maastricht as a `springboard' to Europe, as we are only a few kilometres from
the borders of both Belgium and Germany.
"Historically, Maastricht has always been a centre of industry and trade. During
the 19th century, our city was a key military defense location where thousands
of ceramic products were made for use by the military and others. Today,
Maastricht is still known as the centre of the ceramics industry--and products
with renowned brand names such as Royal Sphinx and Royal Mosa find their way to
all parts of the world.
"In recent years, our key initiative has been the revitalization of our
Ceramique area, a 23-hectare region of downtown Maastricht-home to a museum,
library, industry, office workers, urban dwellers and all the amenities these
groups require. We host more than 15 million visitors to our city each year and
it is important that they see our city at its best--resplendent in the culture
and history for which we are known.
"When we began our renovation, our first step was to rebuild beautiful Ceramique
Avenue. We ordered 100 specially selected Valmont aluminum poles which were
designed to complement the look of the area. Plus, these poles support high top
lights to illuminate the Avenue and at a lower level, support lights for
pedestrians and bicyclists. Although Valmont's were not the lowest-priced
products or the highest-priced, we believe they were the best choice--extremely
high quality and the desired aesthetic appeal. We are now placing 100 more poles
on side streets. I think that is a testament to our satisfaction with the
product and to Valmont's ability to serve its customers well with style,
quality, service, and most importantly, value."
173
<PAGE>
PAGE 24
THE VALUE OF VALMONT
Our past sets the course for our future
What we do best is leverage our expertise--in engineering, manufacturing, and
marketing--to build a stronger presence in our global economies.
Well-planned strategies for growth
The progress of Valmont over the years--from a manufacturer of a single line
of center pivot irrigation equipment to a manufacturer of diverse products
and components for agricultural and industrial uses--has been methodical and
logical. This strategy--of leveraging our strengths and expanding our
presence only in viable markets--will continue to drive our success.
In the early years, necessity mandated that we fabricate our own tubing and
build components from the ground up. Soon, we were the world's leading
manufacturer of mechanized irrigation equipment. Valmont's management team began
to look for ways to leverage the company's steel fabrication expertise while
reducing the company's dependence on agriculture. They recognized the
opportunity to manufacture tubing for other industries, and soon began to
develop the industrial tubing market for original equipment manufacturers, steel
service centers and for use in both private and public projects.
Over the years, our skill base in design, engineering, manufacturing and coating
continued to grow, and we introduced additional irrigation products that
revolutionized the irrigation industry--the corner system, linear move system,
low-pressure system, and computerized technology. We expanded into the
manufacture of tapered tubes for outdoor lighting and traffic signals, and large
tubular structures for the electric utility and communication industries.
We found other profitable ways to put our expertise to use. In 1966, we began
hot-dip galvanizing our products to provide protection. Today, we are among the
largest custom galvanizers in North America. We broadened our position in the
communication industry with the acquisition of the Microflect Company in 1995,
which enabled us to provide towers, components and installation and maintenance
services. We have leveraged our water management expertise as well--putting our
irrigation equipment to use in other sectors such as land application of treated
wastewater. Our acquisition this year of Cascade Earth Sciences will allow us to
offer better solutions to a wide range of agricultural, industrial and municipal
customers.
Expanding around the world
From the beginning, we knew that our products had global appeal and value, and
yet we also understood the prudence of careful international investment. We
decided early on that if we were to participate in markets overseas, we must
also selectively manufacture overseas. In that way--by being closer to our
customers--we can ensure that our products are engineered and built to fit
specific needs. And by employing local people and supporting their local
economies, we are able to become a part of the communities and countries that
sustain us.
Our Irrigation Division began developing overseas markets in the early
1970's. Licensing agreements were established in Saudi Arabia, Brazil,
Yugoslavia, South Africa and the Soviet Union. Soon, Valley-Registered
Trademark- pivot and linear move equipment was being sold in Europe, the
Middle East, Africa, Australia, China, Thailand and Latin America.
Valley-Registered Trademark- irrigation manufacturing facilities are now
located in Brazil and Spain, in addition to the U.S.
Starting with our first investment in France in 1989, our pole products have
also been well received in international markets. In 1991, we acquired two
companies; one, a steel pole manufacturer in the Netherlands and the other a
Canadian producer of aluminum lighting and traffic poles. During 1996, we
completed construction of a facility to manufacture light poles in Shanghai,
China, and we purchased a majority interest in a manufacturer of communication
towers in France. Also that year, we
174
<PAGE>
PAGE 25
purchased a majority interest in a manufacturer and distributor of lighting pole
structures in Gelsenkirchen, Germany. In 1997, we started a lighting pole
manufacturing facility in Siedlce, Poland. Today, in addition to our six
facilities in the U.S., we now manufacture irrigation equipment, poles, tower
structures and fabricated products at plants in Germany, Spain, China, Poland,
France, the Netherlands, Brazil and Canada.
Our future growth will result from doing what we do best: leveraging our
talents and strengths and remaining close to our customers. In all of our
engineering and manufacturing endeavors, we strive to be the `best cost'
producer--to provide the highest-quality products at a fair, competitive
price. We are committed to implementing innovations in design and automating
our manufacturing processes to provide customized products quickly and cost
effectively. This is the value of Valmont and the commitment that our
customers deserve and have come to rely on.
How Valmont goes to market
Valmont's Lighting and Utility products are sold through a network of Valmont
sales representatives and agents to utilities, general contractors, city, state
and federal entities, and others. To increase sales and customer alliances, our
strategy for the future includes: introducing new products customized to meet
customer needs; combining product engineering and manufacturing excellence to
deliver engineered structures at the best cost; forming additional strategic
alliances with key customers and vendors; and expanding our product line through
the use of more diverse materials.
Valley-Registered Trademark- Irrigation products are marketed through a
worldwide network of Valley Irrigation dealers--many of whom have been part
of Valmont since the 1960's. Valmont's strategy for increasing sales
includes: increasing dealer sales within each marketplace; adding and
recruiting new dealers in strategic locations; and encouraging conversion
from current flood irrigation practices by providing farmers, producers and
influencers with educational information about the value and advantages of
mechanized irrigation.
As a customer-driven company, Valmont seeks to provide its end users with the
information and tools they need in order to be more productive and profitable.
We do this by incorporating customer needs into our designs and by ensuring that
our representative dealer networks are equipped with new technologies, improved
services and the benefits they offer.
Pillars for economic growth
THE WORLD BANK HAS DETERMINED THAT TO SUSTAIN ECONOMIC GROWTH OUTSIDE THE U.S.
AND KEEP PACE WITH FUTURE DEMANDS, FOUR BASIC COMPONENTS MUST BE AVAILABLE:
SAFE WATER
ELECTRICITY
PAVED ROADS
TELEPHONES
Illustration of pillars
VALMONT IS AN INDUSTRY LEADER IN THE MANUFACTURE OF PRODUCTS FOR ALL FOUR OF
THESE AREAS. WE ARE THE LEADING PROVIDER OF IRRIGATION AND WASTEWATER MANAGEMENT
SYSTEMS THAT WILL HELP ENSURE A SAFE, PLENTIFUL WATER SUPPLY. WE ARE A LEADING
MANUFACTURER OF STEEL TRANSMISSION STRUCTURES THAT PROVIDE ELECTRICITY TO MEET
INCREASED GLOBAL DEMAND. OUR LIGHTING AND TRAFFIC CONTROL STRUCTURES LINE
FREEWAYS AND ROADWAYS IN LOCATIONS AROUND THE WORLD. AND IN THE TELEPHONE AND
COMMUNICATION INDUSTRY, WE ARE LEADING THE WAY IN THE DESIGN AND MANUFACTURE OF
WIRELESS COMMUNICATION STRUCTURES AND COMPONENTS.
175
<PAGE>
PAGE 26
Photo
Man and daughter standing in a shop
Caption: GENE LOUDEN, OF VALMONT'S IRRIGATION GEAR BOX MANUFACTURING DEPARTMENT,
AND HIS DAUGHTER, BRENDA, LIGHTING PRODUCTS MARKETING TRAINEE, WORK FOR VALMONT
IN VALLEY, NEBRASKA.
176
<PAGE>
PAGE 27
All in the family
"We are all in this together."
"When my daughter, Brenda, was in her final year of college, she was accepted
for a Valmont internship. I couldn't have been happier, because as a long-time
Valmont employee--I work on a gear box manufacturing team--I know that Valmont
is a good place to work.
"Sure, there have been a lot of changes at Valmont over the years. Automation
and technological processes have been put in place and safety is even more a
focus. But what sets Valmont apart, I think, is that as the company has grown,
expanded around the world and the products have become more sophisticated, the
management team has done what a lot of companies have not been able to do.
They've empowered their employees and instilled the sense that we're all in this
together--that our opinions and suggestions are important.
"For instance, we have a team-based approach and a Just-in-Time (JIT) program
that brings employees together from different disciplines to address issues and
solve problems. There is also an emphasis on aptitude evaluations to ensure that
the right employees are in the right positions since there are so many career
paths available. Training sessions are offered for every shift--even the
graveyard shift, which is the one I work on. And for employees who want to
pursue higher education, Valmont provides college tuition assistance. My
daughter, for instance--now a full-time Valmont employee--is working on her
master's degree. Classes are held right here at the Valley location.
"I think all of this has contributed to the company's ability to streamline
processes and increase productivity. But more importantly, it has led to an
increase in employee pride and morale. At Valmont, every person matters--just
like a family. And that's the kind of place I want my daughter to work."
