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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-14287
USEC INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-2107911
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2 DEMOCRACY CENTER,
6903 ROCKLEDGE DRIVE, BETHESDA MD 20817
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 564-3200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of January 31, 2000, there were 90,541,000 shares of Common Stock, par
value $.10 per share, issued and outstanding.
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USEC INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I
FINANCIAL INFORMATION
Consolidated Financial Statements:
<S> <C>
Consolidated Balance Sheets at December 31, 1999 (Unaudited) and June 30, 1999...................... 3
Consolidated Statements of Income for the Three and Six Months Ended
December 31, 1999 and 1998 (Unaudited).......................................................... 4
Consolidated Statements of Cash Flows for the Six Months Ended
December 31, 1999 and 1998 (Unaudited).......................................................... 5
Notes to Consolidated Financial Statements (Unaudited).............................................. 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................................................... 8
Quantitative and Qualitative Disclosures about Market Risk.............................................. 15
PART II
OTHER INFORMATION
Legal Proceedings....................................................................................... 16
Submission of Matters to a Vote of Security Holders..................................................... 16
Exhibits and Reports on Form 8-K........................................................................ 17
Signature............................................................................................... 17
</TABLE>
--------------
This Quarterly Report on Form 10-Q includes certain forward-looking
information (within the meaning of the Private Securities Litigation Reform Act
of 1995) that involves risks and uncertainty, including certain assumptions
regarding the future performance of USEC. Actual results and trends may differ
materially depending upon a variety of factors, including, without limitation,
market demand for USEC's services, pricing trends in the uranium and enrichment
markets, deliveries and costs under the Russian contract, the availability and
cost of electric power, USEC's ability to successfully execute its internal
performance plans, the refueling cycles of USEC's customers and the impact of
any government regulation. Further, customer commitments under their contracts
are based on customers' estimates of their future requirements.
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USEC INC.
CONSOLIDATED BALANCE SHEETS
(MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1999 1999
------------ --------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents ............................................ $ 20.9 $ 86.6
Accounts receivable - trade .......................................... 358.7 373.8
Inventories:
Separative Work Units .............................................. 707.2 648.8
Uranium ............................................................ 200.1 160.1
Uranium provided by customers ...................................... 54.0 101.7
Materials and supplies ............................................. 22.0 22.8
-------- --------
Total Inventories .............................................. 983.3 933.4
Payments for future deliveries under Russian contract ................ - 50.0
Other ................................................................ 34.2 29.3
-------- --------
Total Current Assets ........................................... 1,397.1 1,473.1
Property, Plant and Equipment, net ...................................... 192.9 166.6
Other Assets
Deferred income taxes ................................................ 67.4 49.5
Deferred costs for depleted uranium .................................. 39.6 43.7
Prepaid pension costs ................................................ 52.6 52.9
Inventories .......................................................... 494.4 574.4
-------- --------
Total Other Assets ............................................. 654.0 720.5
-------- --------
Total Assets ............................................................ $ 2,244.0 $ 2,360.2
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt ...................................................... $ 198.3 $ 50.0
Accounts payable and accrued liabilities ............................. 157.0 264.2
Federal and state income taxes ....................................... 84.3 40.9
Payables under Russian contract ...................................... - 73.0
Uranium owed to customers ............................................ 54.0 101.7
-------- --------
Total Current Liabilities ...................................... 493.6 529.8
Long-Term Debt .......................................................... 500.0 500.0
Other Liabilities
Advances from customers .............................................. 17.9 19.2
Depleted uranium disposition ......................................... 35.4 24.8
Postretirement health and life benefit obligations ................... 97.8 93.0
Other liabilities .................................................... 55.1 58.0
-------- --------
Total Other Liabilities ........................................ 206.2 195.0
Stockholders' Equity
Preferred stock, par value $1.00 per share, 25,000,000 shares
authorized, none issued ............................................ - -
Common stock, par value $.10 per share, 250,000,000 shares authorized,
100,320,000 shares and 100,318,000 shares issued ................... 10.0 10.0
Excess of capital over par value ..................................... 1,071.7 1,072.0
Retained earnings .................................................... 68.6 71.9
Treasury stock, 9,779,000 shares and 1,142,000 shares ................ (102.3) (14.8)
Deferred compensation ................................................ (3.8) (3.7)
-------- --------
Total Stockholders' Equity ..................................... 1,044.2 1,135.4
-------- --------
Total Liabilities and Stockholders' Equity .............................. $ 2,244.0 $ 2,360.2
======== ========
</TABLE>
See notes to consolidated financial statements.