177
<PAGE>
PAGE 28
FINANCIAL OBJECTIVES AND RESULTS
OBJECTIVE
Increase trendline earnings 15% per year
Graph
<TABLE>
<CAPTION>
NET EARNINGS
- ------------
<S> <C>
1994 $18.9
1995 $24.8
1996 *$31.3
1997 $37.5
1998 $27.6
15% trendline
</TABLE>
$ in millions
*Before asset valuation charge
OBJECTIVE
Achieve a minimum 10% after tax Return on Invested Capital
Graph
<TABLE>
<CAPTION>
RETURN ON INVESTED CAPITAL
- --------------------------
<S> <C>
1994 10.7%
1995 13.0%
1996 *14.7%
1997 15.4%
1998 10.3%
</TABLE>
OBJECTIVE
Maintain Long-Term Debt as a percent of Invested Capital at less than 40%
Graph
<TABLE>
<CAPTION>
LONG TERM DEBT AS A PERCENT OF INVESTED CAPITAL
- -----------------------------------------------
<S> <C>
1994 21.9%
1995 17.1%
1996 12.1%
1997 10.4%
1998 30.3%
</TABLE>
WE MEASURE OUR PERFORMANCE AGAINST MANY STANDARDS. FINANCIALLY, WE HAVE SELECTED
THREE PRINCIPAL FACTORS THAT TELL JUST HOW WELL WE ARE MANAGING THE COMPANY AND
THE MONEY INVESTED IN IT. THE GOALS WE HAVE ESTABLISHED FOR EARNINGS GROWTH,
RETURN ON INVESTED CAPITAL AND LONG TERM DEBT LEVERAGE ARE APPROPRIATE FOR THE
INDUSTRIES IN WHICH WE PARTICIPATE, YET CHALLENGING ENOUGH TO DEMAND THE VERY
BEST TALENTS AND PERFORMANCE OF OUR MANAGEMENT TEAM.
178
<PAGE>
PAGE 29
MANAGEMENT'S DISCUSSION and analysis of Financial Condition and Results of
Operations
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial position. This discussion
should be read in conjunction with the Consolidated Financial Statements and
related Notes.
RESULTS OF OPERATIONS
The net sales and operating income of the Company's business segments for the
past three years are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
[IN MILLIONS] 1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
NET SALES
Irrigation $221.1 $239.2 $210.7
Infrastructure 296.0 307.6 270.9
Other 89.2 75.7 162.9
-----------------------------------------
Net Sales $606.3 $622.5 $644.5
-----------------------------------------
OPERATING INCOME
Irrigation $25.7 $29.1 $23.9
Infrastructure 8.8 24.6 19.9
Other 13.3 8.3 (7.2)
-----------------------------------------
OPERATING INCOME 47.8 62.0 36.6
Other deductions (4.3) (3.1) (3.6)
-----------------------------------------
Earnings before
income taxes $43.5 $58.9 $33.0
-----------------------------------------
</TABLE>
FISCAL 1998 COMPARED WITH FISCAL 1997 CONSOLIDATED
Net sales of $606.3 million in 1998 were 2.6% lower than 1997 net sales of
$622.5 million. Sales volume declined in both the Infrastructure and Irrigation
segments. Sales in the Irrigation segment declined 7.6% from $239.2 million in
1997 to $221.1 million in 1998. In the Infrastructure segment, 1998 sales were
$296.0 million, down 3.8% from 1997 sales of $307.6 million. Other sales
increased 17.8% from $75.7 million to $89.2 million in 1998, primarily from the
acquisitions of four coatings operations in 1998.
Graph
<TABLE>
<CAPTION>
Segment sales
- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 $645 Infrastructure $271 Irrigation $211 Other $163
1997 $623 Infrastructure $308 Irrigation $239 Other $76
1998 $606 Infrastructure $296 Irrigation $221 Other $89
</TABLE>
$ in millions
GROSS PROFIT AS A PERCENT OF NET SALES
<TABLE>
<S> <C>
1996 26.7%
1997 27.2%
1998 25.2%
</TABLE>
The gross profit margin was 25.2% in 1998, compared with 27.2% in 1997. The
reduction in 1998 was primarily attributable to lower margins in the
Infrastructure segment offset in part by improved margins in the Irrigation
segment. Selling, general and administrative expenses declined from $107.2
million (17.2% of sales) in 1997 to $105.1 million (17.3% of sales) in 1998, as
a result of cost reduction programs, less sales volume and lower incentive
payments. Operating income (pretax earnings before interest and miscellaneous
income) decreased 23.0%.
Net interest expense was $4.8 million in 1998, compared with $2.8 million in
1997. The higher interest expense is attributable to higher average borrowings.
The effective tax rate was 36.5% in 1998, compared with 36.3% in 1997. The
higher tax rate in 1998 results primarily from decreased foreign tax benefits.
179
<PAGE>
PAGE 30
Net earnings decreased 26.4% to $27.6 million and diluted earnings per share
decreased 23.3% to $1.02. The lower percentage decrease in earnings per share
compared to net earnings was primarily attributable to the Company's repurchase
of shares during 1998.
IRRIGATION SEGMENT
Net sales and operating income in the Irrigation segment decreased in 1998 by
7.6% and 11.6%, respectively. Agricultural commodity prices declined in the
second half of 1998 due to large supplies of grain, which were a result of a
favorable growing season and declining demand, particularly from Asia. In recent
years, Asian economies have become a larger force in affecting the world's grain
supply and demand balance. The disruption in their economies beginning in the
summer of 1997 caused a decline in exports of U.S. grain and a decline in prices
in 1998. Consequently, farmers became very conservative in their spending for
equipment and postponed their investments in machinery. To encourage sales,
industry-wide pricing became more competitive. These were the primary
contributors to Valmont's reduced sales and operating income for irrigation
equipment for the year.
Graph
<TABLE>
<CAPTION>
WORKING CAPITAL
- ---------------
<S> <C>
1996 $81.4
1997 $94.4
1998 $99.5
</TABLE>
$ in millions
SG&A EXPENSE AS A PERCENT OF NET SALES
<TABLE>
<S> <C>
1996 18.6%
1997 17.2%
1998 17.3%
</TABLE>
INFRASTRUCTURE SEGMENT
Net sales in the Infrastructure segment decreased 3.8% while operating income
decreased 64.5%. With respect to the Company's lighting and traffic pole
products, wet weather delayed the start of the construction season in many parts
of the United States. Also, a delay in the passage of the federal highway bill
kept many product purchasers sidelined and thereby reduced sales. As a result,
the shipments of lighting and traffic products were lower than the 1997 levels.
The eventual passage of the highway bill in June 1998 resulted in an increase of
orders for lighting and traffic products throughout the second half of the year.
To fill this demand, the Company incurred increased overtime costs. While cost
reductions and a reorganization in the North American Pole business lowered the
Company's overall cost structure, these actions were not sufficient to overcome
the lower prices and reduced gross profit margins on orders taken in the first
half of the year but manufactured and shipped in the second half. In Europe,
sales of lighting products were above 1997 levels due to the improvement of
certain European economies. Lighting sales from the Shanghai, China facility
were higher in 1998 as compared to 1997.
Orders from electric utility companies in 1998 were above 1997 levels for
transmission structures, substations, and distribution poles. This was due to an
overall strengthening in demand from utility companies seeking to increase
service reliability and expand capacity. Additionally, Valmont has entered into
strategic alliances with select electric utility customers to provide cost
savings and custom engineering, which have contributed to increased sales.
Utility product sales also benefited from increased sales of steel transmission
and distribution poles to utility customers who replaced wood poles with steel.
Sales of communication poles, towers, and components to the wireless
communication market declined in 1998. An overall slowdown, in the build-out of
the U.S. wireless communication network, continued throughout 1998. This led to
a very competitive market environment that reduced sales and pressured pricing
levels. Sales of communication poles and towers in Europe also declined. Sales
of communication poles in China increased in 1998. However, the effects of
currency devaluation and economic uncertainty led to a reduced level of sales of
communication products in the rest of Southeast Asia.
180
<PAGE>
PAGE 31
FISCAL 1997 COMPARED WITH FISCAL 1996 CONSOLIDATED
Net sales of $622.5 million were 3.4% lower in 1997 than 1996 net sales of
$644.5 million. The divestiture in 1997 of Valmont Electric, Inc., a ballast
business, was primarily responsible for the sales decline.
The gross profit margin was 27.2% in 1997, compared with 26.7% in 1996. The
increase in 1997 was primarily attributable to the sale of the ballast business.
Operating income (pretax earnings before interest and miscellaneous income)
increased 69.2%.
As a percent of sales, Selling, general and administrative (SG & A) expenses
were 17.2% in 1997 compared to 18.6% in 1996. SG & A expenses in 1997 were
$107.2 million compared to $119.6 million in 1996. The decrease in SG & A
expenses as a percent of sales resulted from the sale of the ballast business in
early 1997, and from leverage of SG & A expenses in other parts of the Company.
Net interest expense was $2.8 million in 1997, compared with $3.6 million in
1996. The lower interest expense was attributable to lower debt levels.
The effective tax rate was 36.3% in 1997, compared with 35.7% in 1996. Increased
income tax rates were primarily the result of tax rates in some foreign
jurisdictions being higher than the U.S.
Net income increased 76.7% to $37.5 million and diluted earnings per share
increased 75.0% to $1.33. The lower percentage decrease in earnings per share
compared to net income was primarily attributable to increased outstanding
shares.
IRRIGATION SEGMENT
Irrigation segment sales and operating income increased in 1997 by 13.5% and
21.6%, respectively, due to volume increases both domestically and
internationally. These volume increases resulted domestically from a strong farm
income and internationally from a new facility in Brazil that led to increased
sales in Latin America.
INFRASTRUCTURE SEGMENT
During 1997, the Infrastructure segment net sales and operating income increased
by 13.5% and 23.3%, respectively. Domestically, infrastructure modernization and
continued road and highway construction and improvement accounted for the sales
increase. Internationally, sales were up in local currencies due to a strong
light pole demand and sales of new products; however, these sales decreased when
translated into U.S. dollars.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at December 26, 1998 was $99.5 million compared to $94.4
million at December 27, 1997. The ratio of current assets to current liabilities
was 1.8:1 at both year ends.
Available short-term credit facilities through bank lines of credit were $44
million at the end of 1998 compared to $47 million at the end of 1997. On
December 26, 1998, $24 million of these credit facilities were unused.
The Company's growth has been financed through a combination of cash provided by
debt financing and from operations. The Company's objective is to maintain
long-term debt as a percent of invested capital below 40%. At the end of 1998,
long-term debt as a percent of invested capital was 30.3% as compared to 10.4%
at the end of 1997. The increased debt level is the result of the share
repurchase program, capital expenditures and acquisitions.
Cash provided from operating activities was $42.0 million in 1998 and $23.3
million in 1997.
In October of 1997, the Company entered into a Revolving Credit Agreement with a
group of banks. Under the terms of the agreement, the Company may borrow up to
the equivalent of $100 million in multiple currencies. This facility is
unsecured and any outstanding principal balance is due on June 30, 2002. The
outstanding principal balance may be paid down at any time without penalty or
additional funds may be borrowed up to the maximum limit. On December 26, 1998,
the outstanding principal balance was $79 million compared to a balance of $5
million at December 27, 1997.
In 1998, the Board of Directors authorized the repurchase of up to 5.4 million
shares of the Company's common stock. Repurchased shares are recorded as
"Treasury Stock" and result in a reduction of "Shareholders' Equity." When
treasury shares are reissued, the Company uses the last-in, first-out method,
and the difference between the repurchase cost and reissuance price is charged
or credited to "Additional Paid-In Capital." As of December 26, 1998, a total of
3,122,160 shares had been purchased for $53,255.
The Company believes cash flows from operations, available credit facilities and
the capital structure now in place will be adequate for 1999 planned capital
expenditures, for dividends, additional share repurchases and other financial
commitments, and for the Company to pursue opportunities to expand its markets
and businesses.
181
<PAGE>
PAGE 32
CAPITAL EXPENDITURES
In 1998, the Company expended $29.7 million in property, plant and equipment,
a $9.4 million decrease from the $39.1 million invested in 1997. The major
expenditure was a new irrigation manufacturing facility under construction in
McCook, Nebraska. Also, included in capital expenditures were increased
capacity and replacement of property at Valley, Nebraska, Elkhart, Indiana,
Tulsa, Oklahoma and Salem, Oregon. An additional $29.4 million was spent for
the acquisition of coating facilities in California, Oklahoma, Oregon and
Utah. These acquisitions enabled the Company's Coating Division to reach new
markets and customers. Also, included in the acquisitions of 1998, was the
purchase of outstanding shares of Cascade Earth Sciences, Ltd., a firm
providing consulting services for environmental and wastewater management
projects with headquarters in Oregon.
RISK MANAGEMENT
The Company is subject to market risks associated with changes in foreign
currency exchange rates and interest rates. The Company conducts business in
many parts of the world. Export sales from the United States are generally
denominated in U.S. dollars. In countries where the Company has manufacturing or
distribution operations (principally Western Europe, Brazil and China),
transactions are generally denominated in the local currency of that country.
Where practical, the Company maintains local currency lines of credit and
long-term debt to reduce the currency rate risk exposure. The Company's exchange
rate exposure totals $40 million and is located in Western Europe ($30 million),
Brazil ($8 million) and China ($2 million).
The Company is subject to market risk from exposure to changes in interest
rates based on its financing, investing and cash management activities. This
risk is managed using a mix of fixed and variable rate debt to maintain the
desired level of interest rate risk exposure and to minimize net interest
expense. At December 26, 1998, the Company had debt outstanding of
approximately $122 million, of which 85% was subject to variable interest
rates.
YEAR 2000
The Company has been addressing the Year 2000 situation for over two years. The
Company's plan has included remediation of its mainframe systems, upgrades to
packaged systems, implementation of new Enterprise Resource Planning (ERP)
systems in certain business units, examination and resolution of administrative
and shop equipment that contain embedded chips, evaluation of the Year 2000
readiness of key suppliers and evaluation and resolution of network equipment
and personal computers.
The Company anticipates completion of its Year 2000 planning during the second
quarter of 1999 in the U.S. and in the fourth quarter of 1999 in Europe.
The Company has contacted most key domestic suppliers relative to their Year
2000 readiness and has received positive responses. The Company is in the
process of contacting key international suppliers and anticipates completion of
this phase in the first quarter of 1999. Completion of supplier evaluation is
expected by the end of the second quarter of 1999.
The process to identify, evaluate and resolve machines and equipment with
embedded chips has been under way for nine months. The process is essentially
complete for the Company's main plant located in Valley, Nebraska and will be
completed at all other locations by the end of the second quarter of 1999.
Since much of the network and personal computer equipment is relatively new and
frequently upgraded, the majority will be inventoried and tested by the end of
the first quarter of 1999.
The total cost of the Company's Year 2000 Project is expected to be less than
$10 million. Approximately $6 million has been spent to date, and the remaining
estimated costs of $4 million are expected to be spent by the end of 1999.
Included in these amounts is the cost of installing new ERP systems, which was
undertaken to improve business and processes and also address Year 2000 issues.
The Company believes its primary Year 2000 risk is that suppliers will not be
able to deliver products and/or services in a timely fashion. The Company is
currently developing contingency plans to identify alternative vendors and is
considering the stockpiling of critical inventory items. Availability of
electrical power and telecommunications is required for the Company to operate
effectively. These services for the most part are beyond the Company's control
and alternate sources are not readily available. Since the Company is currently
testing its major business systems or installing new systems, the Company
believes such systems will be Year 2000 compliant; however, the Company is
discussing contingency plans to cover key business functions for a short period
of time. These contingency plans are expected to be developed by the end of the
second quarter of 1999.
182
<PAGE>
PAGE 33
OUTLOOK FOR 1999
The Company anticipates that spending by farmers on irrigation equipment in the
U.S. will remain low in 1999. However, the Company expects a positive year for
lighting and traffic products as well as utility products. This projection is
based on strong order flows and backlogs in these businesses in late 1998 which
has carried into 1999. The current business outlook for wireless communication,
is that sales levels will be below those of 1998. As a result of anticipated
continued softness in the communication products and irrigation equipment
businesses, the Company's overall current outlook is for earnings in 1999 to be
similar to those of 1998.
Over the long-term, the Company remains positive on the outlook for its
businesses. Every year, the world's population grows and with this growth comes
an increased need for food. In order to keep up with the escalating demand for
food and the desire for improved diets, the agricultural industry must become
more efficient. Mechanized irrigation equipment, such as that produced by
Valmont, is one of the most cost-effective ways for farmers to improve
efficiency. Population growth and economic expansion also create demands on
basic infrastructure. Valmont manufactures poles for street lighting and traffic
signals and signs, which help relieve congestion, improve highway safety and
enhance parking lot safety. The Company also produces structures for the
electric utility industry. These products support the transmission and
distribution of added electrical capacity. Valmont's poles, towers and
components also support wireless communication antennas. Wireless communication
is a technology that has already rapidly transformed worldwide communication and
further expansion of wireless networks is anticipated. Part of the Company's
business plan is to be positioned to respond to trends in these industries with
the manufacture of competitively priced products targeted to those industries.
The goal of the 1999 business plan is to position the Company for long-term
profitable growth and enhanced shareholder value.
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAINS FORWARD LOOKING STATEMENTS WHICH
REFLECT MANAGEMENT'S CURRENT VIEW AND ESTIMATES OF FUTURE ECONOMIC AND MARKET
CIRCUMSTANCES, INDUSTRY CONDITIONS, COMPANY PERFORMANCE AND FINANCIAL RESULTS.
THE STATEMENTS ARE BASED ON MANY ASSUMPTIONS AND FACTORS INCLUDING OPERATING
EFFICIENCIES, AVAILABILITY AND PRICE OF RAW MATERIALS, AVAILABILITY AND MARKET
ACCEPTANCE OF NEW PRODUCTS, PRODUCT PRICING, DOMESTIC AND INTERNATIONAL
COMPETITIVE ENVIRONMENTS, ACTIONS AND POLICY CHANGES OF DOMESTIC AND
INTERNATIONAL GOVERNMENTS, AND OTHER RISKS DESCRIBED FROM TIME TO TIME IN
VALMONT'S REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION. ANY CHANGES IN SUCH
ASSUMPTIONS OR FACTORS COULD PRODUCE SIGNIFICANTLY DIFFERENT RESULTS.
Graph
<TABLE>
<CAPTION>
TOTAL ASSETS
- ------------
<S> <C>
1996 $342
1997 $368
1998 $407
</TABLE>
$ in millions
CAPITAL EXPENDITURES
<TABLE>
<S> <C>
1996 $35.6
1997 $39.1
1998 $29.7
</TABLE>
$ in millions
183
<PAGE>
PAGE 34
SELECTED 11-YEAR FINANCIAL DATA
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS] 1998 1997 1996 1995
OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $606,307 $622,506 $644,531 544,642
Earnings (loss) from continuing operations 27,636 37,544 21,248 24,759
Earnings from discontinued operations -- -- -- --
Cumulative effect of accounting change -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 27,636 $ 37,544 $ 21,248 $ 24,759
- -----------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 19,843 $ 16,437 $ 14,832 $ 12,361
Capital expenditures 29,667 39,115 35,559 34,772
Per share data
Earnings (loss):
Basic $ 1.04 $ 1.36 $ 0.78 $ 0.92
Diluted 1.02 1.33 0.76 0.90
Cash dividends 0.25 0.22 0.19 0.15
Shareholders' equity 7.12 7.49 6.41 5.87
FINANCIAL POSITION
Working capital $ 99,466 $ 94,416 $ 81,403 $ 80,993
Property, plant and equipment, net 157,447 140,834 120,579 113,532
Total assets 406,957 368,052 341,648 308,710
Long-term debt, including current installments 96,218 28,060 29,573 36,687
Shareholders' equity 175,913 207,102 175,231 159,256
Invested capital 317,708 270,400 243,905 215,318
KEY FINANCIAL MEASURES
Return on beginning shareholders' equity 13.3% 21.4% 13.3% 18.0%
Return on invested capital 10.3% 15.4% 10.3% 13.0%
Long-term debt as a percent of invested capital 30.3% 10.4% 12.1% 17.0%
YEAR-END DATA
Shares outstanding (000) 24,721 27,641 27,330 27,120
Approximate number of shareholders 5,500 5,400 4,400 3,900
Number of employees 3,869 3,751 4,868 4,166
</TABLE>
Per share amounts and number of shares reflect the
two-for-one stock splits in 1988, 1989 and 1997.