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USEC INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- --------- ----------
Revenue
<S> <C> <C> <C> <C>
Separative Work Units .............. $ 431.8 $ 413.8 $ 637.0 $ 721.5
Uranium ............................ 15.8 8.6 41.5 8.8
---------- ---------- --------- ----------
447.6 422.4 678.5 730.3
Cost of sales .......................... 377.4 330.7 563.8 579.3
---------- ---------- --------- ----------
Gross profit ........................... 70.2 91.7 114.7 151.0
Project development costs .............. 2.6 27.2 4.0 58.8
Selling, general and administrative .... 11.2 9.3 23.4 17.2
---------- ---------- --------- ----------
Operating income ....................... 56.4 55.2 87.3 75.0
Interest expense ....................... 9.8 8.8 18.3 15.3
Other (income) expense, net ............ (2.9) (2.0) (5.7) (3.6)
---------- ---------- --------- ----------
Income before income taxes ............. 49.5 48.4 74.7 63.3
Provision (benefit) for income taxes ... 16.9 16.3 26.0 (31.9)
---------- ---------- --------- ----------
Net income ............................. $ 32.6 $ 32.1 $ 48.7 $ 95.2
========== ========== ========= ==========
Net income per share - basic and diluted $ .36 $ .32 $ .52 $ .95
Dividends per share .................... $ .275 $ .275 $ .55 $ .275
Average number of shares outstanding ... 90.6 100.0 94.2 100.0
</TABLE>
See notes to consolidated financial statements.
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USEC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------------
1999 1998
-------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income ....................................................... $ 48.7 $ 95.2
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income taxes ..................................... (17.9) (54.5)
Depreciation and amortization ............................. 9.0 9.4
Depleted uranium disposition .............................. 14.7 14.4
Suspension of development of AVLIS technology ............. (32.5) -
Changes in operating assets and liabilities:
Accounts receivable - (increase) decrease .............. 15.1 (72.9)
Inventories - (increase) decrease ...................... (17.6) 31.4
Payables under Russian contract, net ................... (23.0) 23.9
Federal and state income taxes - increase .............. 43.4 17.7
Accounts payable and other liabilities - (decrease) .... (72.6) (32.2)
Other .................................................. (4.4) (2.6)
-------- ----------
Net Cash Provided by (Used in) Operating Activities .............. (37.1) 29.8
-------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures ............................................. (35.3) (16.8)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to stockholders ................................... (52.0) (27.5)
Dividend paid to U.S. Treasury ................................... - (1,709.4)
Repurchase of common stock ....................................... (89.6) -
Proceeds from issuance of debt ................................... 148.3 600.0
Debt issuance and initial public offering costs .................. - (8.5)
-------- ----------
Net Cash Provided by (Used in) Financing Activities .............. 6.7 (1,145.4)
-------- ----------
Net Increase (Decrease) .......................................... (65.7) (1,132.4)
Cash and Cash Equivalents at Beginning of Period ................. 86.6 1,177.8
-------- ----------
Cash and Cash Equivalents at End of Period ....................... $ 20.9 $ 45.4
======== ==========
Supplemental Cash Flow Information
Interest paid ................................................ $ 20.4 $ 13.6
Income taxes paid ............................................ .9 5.4
Supplemental Schedule of Non-Cash Financing Activities
Transfer of responsibility for depleted uranium disposition to
Department of Energy ...................................... - $ 373.8
</TABLE>
See notes to consolidated financial statements.
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USEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared by USEC Inc. ("USEC") pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements reflect all
adjustments which are, in the opinion of management, necessary for a fair
statement of the financial results for the interim period. Certain information
and notes normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to such
rules and regulations.
Operating results for six months ended December 31, 1999 are not necessarily
indicative of the results that may be expected for the fiscal year ending June
30, 2000. The unaudited consolidated financial statements should be read in
conjunction with the financial statements and related notes and management's
discussion and analysis of financial condition and results of operations,
included in the Annual Report on Form 10-K for the fiscal year ended June 30,
1999.