All amounts include pooling-of-interests method of accounting
for the acquisition of Microflect in July, 1995.
184
<PAGE>
PAGE 35
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988
-------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$501,740 $464,274 $445,481 $446,543 $461,789 $443,444 $439,569
18,887 7,551 11,671 (8,822) 11,373 16,818 12,301
-- 4,637 3,564 2,134 5,474 4,602 3,639
-- (4,910) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
$ 18,887 $ 7,278 $ 15,235 $ (6,688) $ 16,847 $ 21,420 $ 15,940
- --------------------------------------------------------------------------------------------------------------------------------
$ 11,018 $ 10,907 $ 12,585 $ 11,285 $ 9,887 $ 7,608 $ 7,788
23,535 17,089 8,353 11,539 20,607 17,470 9,750
$ 0.70 $ 0.27 $ 0.57 $ (0.25) $ 0.63 $ 0.81 $ 0.62
0.69 0.27 0.56 (0.25) 0.63 0.81 0.62
0.15 0.15 0.13 0.13 0.13 0.11 0.09
5.10 4.52 4.43 4.06 4.42 3.94 3.26
$ 88,278 $ 87,793 $ 68,551 $ 69,143 $ 66,302 $ 72,811 $ 58,786
89,201 75,501 78,150 84,144 81,675 71,872 53,135
283,443 261,275 286,076 291.041 291,163 268,216 225,461
43,242 44,076 69,735 81,698 63,003 66,774 47,337
137,582 121,841 118,428 108,142 117,200 104,069 84,163
197,591 180,961 200,501 205,618 191,255 180,464 138,392
15.5% 6.1% 14.1% (5.7%) 16.2% 25.5% 23.2%
10.7% 5.6% 7.4% (1.9%) 9.5% 12.4% 11.6%
21.9% 24.4% 34.8% 39.7% 32.9% 37.0% 34.2%
26,990 26,972 26,750 26,620 26,494 26,412 25,828
3,800 3,800 3,500 3,500 2,800 1,600 1,500
3,946 4,152 4,532 4,478 4,524 4,255 3,569
</TABLE>
185
<PAGE>
PAGE 36
Consolidated Statements of Operations
THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS] 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $606,307 $622,506 $644,531
Cost of sales 453,459 453,326 472,463
-----------------------------------------------
Gross profit 152,848 169,180 172,068
Selling, general and administrative expenses 105,096 107,190 119,624
Asset valuation charge -- -- 15,800
-----------------------------------------------
Operating income 47,752 61,990 36,644
-----------------------------------------------
Other income (deductions):
Interest expense (5,858) (3,731) (3,952)
Interest income 1,012 900 344
Miscellaneous 630 (215) 12
-----------------------------------------------
(4,216) (3,046) (3,596)
-----------------------------------------------
Earnings before income taxes 43,536 58,944 33,048
-----------------------------------------------
Income tax expense (benefit):
Current 12,500 14,400 19,970
Deferred 3,400 7,000 (8,170)
-----------------------------------------------
15,900 21,400 11,800
-----------------------------------------------
Net earnings $ 27,636 $ 37,544 $ 21,248
-----------------------------------------------
-----------------------------------------------
Earnings per share:
Basic $ 1.04 $ 1.36 $ 0.78
-----------------------------------------------
-----------------------------------------------
Diluted $ 1.02 $ 1.33 $ 0.76
-----------------------------------------------
-----------------------------------------------
Cash dividends per share $0.25125 $0.21875 $ 0.1875
-----------------------------------------------
-----------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
186
<PAGE>
PAGE 37
CONSOLIDATED BALANCE SHEETS
DECEMBER 26, 1998 AND DECEMBER 27, 1997
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS] 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7,580 $ 11,505
Receivables, less allowance for doubtful receivables
of $3,421 in 1998 and $2,132 in 1997 115,843 110,531
Inventories 77,694 79,444
Prepaid expenses 5,297 3,388
Refundable and deferred income taxes 13,532 13,062
-----------------------------
219,946 217,930
Property, plant and equipment, at cost 292,944 258,478
Less accumulated depreciation and amortization 135,497 117,644
-----------------------------
Net property, plant and equipment 157,447 140,834
-----------------------------
Goodwill and other assets 29,564 9,288
-----------------------------
Total assets $406,957 $368,052
-----------------------------
-----------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES:
Current installments of long-term debt $ 5,737 $ 7,317
Notes payable to banks 25,494 18,545
Accounts payable 45,996 48,717
Accrued expenses 41,646 47,380
Dividends payable 1,607 1,555
-----------------------------
Total current liabilities 120,480 123,514
-----------------------------
Deferred income taxes 11,984 9,038
Long-term debt, excluding current installments 90,481 20,743
Minority interest in consolidated subsidiaries 3,862 3,957
Other noncurrent liabilities 4,237 3,698
Shareholders' equity:
Preferred stock of $1 par value.
Authorized 500,000 shares; none issued -- --
Common stock of $1 par value.
Authorized 75,000,000 shares; issued 27,900,000 shares 27,900 27,900
Additional paid-in capital 1,280 838
Retained earnings 200,393 179,360
Accumulated other comprehensive income (1,423) (966)
-----------------------------
228,150 207,132
Less:
Cost of common shares in treasury
3,178,627 shares in 1998 (259,031 shares in 1997) 52,235 8
Unearned restricted stock 2 22
-----------------------------
Total shareholders' equity 175,913 207,102
-----------------------------
Total liabilities and shareholders' equity $406,957 $368,052
-----------------------------
-----------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
187
<PAGE>
PAGE 38
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS] 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net earnings $27,636 $37,544 $21,248
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 19,843 16,437 14,832
Other adjustments (302) 1,385 580
Changes in assets and liabilities:
Receivables 1,379 (32,040) (16,484)
Inventories 4,057 (7,671) (16,270)
Prepaid expenses (1,704) (1,081) (1,217)
Accounts payable (4,645) 7,154 10,120
Accrued expenses (7,986) (4,297) 15,022
Other noncurrent liabilities 253 769 (394)
Income taxes 3,517 5,147 (7,594)
---------------------------------------------
Net cash provided by operations 42,048 23,347 19,843
---------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (29,667) (39,115) (35,559)
Acquisitions (29,447) -- (1,255)
Proceeds from sale of property and equipment 4,768 289 858
Proceeds from sale of assets held for sale -- 26,903 --
Proceeds from investments by minority shareholder -- 1,959 97
Changes in other assets (1,875) 924 (1,246)
Other, net (581) (1,007) (260)
---------------------------------------------
Net cash used in investing activities (56,802) (10,047) (37,365)
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments)
under short-term agreements 6,612 (4,550) 20,630
Proceeds from long-term borrowings 73,443 7,172 1,942
Principal payments on long-term obligations (9,742) (7,856) (8,142)
Dividends paid (6,551) (5,838) (4,762)
Proceeds from exercises under stock plans 3,347 3,067 2,073
Purchase of common treasury shares:
Stock repurchase program (53,255) -- --
Stock plan exercises (3,025) (3,273) (1,732)
---------------------------------------------
Net cash provided (used) by
financing activities 10,829 (11,278) 10,009
---------------------------------------------
Net increase (decrease) in cash and cash equivalents (3,925) 2,022 (7,513)
Cash and cash equivalents--beginning of year 11,505 9,483 16,996
---------------------------------------------
Cash and cash equivalents--end of year $ 7,580 $11,505 $ 9,483
---------------------------------------------
---------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
188
<PAGE>
PAGE 39
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
<TABLE>
<CAPTION>
Common Additional Retained Accumulated Treasury Unearned Total
stock paid-in earnings other stock restricted shareholders'
[DOLLARS IN THOUSANDS, capital comprehensive stock equity
EXCEPT PER SHARE AMOUNTS] income
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 30, 1995 $13,950 $4,694 $137,009 $3,689 $(24) $(62) $159,256
Comprehensive income:
Net earnings -- -- 21,248 -- -- -- 21,248
Currency translation adjustment -- -- -- (1,952) -- -- (1,952)
-------
Total comprehensive income 19,296
Cash dividends ($0.1875 per share) -- -- (5,111) -- -- -- (5,111)
Purchase of 97,444 common
shares - stock plan exercises -- -- -- -- (1,732) -- (1,732)
Stock options exercised;
174,810 shares issued -- 335 -- -- 1,738 -- 2,073
Tax benefit from exercise
of stock options -- 1,023 -- -- -- -- 1,023
Stock awards; 27,824 shares issued -- 406 -- -- -- 20 426
-----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 28, 1996 13,950 6,458 153,146 1,737 (18) (42) 175,231
Comprehensive income:
Net earnings -- -- 37,544 -- -- -- 37,544
Currency translation
adjustment -- -- -- (2,703) -- -- (2,703)
-------
Total comprehensive income 34,841
Cash dividends ($0.21875 per share) -- -- (6,027) -- -- -- (6,027)
Purchase of 154,039 common
shares - stock plan exercises -- -- -- -- (3,273) -- (3,273)
Sale of 43, 914 common
shares -- 905 -- -- -- -- 905
Stock options exercised;
393,164 shares issued -- (216) -- -- 3,283 -- 3,067
Tax benefit from exercise
of stock options -- 1,796 -- -- -- -- 1,796
Stock awards; 27,146 shares issued -- 542 -- -- -- 20 562
Two-for-one stock split 13,950 (8,647) (5,303) -- -- -- --
-----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 27, 1997 27,900 838 179,360 (966) (8) (22) 207,102
Comprehensive income:
Net earnings -- -- 27,636 -- -- -- 27,636
Currency translation adjustment -- -- -- (457) -- -- (457)
-----
Total comprehensive income 27,179
Cash dividends ($0.25125 per share) -- -- (6,603) -- -- -- (6,603)
Purchase of treasury shares:
Stock repurchase program
3,122,160 shares -- -- -- -- (53,255) -- (53,255)
Stock plan exercises,
163,590 shares -- -- -- -- (3,025) -- (3,025)
Stock options exercised;
339,241 shares issued -- (1,331) -- -- 4,052 -- 2,721
Tax benefit from exercise
of stock options -- 1,169 -- -- -- -- 1,169
Stock awards;
26,913 shares issued -- 604 -- -- 1 20 625
-----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 26, 1998 $27,900 $1,280 $200,393 $(1,423) $(52,235) $ (2) $175,913
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
189
<PAGE>
PAGE 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE-YEAR PERIOD ENDED DECEMBER 26, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Valmont
Industries, Inc. (the Company) and its wholly and majority-owned subsidiaries.
Investments in 20% to 50% owned affiliates are accounted for on the equity
method and investments in less than 20% owned affiliates are accounted for on
the cost method. All significant intercompany items have been eliminated.
OPERATIONS
The Company designs, manufactures and distributes agricultural irrigation
equipment and related products and services, engineered metal structures and
related products for the lighting, utility and wireless communications
industries, and industrial products including steel tubing, pressure vessels,
machine tool accessories, industrial fasteners; and provides custom coating
services.
FISCAL YEAR
The Company operates on 52/53 week fiscal years with each year ending on the
last Saturday in December. Accordingly, the Company's fiscal years 1998, 1997
and 1996 ended on December 26, December 27 and December 28, respectively, and
each of these fiscal years consisted of 52 weeks.
INVENTORIES
At December 26, 1998, approximately 65% of inventory is valued at the lower of
cost, determined on the last-in, first-out (LIFO) method or market. All other
inventory is valued at the lower of cost, determined on the first-in, first-out
(FIFO) method or market.
The excess of replacement cost of inventories over the LIFO value is
approximately $10,000 and $11,000 at December 26, 1998 and December 27, 1997,
respectively.
LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121, (SFAS
No. 121), "Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to Be Disposed Of," which prescribes that an impairment loss be
recognized if the carrying amount of an asset may not be recoverable and exceeds
estimated future undiscounted cash flows of the asset. A recognized impairment
loss reduces the carrying amount of the asset to its fair value. (Note 14).
Property, plant and equipment are recorded at historical cost. The Company uses
the straight-line method in computing depreciation and amortization for
financial reporting purposes and generally uses accelerated methods for income
tax purposes. The annual provisions for depreciation and amortization have been
computed principally in accordance with the following ranges of asset lives:
buildings 15 to 40 years, machinery and equipment 3 to 12 years, and intangibles
3 to 40 years.
INCOME TAXES
The Company uses the asset and liability method to calculate deferred income
taxes. Deferred tax assets and liabilities are recognized on temporary
differences between financial statement and tax basis of assets and liabilities
using enacted tax rates. The effect of tax rate changes on deferred tax assets
and liabilities is recognized in income during the period that includes the
enactment date.
FOREIGN CURRENCY TRANSLATIONS
Results of operations for foreign subsidiaries are translated using the average
exchange rates during the period. Assets and liabilities are translated at the
exchange rates in effect on the balance sheet dates. Cumulative translation
adjustments are included as a separate component of accumulated other
comprehensive income as shown on the Consolidated Statements of Shareholders'
Equity. These translation adjustments are the Company's only component of other
comprehensive income.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
effective for fiscal years beginning after June 15, 1999.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company plans initial
application of this statement for the quarter beginning December 26, 1999. The
Statement will not be applied retroactively to financial statements of prior
periods.
190
<PAGE>
PAGE 41
RECLASSIFICATIONS
Certain amounts in the 1997 and 1996 financial statements have been reclassified
to conform with the 1998 presentation.
(2) CASH FLOW SUPPLEMENTARY INFORMATION
The Company considers all highly liquid temporary cash investments purchased
with a maturity of three months or less to be cash equivalents. Cash payments
for interest and income taxes (net of refunds) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Interest $ 5,747 $ 4,035 $ 3,824
Income taxes 11,223 16,373 17,904
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
Land and improvements $ 12,696 $ 12,661
Buildings and improvements 69,690 65,495
Machinery and equipment 152,229 131,939
Transportation equipment 5,131 4,343
Office furniture and equipment 25,786 23,387
Construction in progress 27,412 20,653
----------------------------
$292,944 $258,478
----------------------------
----------------------------
</TABLE>
The Company also leases certain facilities, machinery, computer equipment and
transportation equipment under operating leases with unexpired terms ranging
from one to twelve years. Rental expense for operating leases amounted to
$5,807, $4,920 and $4,963 for fiscal 1998, 1997 and 1996, respectively.
Minimum lease payments under operating leases expiring subsequent to
December 26, 1998 are:
<TABLE>
<CAPTION>
Fiscal year ending
<S> <C>
1999 $ 6,224
2000 5,571
2001 5,245
2002 3,934
2003 3,779
Subsequent 8,133
-------
Total minimum lease payments $32,886
-------
-------
</TABLE>
(4) BANK CREDIT ARRANGEMENTS
The Company maintains various lines of credit for short-term borrowings totaling
$44,000. The interest rates charged on these lines of credit vary in relation to
the banks' costs of funds. The unused borrowings under the lines of credit were
$24,000 at December 26, 1998. The lines of credit can be modified at any time at
the option of the banks. The Company pays facility fees of 1/8 of 1% in
connection with $10,000 of its lines of credit, and pays no fees in connection
with the remaining lines of credit. The weighted average interest rate on
short-term borrowings was 5.3% at December 26, 1998 and 5.7% at December 27,
1997.
(5) INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 9,501 $11,423 $16,914
State 912 940 1,086
Foreign 2,087 2,037 1,970
--------------------------------------------
12,500 14,400 19,970
--------------------------------------------
Deferred:
Federal 2,224 5,963 (7,006)
State 176 529 (392)
Foreign 1,000 508 (772)
--------------------------------------------
3,400 7,000 (8,170)
--------------------------------------------
$15,900 $21,400 $11,800
--------------------------------------------
--------------------------------------------
</TABLE>
The reconciliations of the statutory Federal income tax rate and the effective
tax rates follow:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
Statutory Federal
income tax rate 35.0% 35.0% 35.0%
State income taxes,
net of Federal benefit 1.8% 1.9% 2.1%
Other (0.3)% (0.6)% (1.4)%
-------------------------------------------
36.5% 36.3% 35.7%
-------------------------------------------
-------------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and liabilities at December 26, 1998 and December 27, 1997, are presented below:
<TABLE>
<CAPTION>
1998 1997
--------------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and allowances $10,688 $11,920
Allowance for doubtful receivables 289 166
Inventory capitalization 1,199 1,273
--------------------------
Total deferred tax assets 12,176 13,359
--------------------------
Deferred tax liabilities:
Plant and equipment 11,062 9,578
Lease transactions 1,507 1,586
Warranty accrual 323 442
Other 4,241 2,609
--------------------------
Total deferred tax liabilities 17,133 14,215
--------------------------
Net deferred tax liabilities $(4,957) $(856)
--------------------------
--------------------------
</TABLE>
No valuation allowance for deferred tax assets has been provided since all tax
benefits are more likely than not to be realized. No taxes have been provided on
undistributed earnings of foreign subsidiaries as the Company intends to
reinvest these earnings in foreign operations.
191
<PAGE>
PAGE 42
(6) LONG-TERM DEBT
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
9.40% to 12.77% promissory
notes, unsecured (a) $10,250 $14,750
Promissory note, secured -- 2,165
Revolving credit agreement (b) 78,833 5,000
3.0% to 9.25% notes 7,135 6,145
---------------------------
Total long-term debt 96,218 28,060
Less current installments
of long-term debt 5,737 7,317
---------------------------
Long-term debt, excluding
current installments $90,481 $20,743
---------------------------
---------------------------
</TABLE>
(A) The unsecured promissory notes payable are due in varying annual
principal installments through 2001. The notes are subject to prepayment
in whole or in part with or without premium as specified in the
agreements.
(B) The revolving credit agreement is an unsecured facility with a group of
banks for a maximum of $100,000. The facility has a termination date of
June 30, 2002. The funds borrowed may be repaid at any time without
penalty, or additional funds may be borrowed up to the facility limit.
The Company may choose from the following three interest rate
alternatives: the higher of prime rate or Federal Funds Rate plus 0.5%,
the applicable Eurodollar rate plus a leverage ratio-based spread (which
at December 26, 1998 was 0.2%) or up to $50,000 at a rate determined
through a competitive bid process. The effective interest rate at
December 26, 1998 was 5.36% and at December 27, 1997 was 6.18%.
The agreements place certain restrictions on working capital, capital
expenditures, payment of dividends, purchase of Company stock and additional
borrowings. Under the most restrictive covenants of the Agreements, the Company
may purchase the remainder of the 5.4 million shares of Company stock authorized
by the Board of Directors in 1998 and make payments of cash dividends and
purchases of the Company's capital stock of $12,000 in any fiscal year.
The minimum aggregate maturities of long-term debt for each of the four years
following 1999 are: $4,330, $2,906, $79,473 and $452.
(7) STOCK PLANS
The Company maintains stock-based compensation plans approved by the
shareholders which provide that the Compensation Committee of the Board of
Directors may grant incentive stock options, nonqualified stock options, stock
appreciation rights, restricted stock awards and bonuses of common stock. At
December 26, 1998, 448,000 shares of common stock remained available for
issuance under the plans. The optioned shares are subject to changes in
capitalization.