2. STOCKHOLDERS' EQUITY
Changes in stockholders' equity follow (in millions):
<TABLE>
<CAPTION>
COMMON
STOCK, EXCESS OF TOTAL
PAR VALUE CAPITAL OVER RETAINED TREASURY DEFERRED STOCKHOLDERS'
$.10 PER SHARE PAR VALUE EARNINGS STOCK COMPENSATION EQUITY
-------------- ------------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1999 ...... $ 10.0 $ 1,072.0 $ 71.9 $ (14.8) $ (3.7) $ 1,135.4
Repurchase of common stock .... - - - (89.6) - (89.6)
Restricted stock issued, net of
amortization .............. - (.3) - 2.1 (.1) 1.7
Dividends paid to stockholders - - (52.0) - - (52.0)
Net income .................... - - 48.7 - - 48.7
------- ---------- ------- -------- ------ ----------
BALANCE AT DECEMBER 31, 1999 . $ 10.0 $ 1,071.7 $ 68.6 $ (102.3) $ (3.8) $ 1,044.2
======= ========== ======= ======== ====== ==========
</TABLE>
The number of shares of common stock outstanding amounted to 90.5 million at
December 31, 1999, a decline of 8.7 million shares from 99.2 million shares at
June 30, 1999. In the six months ended December 31, 1999, 8.8 million shares
were repurchased at a cost of $89.6 million. At December 31, 1999, a total of
9.6 million shares had been repurchased under a program approved by the Board in
June 1999 to repurchase up to 10.0 million shares of common stock over a two
year period.
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USEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. POWER COMMITMENTS
Under the terms of the plant lease, USEC purchases a significant portion of
its electric power at amounts based on actual costs incurred under the
Department of Energy ("DOE") power contracts with Ohio Valley Electric
Corporation ("OVEC") and Electric Energy, Inc. that extend through December
2005. USEC has the right to have DOE terminate the power contracts with notice
ranging from three to five years. USEC is responsible for DOE's guarantee of
OVEC's short-term borrowings and senior secured notes that amounted to $22.1
million and $51.9 million, respectively, at December 31, 1999.
4. SUBSEQUENT EVENTS
On February 3, 2000, the Board of Directors reduced by half the dividend
paid on common stock, declaring a quarterly dividend of $.1375 per share payable
March 15, 2000, to shareholders of record on February 25, 2000. In a related
action, the Board of Directors approved an expansion of the common stock
repurchase program and authorized buying up to an additional 20 million shares
by June 2001.
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USEC INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated financial statements
and related notes and management's discussion and analysis of financial
condition and results of operations included in the Annual Report on Form 10-K
for the fiscal year ended June 30, 1999.
RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
Revenue
Revenue from the sale of SWU amounted to $431.8 million in the three months
ended December 31, 1999, an increase of $18.0 million (or 4%) over the $413.8
million in the corresponding period of fiscal 1999. In the six months ended
December 31, 1999, revenue was $637.0 million, a reduction of $84.5 million (or
12%) from the $721.5 million in the fiscal 1999 period.
Changes in revenue in the fiscal 2000 periods resulted from a reduction in
average prices for separative work units ("SWU") billed to customers, changes in
timing of customer nuclear reactor refueling orders, and lower SWU commitment
levels of two domestic and a foreign customer. Average SWU prices billed to
customers declined 9% and 5% in the three and six months ended December 31,
1999, respectively, compared with the fiscal 1999 periods.
The volume of SWU sold increased 14% in the three months ended December 31,
1999, but declined 7% in the six months ended December 31, 1999, compared with
the corresponding periods of fiscal 1999. Revenue and operating results can
fluctuate significantly from quarter-to-quarter, and in some cases,
year-to-year. Customer requirements are determined by refueling schedules for
nuclear reactors, which generally range from 12 to 18 months (or in some cases
up to 24 months), and are in turn affected by, among other things, the seasonal
nature of electricity demand, reactor maintenance, and reactors beginning or
terminating operations.
Revenue in the three months ended December 31, 1999, includes sales of $42.8
million to customers in Japan to replace SWU stranded at the Tokai-mura uranium
processing facility in Japan. Operations at the facility were suspended in
September 1999 following an incident involving highly enriched uranium for an
experimental reactor. Nuclear fuel services sold by USEC were not involved in
the incident. Additional sales to Japanese customers affected by the incident
are expected during the remainder of fiscal 2000. As SWU is retrieved from the
facility and used by the Japanese customers in fiscal years 2001 and 2002,
USEC's sales to such customers may be reduced.
USEC's financial performance over time can be significantly affected by
changes in the market price for SWU. As older customer contracts with higher
prices expire, USEC's backlog is becoming more heavily weighted with newer
contracts with shorter terms and lower prices. In light of this, USEC expects
that its backlog will decline over time unless new SWU commitments are added at
sufficient levels to offset the impact of shorter term contracts, expiring
commitments and lower prices.
Revenue from sales of uranium, primarily uranium hexafluoride, amounted to
$15.8 million and $41.5 million in the three and six months ended December 31,
1999, compared with $8.6 million and $8.8
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million in the corresponding periods in fiscal 1999. The level of uranium sales
is consistent with USEC's long-range plans developed at the time of
privatization. Although uranium prices have declined in the six months ended
December 31, 1999, compared with the corresponding period in fiscal 1999, sales
of uranium from inventory are expected to continue to generate cash flow.
The percentage of revenue from domestic and international customers follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Domestic ................................. 62% 54% 56% 56%
Asia ..................................... 35 41 39 34
Europe and other ......................... 3 5 5 10
--- --- --- ---
100% 100% 100% 100%
=== === === ===
</TABLE>
Revenue from domestic customers declined $29.3 million (or 7%), revenue from
customers in Asia increased $16.4 million (or 7%), and revenue from customers in
Europe and other areas declined $38.9 million (or 54%) in the six months ended
December 31, 1999, compared with the corresponding period of fiscal 1999. The
changes in the geographic mix of revenue resulted primarily from replacement SWU
sales to Japan, the timing of customers' orders, and the growth in sales of
uranium.
Cost of Sales
Cost of sales is based on the quantity of SWU sold during the period and is
dependent upon production costs at the plants and purchase costs primarily under
the Russian contract. Production costs consist principally of electric power,
labor and benefits, depleted uranium disposition costs, materials, and
maintenance and repairs. Under the monthly moving average inventory cost method,
an increase or decrease in production or purchase costs will have an effect on
cost of sales over current and future periods.
Cost of sales amounted to $377.4 million in the three months ended December
31, 1999, an increase of $46.7 million (or 14%) compared with $330.7 million in
the corresponding period in fiscal 1999. Cost of sales in the six months ended
December 31, 1999, was $563.8 million, a decline of $15.5 million (or 3%) from
the $579.3 million in the corresponding period of fiscal 1999. The increase in
cost of sales for the three months ended December 31, 1999, reflects the 14%
increase in the volume of SWU sold and higher sales of uranium. Cost of sales
continues to be adversely affected by increased purchases of SWU under the
Russian contract and lower production at the plants. As a percentage of revenue,
cost of sales amounted to 83% in the first six months of fiscal 2000, compared
with 79% in the corresponding period of fiscal 1999.
USEC purchases a significant portion of its electric power based on
long-term contracts with dedicated power generating facilities. Firm power costs
vary depending on operating and capital costs incurred at the power generating
facilities. Non-firm power costs vary seasonally with rates being higher during
winter and summer as a function of the extremity of the weather. USEC's power
costs are typically higher in the summer months as almost all of the power
supplied to the Paducah plant in the summer months is purchased at market-based
rates because it is non-firm power. In the summers of 1999 and 1998, production
at the Paducah plant was reduced to mitigate the high cost of non-firm power.
Electric power costs amounted to $177.4 million in the first six months of
fiscal 2000 (representing
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52% of production costs) compared with $199.0 million (representing 55% of
production costs) in the corresponding period of fiscal 1999, a reduction of
$21.6 million (or 11%). Power supplied to and purchased for the Portsmouth plant
in the six months ended December 31, 1999, was lower than in the corresponding
period in fiscal 1999. USEC negotiated and implemented changes to its power
supply agreements to limit exposure to high-cost, non-firm power prices at the
Paducah plant, to monetize excess power available in the summer of 1999 under
the contract to the Portsmouth plant, and to have the ability to move blocks of
power in the summer of 1999 from the Portsmouth plant to the Paducah plant. USEC
and one of its major suppliers are in negotiations for a similar supply
agreement modification to be in place for the summer of the year 2000. In the
six months ended December 31, 1998, persistent hot weather, high electricity
demand in the Midwest and power generation shortages had contributed to record
high power costs at the Paducah plant.