Under the plans, the exercise price of each option equals the market price at
the time of the grant. Options vest beginning on the first anniversary of the
grant in equal amounts over three to six years or on the fifth anniversary of
the grant. Expiration of grants is from six to ten years from the date of grant.
The Company applies APB Opinion 25 in accounting for its fixed stock
compensation plans. Accordingly, no compensation cost has been recognized for
the fixed plans in 1996, 1997 or 1998. Had compensation cost been determined on
the basis of fair value pursuant to Statement of Financial Accounting Standards
No. 123, net earnings and earnings per share would have been reduced as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Net earnings
As reported $27,636 $37,544 $21,248
------------------------------------------
Pro forma $25,969 $36,584 $20,561
------------------------------------------
Earnings per share
As reported: Basic $1.04 $1.36 $0.78
----------------------------------------
Diluted $1.02 $1.33 $0.76
----------------------------------------
Pro forma: Basic $0.98 $1.33 $0.75
----------------------------------------
Diluted $0.96 $1.30 $0.73
----------------------------------------
</TABLE>
The fair value of each option grant was estimated as of the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Expected volatility 35% 29% 28%
Risk-free interest rate 4.71% 5.75% 6.11%
Expected life from vesting date 2.6yrs 2.7yrs 2.5yrs
Dividend yield 1.15% 1.03% 1.03%
</TABLE>
Following is a summary of the activity of the stock plans during 1996, 1997 and
1998:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
<S> <C> <C>
Outstanding at
December 30, 1995 1,790,042 $ 8.61
Granted 414,030 18.64
Exercised (280,000) (7.41)
Forfeited (57,098) (5.57)
Outstanding at
----------------------------
December 28, 1996 1,866,974 $11.11
----------------------------
Options exercisable at
December 28, 1996 825,306 $ 8.33
----------------------------
Weighted average fair value
of options granted during 1996 $ 6.24
-----
</TABLE>
192
<PAGE>
PAGE 43
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
----------- -----------
<S> <C> <C>
Outstanding at
December 28, 1996 1,866,974 $11.11
Granted 443,414 21.48
Exercised (308,876) (7.43)
Forfeited (76,850) (14.34)
----------------------------
Outstanding at December 27, 1997 1,924,662 $13.96
----------------------------
Options exercisable at
December 27, 1997 919,801 $10.22
----------------------------
Weighted average fair value of
options granted during 1997 $6.56
-----
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
----------- ----------
<S> <C> <C>
Outstanding at
December 27, 1997 1,924,662 $13.96
Granted 712,687 17.09
Exercised (339,241) (8.57)
Forfeited (118,012) (19.27)
Outstanding at
----------------------------
December 26, 1998 2,180,096 $15.52
----------------------------
Options exercisable at
December 26, 1998 1,034,491 $13.35
----------------------------
Weighted average fair value of
options granted during 1998 $5.58
-----
</TABLE>
Following is a summary of the status of stock options outstanding at
December 26, 1998:
OUTSTANDING AND EXERCISABLE BY PRICE RANGE
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
EXERCISE REMAINING AVERAGE AVERAGE
PRICE CONTRACTUAL EXERCISE EXERCISE
RANGE NUMBER LIFE PRICE NUMBER PRICE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.50-11.88 745,943 5.39 years $ 9.78 680,706 $ 9.88
12.25-15.88 578,542 9.43 years 15.78 18,500 15.09
16.00-21.78 765,731 8.14 years 20.11 295,405 19.99
22.13-23.00 89,880 6.90 years 22.51 39,880 22.67
---------------------------------------------------------------------------------------------------------
2,180,096 1,034,491
---------------------------------------------------------------------------------------------------------
</TABLE>
(8) EARNINGS PER SHARE
The following table provides a reconciliation between Basic and Diluted earnings
per share (EPS).
<TABLE>
<CAPTION>
DILUTIVE
EFFECT OF
STOCK DILUTED
BASIC EPS OPTIONS EPS
--------------------------------------------------
1996:
<S> <C> <C> <C>
Net earnings $21,248 -- $21,248
Shares outstanding 27,308 751 28,059
Per share amount $ 0.78 $ 0.76
1997:
Net earnings $37,544 -- $37,544
Shares outstanding 27,521 686 28,207
Per share amount $ 1.36 $ 1.33
1998:
Net earnings $27,636 -- $27,636
Shares outstanding 26,605 498 27,103
Per share amount $ 1.04 $ 1.02
</TABLE>
(9) TREASURY STOCK
During 1998, the Board of Directors authorized management to repurchase up to
5.4 million shares of the Company's common stock. In the year ended December 26,
1998, a total of 3.1 million shares had been repurchased for $53,255.
Repurchased shares are recorded as "Treasury Stock" and result in a reduction of
"Shareholders' Equity." When treasury shares are reissued, the Company uses the
last-in, first-out method, and the difference between the repurchase cost and
reissuance price is charged or credited to "Additional Paid-In Capital."
(10) EMPLOYEE RETIREMENT SAVINGS PLAN
Established under Internal Revenue Code Section 401(k), the Valmont Employee
Retirement Savings Plan is available to all eligible employees. Participants can
elect to contribute up to 15% of annual pay, on a pretax and/or after-tax basis.
The Company may also make basic, matching and/or supplemental contributions to
the Plan. In addition, the Company has a defined contribution plan covering the
employees of Microflect; contributions under this plan are based primarily on
the performance of the business unit and employee compensation. The 1998, 1997
and 1996 Company contributions to these plans amounted to approximately $3,900,
$5,400 and $5,000, respectively.
(11) RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations in the year incurred.
Research and development expenses were approximately $3,300 in 1998, $3,700 in
1997, and $3,900 in 1996.
193
<PAGE>
PAGE 44
(12) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, receivables, accounts payable,
notes payable to banks and accrued expenses approximate fair value because of
the short maturity of these instruments. The fair values of each of the
Company's long-term debt instruments are based on the amount of future cash
flows associated with each instrument discounted using the Company's current
borrowing rate for similar debt instruments of comparable maturity. The fair
value estimates are made at a specific point in time and the underlying
assumptions are subject to change based on market conditions. At December 26,
1998, the carrying amount of the Company's long-term debt was $96,218 with an
estimated fair value of approximately the same. At December 27, 1997, the
carrying amount of the Company's long-term debt was $28,060 with an estimated
fair value of approximately $29,000.
(13) STOCKHOLDERS' RIGHT PLAN
In December 1995, the Company's Board of Directors declared a dividend of one
preferred stock purchase right ("Right") for each outstanding share of common
stock. The Right becomes exercisable ten days after a person (other than Robert
B. Daugherty and his related persons and entities) acquires or commences a
tender offer for 15% or more of the Company's common stock. Each Right entitles
the holder to purchase one one-thousandth of a share of a new series of
preferred stock at an exercise price of $100, subject to adjustment. The Right
expires on December 19, 2005 and may be redeemed at the option of the Company at
$.01 per Right, subject to adjustment. Under certain circumstances, if (i) any
person becomes an Acquiring Person or (ii) the Company is acquired in a merger
or other business combination, each holder of a Right (other than the Acquiring
Person) will have the right to receive, upon exercise of the Right, shares of
common stock (of the Company under (i) and of the acquiring company under (ii))
having a value of twice the exercise price of the Right.
(14) ACQUISITIONS AND DIVESTITURE
During 1998 the Company acquired the operating assets of four separate
galvanizing facilities in California, Oklahoma, Oregon and Utah. The excess of
purchase price over the estimated fair values of the net assets acquired has
been recorded as goodwill and is amortized over estimated useful lives. In
November 1998, the Company acquired the outstanding shares of Cascade Earth
Sciences, Ltd., a firm providing consulting services for environmental and
wastewater management projects with headquarters in Oregon.
During 1996, the Company initiated a plan to dispose of Valmont Electric, Inc.,
its ballast business. In accordance with SFAS No. 121, the Company recorded a
pretax asset valuation charge of $15,800 ($10,100 after tax) in 1996 to reduce
the value of the net assets of the ballast business to the sales price, net of
expenses. The Company sold the common stock of Valmont Electric, Inc. in January
1997 for approximately $25,000.
In February 1996, the Company purchased a majority interest in Telec Centre
S.A., a small French manufacturer of communication towers. In March 1996, the
Company purchased a majority interest in Gibo-Conimast GmbH, a German
manufacturer and distributor of pole structures for the lighting market.
These acquisitions have been accounted for under the purchase method. The
results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition.
(15) BUSINESS SEGMENTS
The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Disclosures," in 1998.This accounting pronouncement changes the way
the Company reports information about its operating segments and, accordingly,
the 1997 and 1996 information has been restated to conform to the 1998
presentation.
The Company organizes its businesses on a world-wide product line basis and has
two reportable segments:
IRRIGATION: This segment consists of the manufacture and distribution
of agricultural irrigation equipment and related products and services;
INFRASTRUCTURE: This segment includes the manufacture and distribution
of engineered metal structures and related products for the lighting,
utility and wireless communications industries.
In addition to these two reportable segments, the Company has several other
businesses that do not fit within the reportable segments listed above, and are
not individually more than 10% of combined net sales. These businesses include
custom coatings, steel tubing, pressure vessels, machine tool accessories and
industrial fasteners. For fiscal years 1997 and 1996, the "Other" category also
includes the ballast business that was sold in January 1997.
The accounting policies of the reportable segments are the same as those
described in Note 1. The Company evaluates the performance of its operating
segments based upon operating income and invested capital. The Company does not
allocate interest expense, non-operating income and deductions or income taxes
to its operating segments. All Corporate expenses and assets are allocated to
the operating segments. Intersegment sales include tubing sales to the
Irrigation segment and coatings services to the Irrigation and Infrastructure
segments. Intersegment sales prices are both cost and market based.