Costs for labor included in production costs declined 7% compared with the
first six months of fiscal 1999. The average number of employees at the plants
declined 9% in the first six months of fiscal 2000 compared with the
corresponding period in fiscal 1999. In fiscal 1998, USEC had recorded a special
charge of $12.8 million for costs related to severance benefits to be paid to
plant workers in connection with workforce reductions, of which $11.8 million
had been paid with respect to 470 workers as of December 31, 1999.
During fiscal 1999 and most of the six months ended December 31, 1999, SWU
unit production costs at the Portsmouth plant were adversely affected by low
production facility capability due to sub-optimal gaseous diffusion production
equipment availability. A significant improvement in equipment availability was
achieved in the three months ended December 31, 1999.
Pursuant to the agreement with the U.S. Treasury, USEC has committed to
continue operation of the two plants until at least January 2005, subject to
limited exceptions, including:
- events beyond the reasonable control of USEC, such as natural disasters;
- a decrease in annual worldwide demand to less than 28 million SWU;
- a decline in the average price for all SWU under USEC's long-term firm
contracts to less than $80 per SWU (in 1998 dollars);
- a decline in the operating margin to below 10% in a consecutive
twelve-month period;
- a decline in the interest coverage ratio to below 2.5x in a consecutive
twelve-month period; or
- if the long-term corporate credit rating of USEC is, or is reasonably
expected in the next twelve months to be, downgraded below an investment
grade rating.
On February 4, 2000, Standard & Poor's revised its credit rating of USEC's
long-term debt to below investment grade.
USEC is the Executive Agent of the U.S. Government under a
government-to-government agreement to purchase the SWU component of enriched
uranium recovered from dismantled nuclear weapons from the former Soviet Union
for use in commercial electricity production. Cost of sales has been, and will
continue to be, adversely affected by amounts paid to purchase SWU under the
Russian contract. In addition, since the volume of Russian SWU purchases has
increased, USEC has operated the plants at significantly lower production levels
resulting in higher unit production costs. Global market prices for SWU have
declined below the price being paid for SWU under the Russian contract. Based on
preliminary discussions with the U.S. and Russian governments, USEC expects that
prices for SWU purchased under the Russian contract will be aligned with market
prices beginning in calendar year 2002.
SWU purchased from the Russian Federation represented 45% of the combined
produced and purchased supply mix in the six months ended December 31, 1999,
compared with 35% in the corresponding period in fiscal 1999. USEC has ordered
5.5 million SWU for delivery under the Russian
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contract in calendar year 2000 and expects to order and purchase 5.5 million SWU
in calendar 2001.
Gross Profit
Gross profit amounted to $114.7 million in the first six months of fiscal
2000, a reduction of $36.3 million (or 24%) from $151.0 million in the
corresponding period in fiscal 1999. Gross margin was 17% compared with 21% in
the first six months of fiscal 1999. The reduction reflects the 5% decline in
average SWU prices billed to customers.
Project Development Costs
Project development costs amounted to $4.0 million in the first six months of
fiscal 2000 compared with $58.8 million in the corresponding period in fiscal
1999. Costs incurred in the fiscal 1999 period were primarily for AVLIS. In June
1999, further development of the AVLIS enrichment technology was suspended,
resulting in a special charge of $34.7 million against income in fiscal 1999 for
contract termination, shutdown activities and employee benefit arrangements, of
which $33.0 million had been paid as of December 31, 1999.
USEC is evaluating the availability and economics of centrifuge technology
and a potential new advanced enrichment technology called "SILEX". Project
development costs are expected to be $18.0 million in fiscal 2000, including
costs for SILEX.
Selling, General and Administrative
Selling, general and administrative expense amounted to $23.4 million in the
six months ended December 31, 1999, an increase of $6.2 million (36%) from $17.2
million in the corresponding period in fiscal 1999. The increase reflects costs
for executive compensation plans, including amortization of the cost of
restricted stock grants, and additional corporate staff following the initial
public offering in July 1998.
Operating Income
Operating income amounted to $87.3 million in the first six months of fiscal
2000, an increase of $12.3 million (or 16%), compared with $75.0 million in the
corresponding period in fiscal 1999. The increase reflects the reduction of
$54.8 million in project development costs following the suspension of AVLIS
development in June 1999, partially offset by a lower gross profit.
Interest Expense
Interest expense amounted to $18.3 million in the six months ended December
31, 1999, an increase of $3.0 million (20%) from $15.3 million in the first six
months of fiscal 1999. Total long-term and short-term debt outstanding averaged
$567.8 million in the six months ended December 31, 1999 compared with $480.1
million in the corresponding period in fiscal 1999, an increase of 18%. Prior to
July 28, 1998, the date of the initial public offering, USEC had no debt.
As a result of the revised credit rating of USEC's long-term debt to below
investment grade on February 4, 2000, USEC anticipates that costs of borrowing
under its bank credit facilities will increase.
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Provision for Income Taxes
The effective income tax rate was 34.8% in the six months ended December
31, 1999.
USEC became subject to federal, state and local income taxes July 28, 1998,
the date of the initial public offering, and the provision for income taxes in
the six months ended December 31, 1998 includes a special income tax benefit of
$54.5 million ($.54 per share) for deferred income tax benefits that arose from
the transition to taxable status. Excluding the special tax benefit, the
provision for income taxes amounted to $22.6 million in the six months ended
December 31, 1998.
Net Income
Net income amounted to $48.7 million (or $.52 per share) in the first six
months of fiscal 2000 compared with $40.7 million (or $.41 per share), excluding
a special tax credit in the corresponding period in fiscal 1999. The increase
reflects lower project development costs following the suspension of AVLIS
development in June 1999, partly offset by lower gross profit. Net income was
$95.2 million (or $.95 per share) in the six months ended December 31, 1998.
The average number shares of common stock outstanding was 94.2 million in
the six months ended December 31, 1999, a decline of 5.8 million shares from
100.0 million shares in the corresponding period of fiscal 1999. The reduction
reflects the repurchase of shares under a repurchase program authorized in June
1999. At December 31, 1999, there were 90.5 million shares issued and
outstanding.
Fiscal 2000 and 2001 Outlook
Based on the results of the first half of fiscal 2000, USEC continues to
expect net income of $110.0 million to $115.0 million in fiscal 2000, excluding
a special charge relating to workforce reductions.
Looking ahead to fiscal 2001 and beyond, USEC expects that its financial
condition and results of operations will continue to be adversely affected by
unfavorable global market conditions for the sale of enriched uranium and the
legal constraints placed on USEC's ability to reduce costs in response to these
changed market conditions.
Global overcapacity for uranium enrichment, aggressive competitor pricing,
unfavorable currency exchange rate movements and the liquidation by customers
and countries of their SWU inventories has maintained significant downward
pressure on market prices for enrichment services. With new contracts being
signed at substantially lower prices, USEC's average price billed to customers
has declined, and is expected to continue to decline, reducing future revenue.
Also, the ongoing liquidation of worldwide SWU inventories by customers and
countries is reducing the open demand for enrichment services and will
negatively affect USEC sales volumes in fiscal 2001.
In the face of this declining market, USEC has recognized that it must
reduce its operating costs to remain profitable. USEC's cost structure will
continue to be adversely impacted by the substantial volume of Russian enriched
uranium USEC must purchase at above-market prices and the resulting lower
production volumes and associated higher unit production costs. In addition,
notwithstanding the success of USEC's efforts to reduce its exposure to
high-priced, non-firm power, the overall cost of power has been rising. Because
electricity constitutes more than half of USEC's production costs, rising power
prices have a significant negative impact on production costs.
USEC has been constrained in responding to these market conditions by its
privatization agreement with the U.S. Treasury Department. This agreement
restricts the actions that USEC can take to reduce
12
<PAGE> 13
operating costs. Within those constraints, however, USEC has and will continue
to concentrate on cost reductions. For example, USEC is in discussions with one
of its major power suppliers to conclude a new, one-year power supply agreement
for the summer of 2000 with benefits similar to one signed last year that
provided $30 million in pre-tax savings.
During calendar year 2000, USEC expects to purchase 5.5 million SWU from
Russia, which is almost half of expected sales. To balance production with
expected SWU purchases from Russia, USEC will decrease production and expects to
operate its two production plants at about one-quarter of their nameplate
capacity in fiscal 2001. This will force USEC to implement a reduction in the
workforce in July 2000 when one of the government restrictions ends. USEC
expects to reduce the number of production employees by about 850, or 20 percent
of the workforce. The reductions will be divided approximately equally between
the two production plants. This will result in approximately $39.0 million in
annual production cost savings. A special charge will be taken in fiscal 2000 to
reflect the one-time cost associated with employee severance expense. In
addition, USEC will reduce its headquarters costs.