194
<PAGE>
PAGE 45
BUSINESS SEGMENT INFORMATION
SUMMARY BY BUSINESS SEGMENTS
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS] 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES
Irrigation $221,087 $239,157 $210,672
Infrastructure 296,002 307,586 270,897
Other--Total 124,258 110,231 194,726
Less: Intersegment sales 35,040 34,468 31,764
------------------------------------------------------
Other--Sales to external customers 89,218 75,763 162,962
------------------------------------------------------
Total $606,307 $622,506 $644,531
------------------------------------------------------
OPERATING INCOME
Irrigation 25,725 29,090 23,918
Infrastructure 9,553 25,274 20,611
Other 12,474 7,626 (7,885)
------------------------------------------------------
Total 47,752 61,990 36,644
INTEREST EXPENSE, NET (4,846) (2,831) (3,608)
MISCELLANEOUS 630 (215) 12
------------------------------------------------------
Earnings before income taxes $ 43,536 $ 58,944 $ 33,048
------------------------------------------------------
TOTAL ASSETS:
Irrigation 107,899 94,294 68,588
Infrastructure 202,140 214,789 188,057
Other 96,918 58,969 85,003
------------------------------------------------------
Total $406,957 $368,052 $341,648
------------------------------------------------------
CAPITAL EXPENDITURES:
Irrigation 16,484 7,421 4,055
Infrastructure 3,846 22,671 15,300
Other 9,337 9,023 16,204
------------------------------------------------------
Total $ 29,667 $ 39,115 $ 35,559
------------------------------------------------------
DEPRECIATION AND AMORTIZATION:
Irrigation 3,875 3,245 2,958
Infrastructure 4,943 3,047 1,841
------------------------------------------------------
Total $19,843 $16,437 $14,832
------------------------------------------------------
SUMMARY BY GEOGRAPHICAL AREA
BY LOCATION OF VALMONT FACILITIES: 1998 1997 1996
------------------------------------------------------
NET SALES
United States 493,413 527,609 557,826
France 59,887 52,226 58,843
Other 53,007 42,671 27,862
------------------------------------------------------
Total $606,307 $622,506 $644,531
------------------------------------------------------
OPERATING INCOME
United States 42,398 56,594 32,451
France 505 1,976 2,644
Other 4,849 3,420 1,549
------------------------------------------------------
Total $ 47,752 $ 61,990 $ 36,644
------------------------------------------------------
LONG-LIVED ASSETS
United States 153,712 116,265 95,922
France 17,729 18,597 20,769
Other 15,570 15,260 14,110
------------------------------------------------------
Total $187,011 $150,122 $130,801
------------------------------------------------------
</TABLE>
NO SINGLE CUSTOMER ACCOUNTED FOR MORE THAN 10% OF NET SALES IN 1996, 1997 OR
1998. NET SALES BY GEOGRAPHICAL AREA ARE BASED ON THE LOCATION OF THE FACILITY
PRODUCING THE SALES.
OPERATING INCOME BY BUSINESS SEGMENT AND GEOGRAPHICAL AREAS ARE BASED ON NET
SALES LESS IDENTIFIABLE OPERATING EXPENSES AND ALLOCATIONS.
LONG-LIVED ASSETS CONSIST OF INVESTMENT IN NONCONSOLIDATED AFFILIATES, GOODWILL,
OTHER ASSETS AND PROPERTY, PLANT AND EQUIPMENT, NET OF DEPRECIATION. LONG-LIVED
ASSETS BY GEOGRAPHICAL AREA ARE BASED ON LOCATION OF FACILITIES.
195
<PAGE>
PAGE 46
QUARTERLY FINANCIAL DATA (UNAUDITED)
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS]
<TABLE>
<CAPTION>
NET EARNINGS (LOSS)
-----------------------------
Net Gross Per Share Stock Price Dividends
Sales Profit Amount Basic Diluted High Low Declared
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
First $160,587 $ 43,069 $ 9,645 $0.35 $0.34 $24.63 $17.63 $0.05625
Second 154,340 38,239 7,450 0.27 0.26 25.00 15.75 0.06500
Third 140,105 34,906 4,678 0.18 0.18 20.50 13.25 0.06500
Fourth 151,275 36,634 5,863 0.23 0.23 16.19 12.25 0.06500
----------------------------------------------------------------------------------------------------------
Year $606,307 $152,848 $27,636 $1.04 $1.02 $25.00 $12.25 $0.25125
1997
First $165,418 $ 44,616 $ 8,954 $0.33 $0.32 $22.63 $18.63 $0.05000
Second 159,100 44,144 9,893 0.36 0.35 22.38 18.50 0.05625
Third 136,015 37,746 7,857 0.28 0.28 21.88 19.00 0.05625
Fourth 161,973 42,674 10,840 0.39 0.38 23.88 19.00 0.05625
----------------------------------------------------------------------------------------------------------
Year $622,506 $169,180 $37,544 $1.36 $1.33 $23.88 $18.50 $0.21875
1996
First $148,914 $ 39,999 $ 6,946 $0.26 $0.25 $15.07 $12.13 0.03750
Second 166,849 43,913 8,501 0.32 0.30 17.00 14.75 0.05000
Third 148,048 40,583 6,578 0.24 0.24 18.00 14.13 0.05000
Fourth 180,720 47,573 (777) (0.03) (0.03)1 19.75 16.88 0.05000
----------------------------------------------------------------------------------------------------------
Year $644,531 $172,068 $21,248 $0.78 $0.76 $19.75 $12.13 $0.18750
</TABLE>
EARNINGS PER SHARE ARE COMPUTED INDEPENDENTLY FOR EACH OF THE QUARTERS.
THEREFORE, THE SUM OF THE QUARTERLY EARNINGS PER SHARE MAY NOT EQUAL THE TOTAL
FOR THE YEAR.
(1) AFTER A PRE-TAX ASSET VALUATION CHARGE OF ASSETS OF $15,800, ($10,100 AFTER
TAX) OR $0.36 PER SHARE.
196
<PAGE>
PAGE 47
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF VALMONT INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheets of Valmont
Industries, Inc. and subsidiaries as of December 26, 1998 and December 27, 1997,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 26, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Valmont Industries, Inc. and
subsidiaries as of December 26, 1998 and December 27, 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 26, 1998 in conformity with generally accepted accounting
principles.
/s/ DELOITTE & TOUCHE LLP
- ----------------------------
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 5, 1999
REPORT OF MANAGEMENT
The consolidated financial statements of Valmont Industries, Inc. and
Subsidiaries and the other information contained in the Annual Report were
prepared by and are the responsibility of management. The statements have been
prepared in accordance with generally accepted accounting principles and
necessarily include amounts based on management's best estimates and judgements.
In fulfilling its responsibilities, management relies on a system of internal
controls which provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining accountability of
assets. Internal controls are designed to reduce the risk that material errors
or irregularities in the financial statements may occur and not be timely
detected. These systems are augmented by written policies, careful selection and
training of qualified personnel, an organizational structure providing for the
division of responsibilities and a program of financial, operational and systems
audits. The Company also has a business ethics policy which requires employees
to maintain high ethical standards in the conduct of Company business.
The Audit Committee, composed of non-employee directors is responsible for
recommending to the Board of Directors, subject to ratification of shareholders,
the independent accounting firm to be retained each year. The Audit Committee
meets regularly, and when appropriate separately, with the independent certified
public accountants, management and the internal auditors to review company
performance. The independent certified public accountants, internal auditors,
and the Audit Committee have unrestricted access to each other in the discharge
of their responsibilities.
<TABLE>
<CAPTION>
Signature Signature
<S> <C>
/s/ Mogens C. Bay /s/ Terry J. McClain
- ------------------------------------ -------------------------------------------------
Mogens C. Bay Terry J. McClain
Chairman and Chief Executive Officer Senior Vice President and Chief Financial Officer
</TABLE>
197
<PAGE>
PAGE 48
OFFICERS AND MANAGEMENT
CORPORATE
- -------------------------------
CORPORATE OFFICERS
- -------------------------------
MOGENS C. BAY*
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
VINCENT T. CORSO*
SENIOR VICE PRESIDENT
AND CHIEF OPERATING OFFICER
THOMAS P. EGAN, JR.
VICE PRESIDENT
CORPORATE COUNSEL
AND SECRETARY
TERRY J. MCCLAIN*
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
E. ROBERT MEANEY*
SENIOR VICE PRESIDENT
VALMONT INTERNATIONAL
BRIAN C. STANLEY
VICE PRESIDENT AND
CONTROLLER
MARK E. TREINEN
VICE PRESIDENT
BUSINESS DEVELOPMENT
*MEMBER, OFFICE OF
THE PRESIDENT
DIVISIONS
- -------------------------------
LIGHTING & UTILITY
- -------------------------------
VINCENT T. CORSO
(ACTING) PRESIDENT
LEONARD M. ADAMS
VICE PRESIDENT
OPERATIONS, NORTH AMERICA
RICHARD M. SAMPSON
VICE PRESIDENT
SALES
THOMAS F. SANDERSON
VICE PRESIDENT
MARKETING AND
PROJECT DEVELOPMENT
THOMAS J. SUTKO
VICE PRESIDENT
ADMINISTRATION
INDUSTRIAL PRODUCTS DIVISION
- -------------------------------
JOHN V. FOLEY
PRESIDENT
IRRIGATION DIVISION
- -------------------------------
THOMAS D. SPEARS
PRESIDENT
DUANE BIER
VICE PRESIDENT
OPERATIONS
JAMES J. EITING
VICE PRESIDENT
KEY ACCOUNTS
HECTOR A. HAGET
VICE PRESIDENT
MARKETING AND ENGINEERING
TERRY RAHE
PRESIDENT
CASCADE EARTH SCIENCES
DENNIS E. SCHWIEGER
VICE PRESIDENT
GLOBAL SALES
COATINGS DIVISION
- -------------------------------
JEFFREY BRIGGS
PRESIDENT
RICHARD S. CORNISH
VICE PRESIDENT
OPERATIONS
COMMUNICATION DIVISION
- -------------------------------
JAMES R. CALLAWAY
PRESIDENT
SEAN GALLAGHER
VICE PRESIDENT
SALES
J. MARSHALL HAINES
VICE PRESIDENT
OPERATIONS
VALMONT ASIA/PACIFIC
- -------------------------------
E. ROBERT MEANEY
(ACTING) PRESIDENT
VALMONT EUROPE/MIDDLE EAST/AFRICA
- -------------------------------
JAN A.M. DRIESSENS
PRESIDENT
PAUL VAN ISEGHEM
VICE PRESIDENT OPERATIONS
- --------------------------------
CORPORATE HEADQUARTERS
Valmont Industries, Inc.