Negotiations are now underway to develop the framework for a market-based
pricing mechanism for the purchase of Russian SWU. USEC hopes to conclude these
negotiations this year, with implementation of market-based pricing in January
2002.
Based on a review of operations, USEC expects fiscal year 2001 net income
will be between $35 million and $45 million. These amounts depend upon USEC
achieving additional one-year power supply agreements for summer power with
benefits similar to the one signed last year. It also assumes the reduction in
labor costs resulting from the planned July 2000 workforce reduction at the
production plants.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Cash Flows
Net cash flows from operating activities amounted to an outflow of $37.1
million in the six months ended December 31, 1999, compared with an inflow
of $29.8 million in the corresponding period of fiscal 1999. The outflow in the
fiscal 2000 period reflects an acceleration of $96.6 million paid in December
1999 for SWU purchased under the Russian contract. Standard payment terms would
have resulted in payments in January and February 2000. The fiscal 2000 period
also reflects payments of $32.5 million relating to suspension of development of
the AVLIS technology, and the first semiannual payment of $16.7 million in July
1999 for interest on senior notes issued in January 1999.
Capital expenditures amounted to $35.3 million in the six months ended
December 31, 1999, compared with $16.8 million in the corresponding period in
fiscal 1999. Capital expenditures include costs for seismic upgrades at the
Paducah plant, required by the NRC Compliance Plan, to reduce the risk of
release of radioactive and hazardous material in the event of an earthquake.
During fiscal 2000, USEC expects its capital expenditures will approximate $71.0
million, including costs for seismic upgrades and costs to upgrade the Paducah
plant's capability to produce enriched uranium up to 5.5% U235.
In June 1999, the Board of Directors approved a share repurchase program of up
to 10.0 million shares of common stock over a two year period. In the six months
ended December 31, 1999, 8.8 million shares were repurchased at a cost of $89.6
million. At December 31, 1999, a total of 9.6 million shares had been
repurchased since the inception of the program.
13
<PAGE> 14
Dividends paid to stockholders amounted to $52.0 million in the first six
months of fiscal 2000 compared with $27.5 million in the fiscal 1999 period.
There was no dividend payment in the first quarter of fiscal 1999 as USEC began
quarterly dividend payments in December 1999.
On February 3, 2000, the Board of Directors reduced by half the dividend
paid on common stock, declaring a quarterly dividend of $.1375 per share payable
March 15, 2000, to shareholders of record on February 25, 2000. In a related
action, the Board of Directors approved an expansion of the common stock
repurchase program and authorized buying up to an additional 20 million shares
by June 2001.
Capital Structure and Financial Resources
In January 1999, USEC issued $350.0 million of 6.625% senior notes due
January 2006 and $150.0 million of 6.750% senior notes due January 2009. The
senior notes are unsecured obligations and rank on a parity with all other
unsecured and unsubordinated indebtedness of USEC Inc.
In November 1999, USEC increased its available lines of credit by $100.0
million under a new credit facility with rates and covenants similar to an
existing credit facility. Commitments available under bank credit facilities
amounted to $400.0 million at December 31, 1999, as follows: $100.0 million
under a revolving credit facility expiring May 2000, $150.0 million under a
revolving credit facility convertible in July 2000 into a one-year term loan,
and $150.0 million under a revolving credit facility expiring July 2003.
Short-term borrowings amounted to $198.3 million at December 31, 1999, with a
weighted average interest rate of 6.64%.
Net working capital amounted to $903.5 million, including net inventories of
$929.3 million, at December 31, 1999, compared with $943.3 million, including
net inventories of $831.7 million, at June 30, 1999. The total
debt-to-capitalization ratio was 40% at December 31, 1999, compared with 33% at
June 30, 1999, reflecting the increase in short-term borrowings at December 31,
1999.
USEC expects that its cash, internally generated funds from operating
activities, and available financing sources under the bank credit facilities
will be sufficient to meet its obligations as they become due, to fund operating
requirements of the plants, purchases of SWU under the Russian contract, capital
expenditures, interest expense, quarterly dividends, and repurchases of shares
of common stock.
CHANGING PRICES AND INFLATION
The plants require substantial amounts of electric power to enrich uranium.