One Valmont Plaza
Omaha, Nebraska 68154 USA
402.963.1000
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
Omaha, Nebraska USA
LEGAL COUNSEL
McGrath, North, Mullin &
Kratz, P.C.
Omaha, Nebraska USA
STOCK TRANSFER AGENT AND
REGISTRAR
First National Bank of
Omaha Trust Department
One First National Center
Omaha, Nebraska 68102 USA
402.341.0500
Notices regarding changes of
address and inquiries regarding
lost or stolen certificates and
transfers of stock should be
directed to the transfer agent.
ANNUAL MEETING
The annual meeting of Valmont's
shareholders will be held at
2:00 p.m. on Monday, April 26,
1999, at the Joslyn Art Museum
in Omaha, Nebraska USA
SHAREHOLDER AND INVESTOR
RELATIONS
Valmont's common stock trades
on the Nasdaq national market
under the symbol VALM.
Valmont's most recent Quarterly
News Releases are available
on the internet at
www.valmont.com under
the heading "Valmont News."
Valmont maintains an active
investor relations program
and mailing list to keep
shareholders and potential
investors informed about the
Company. Comments and
inquiries are welcomed
and should be directed to
Investor Relations.
A copy of Valmont's 1998 Annual
Report on form 10-K may be
obtained by calling or writing
Investor Relations:
Jeffrey S. Laudin
Investor Relations Department
Valmont Industries, Inc.
One Valmont Plaza
Omaha, Nebraska 68154 USA
Phone: 402.963.1000
Fax: 402.963.1199
MARKET MAKERS
The following make a market in Valmont Industries, Inc. common stock as of
February 1999: George K. Baum & Company, Dain Rauscher Inc.,Herzog, Heine,
Geduld, Inc., Kirkpatrick Pettis Inc., Knight Securities, L.P., Spear, Leeds &
Kellogg, Sherwood Securities.
Visit Valmont's Website: www.valmont.com
198
<PAGE>
(INSIDE BACK COVER)
BOARD OF DIRECTORS
MOGENS C. BAY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
VALMONT INDUSTRIES, INC.
DIRECTOR SINCE 1993
ROBERT B. DAUGHERTY
FOUNDER AND CHAIRMAN EMERITUS
VALMONT INDUSTRIES, INC.
DIRECTOR SINCE 1947
CHARLES M. HARPER
FORMER CHAIRMAN AND CEO
RJR NABISCO HOLDINGS CORP. AND CONAGRA, INC.
DIRECTOR SINCE 1979
ALLEN F. JACOBSON
RETIRED CHAIRMAN AND CEO
3M COMPANY
DIRECTOR SINCE 1976
LLOYD P. JOHNSON
RETIRED CHAIRMAN OF THE BOARD
NORWEST CORPORATION
DIRECTOR SINCE 1991
JOHN E. JONES
RETIRED CHAIRMAN, PRESIDENT AND CEO
CBI INDUSTRIES, INC.
DIRECTOR SINCE 1993
THOMAS F. MADISON
PRESIDENT, MLM PARTNERS
CHAIRMAN OF THE BOARD
COMMUNICATIONS HOLDINGS, INC.
DIRECTOR SINCE 1987
WALTER SCOTT, JR.
CHAIRMAN
LEVEL 3 COMMUNICATIONS, INC.
DIRECTOR SINCE 1981
KENNETH E. STINSON
CHAIRMAN AND CEO
PETER KIEWIT SONS', INC.
DIRECTOR SINCE 1996
ROBERT G. WALLACE
RETIRED EXECUTIVE VICE PRESIDENT
PHILLIPS PETROLEUM CO.
DIRECTOR SINCE 1984
AUDIT COMMITTEE
WALTER SCOTT, JR., CHAIRMAN
JOHN E. JONES
ROBERT G. WALLACE
COMPENSATION COMMITTEE
ALLEN F. JACOBSON, CHAIRMAN
CHARLES M. HARPER
LLOYD P. JOHNSON
THOMAS F. MADISON
FROM LEFT
ALLEN F. JACOBSON
KENNETH E. STINSON
WALTER SCOTT, JR.
ROBERT B. DAUGHERTY
MOGENS C. BAY
THOMAS F. MADISON
CHARLES M. HARPER
JOHN E. JONES
LLOYD P. JOHNSON
ROBERT G. WALLACE
199
<PAGE>
(BACK COVER)
Valmont Logo
One ValmontPlaza
Omaha, Nebraska 68154-5215 USA
402.963.1000 fax 402.963.1199
www.valmont.com
200
<PAGE>
Exhibit 21
SUBSIDIARIES OF VALMONT INDUSTRIES, INC.
<TABLE>
State or Country
Name of Subsidiary of Incorporation
------------------ ----------------
<S> <C>
American Lighting Standards Corp.
d/b/a Valmont/ALS Texas
Best-All Electric, Inc. Nebraska
Cascade Earth Sciences, Ltd. Oregon
Clearwater International, Inc. Oregon
Gate City Steel Corporation Delaware
Golden State Irrigation, Inc. California
InterAg Technologies, Inc. Delaware
KUO Testing Labs, Inc. Washington
Lampadaires Feralux, Inc. Canada
Microflect Company, Inc. Oregon
NeuValco S.A. France
NeuValco GmbH Germany
Oregon Pacific Group, LLC. Oregon
Sermeto S.A. France
Sermeto Iberica S.A. Spain
Shanghai Valmont Special Steel Tube Co., Ltd. China
TelecCentre, S.A. France
Tubalco S.A. France
Valmont California Irrigation, Inc. California
Valmont Composites, LLC Utah
Valmont de Espana, S.A. Spain
Valmont Mastbau, KG Germany
Valmont S.A. Spain
Valmont Industria e Comercio, Ltd. Brazil
Valmont Industries (Asia-Pacific) Ltd. Hong Kong
Valmont Industries Holland B.V. The Netherlands
Valmont International, L.L.C. Delaware
Valmont International Corp. Texas
Valmont International Inc. U. S. Virgin Islands
Valmont Nederlands B.V. The Netherlands
Valmont Northwest, Inc. Nebraska
Valmont Polska Sp. zp.p Poland
Valmont Service Centers, Inc. Nebraska
Valmont Services Irrigacao, Ltd. Brazil
Valmont World Trade, N.V. Netherlands Antilles
</TABLE>
201
<PAGE>
Exhibit 23
DELOITTE & TOUCHE LLP (letterhead)
2000 First National Center Telephone 402-346-7788
Omaha, NE 68102-1578 Facsimile 402-346-0711
402-344-0372
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to incorporation by reference in Registration Statements No. 2-88663,
33-21680, 33-57117, and 333-02785 of Valmont Industries, Inc. on Form S-8 of our
reports dated February 5, 1999 appearing in or incorporated by reference in the
Annual Report on Form 10-K of Valmont Industries, Inc. for the year ended
December 26, 1998.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 24, 1999
202
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned Directors of Valmont Industries, Inc., a Delaware
corporation, hereby constitute and appoint Mogens C. Bay as attorney-in-fact
in their name, place and stead to execute Valmont's Annual Report on Form 10-K
for the fiscal year ended December 26, 1998, together with any and all
subsequent amendments thereof in their capacity as Chairman of the Board and
hereby ratify all that said attorney-in-fact may do by virtue thereof.
DATED this 24th day of February, 1999.
/s/ Robert B. Daugherty /s/ John E. Jones
- ------------------------------- -----------------------------
Robert B. Daugherty, Director John E. Jones, Director
/s/ Charles M. Harper /s/ Thomas F. Madison
- ------------------------------- -----------------------------
Charles M. Harper, Director Thomas F. Madison, Director
/s/ Allen F. Jacobson /s/ Walter Scott, Jr.
- ------------------------------- -----------------------------
Allen F. Jacobson, Director Walter Scott, Jr., Director
/s/ Lloyd P. Johnson /s/ Kenneth E. Stinson
- ------------------------------- -----------------------------
Lloyd P. Johnson, Director Kenneth E. Stinson, Director
/s/ Robert G. Wallace /s/ Charles D. Peebler, Jr.
- ------------------------------- -----------------------------
Robert G. Wallace, Director Charles D. Peebler, Jr.
/s/ Bruce Rhode
- -------------------------------
Bruce Rhode
203
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> DEC-26-1998
<CASH> 7,580
<SECURITIES> 0
<RECEIVABLES> 115,843
<ALLOWANCES> 0
<INVENTORY> 77,694
<CURRENT-ASSETS> 219,946
<PP&E> 292,944
<DEPRECIATION> 135,497
<TOTAL-ASSETS> 406,957
<CURRENT-LIABILITIES> 120,480
<BONDS> 0
0
0
<COMMON> 27,900
<OTHER-SE> 148,013
<TOTAL-LIABILITY-AND-EQUITY> 406,957
<SALES> 606,307
<TOTAL-REVENUES> 606,307
<CGS> 453,459
<TOTAL-COSTS> 453,459
<OTHER-EXPENSES> 105,096
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,216
<INCOME-PRETAX> 43,536
<INCOME-TAX> 15,900
<INCOME-CONTINUING> 27,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,636
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.02
</TABLE>