Information with respect to electric power prices and costs is included above.
A majority of USEC's long-term requirements contracts with customers
generally provide for prices that are subject to adjustment for inflation.
IMPACT OF YEAR 2000
As a result of software modification and computer systems upgrades by USEC
and its vendors, USEC experienced no problems related to the year 2000. Costs
for software modifications and systems upgrades to resolve year 2000 issues
aggregated $12.2 million through December 31, 1999.
14
<PAGE> 15
USEC INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At December 31, 1999, the balance sheet carrying amounts for cash and cash
equivalents, accounts receivable, and accounts payable and accrued liabilities
approximate fair value because of the short-term nature of the instruments.
As a result of variable interest rates, the fair value of short-term debt
approximates its carrying value. The fair value of long-term debt is calculated
based on a spread over U.S. Treasury securities with similar maturities. The
repayment schedule of short-term debt based on maturity dates available under
the bank credit facilities, the scheduled maturity dates of long-term debt, the
balance sheet carrying amounts at December 31, 1999, and related fair values
follow (millions):
<TABLE>
<CAPTION>
MATURITY DATES
---------------------------------------
DUE WITHIN JANUARY JANUARY BALANCE SHEET FAIR
ONE YEAR 2006 2009 CARRYING AMOUNT VALUE
--------- ---- ----- --------------- -----
<S> <C> <C> <C> <C> <C>
Short-term debt................. $198.3 $198.3 $198.3
Long-term debt:
6.625% senior notes....... $350.0 350.0 315.0
6.750% senior notes....... $150.0 150.0 129.5
------ ------
$698.3 $642.8
====== ======
</TABLE>
15
<PAGE> 16
USEC INC.
PART II. OTHER INFORMATION
LEGAL PROCEEDINGS
None
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
USEC held its annual meeting of shareholders on November 3, 1999. As of
the September 10, 1999 record date, there were 97.5 million shares of common
stock outstanding and entitled to vote. 94.1% of those shares were represented
at the annual meeting.
A board of seven directors (listed below) was elected at the annual
meeting. Each director holds office until the next annual meeting. There was no
solicitation in opposition to the nominees proposed in the proxy statement, and
there were no abstentions or broker non-votes.
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
James R. Mellor, Chairman 91,388,673 358,275
Joyce F. Brown 91,361,564 385,384
Frank V. Cahouet* 91,396,379 350,569
John R. Hall 84,312,224 7,434,724
Dan T. Moore, III 91,410,985 335,963
William H. Timbers, Jr. 91,418,801 328,147
William H. White 91,412,653 334,295
</TABLE>
-------
* Frank V. Cahouet retired from the Board of Directors effective January
15, 2000.
The appointment of Arthur Andersen LLP as independent auditors for
fiscal 2000 was ratified with 91,417,774 votes for (99.8% of votes cast) and
136,239 against (.2% of votes cast). There were 192,935 abstentions and no
broker non-votes.
16
<PAGE> 17
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Quarterly Report on Form
10-Q:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
10.41 USEC Inc. 401(k) Restoration Plan, effective
January 1, 2000.
10.42 Revolving Loan Agreement, dated November 15, 1999,
among Bank of America, N.A., First Union National
Bank, and USEC Inc.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended December
31, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
USEC INC.
February 7, 2000 By /s/ Henry Z Shelton, Jr.
---------------------------------------
HENRY Z SHELTON, JR.
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
17
<PAGE> 18
USEC INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
-------- -----------
<S> <C>
10.41 USEC Inc. 401(k) Restoration Plan, effective
January 1, 2000.
10.42 Revolving Loan Agreement, dated November 15, 1999,
among Bank of America, N.A., First Union National Bank,
and USEC Inc.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit 10.41
USEC Inc. 401(k) Restoration Plan
10.41a USEC Inc. 401(k) Restoration Plan Basic Plan Document
10.41b Amendment to the Basic Plan Document
10.41c Second Amendment to the Basic Plan Document
10.41d USEC Inc. 401(k) Restoration Plan Adoption Agreement
10.41e Amendment to the Adoption Agreement
10.41f Second Amendment to the Adoption Agreement
<PAGE> 2
EXHIBIT 10.41a
THE CORPORATEPLAN FOR RETIREMENT SELECT PLAN
BASIC PLAN DOCUMENT
IMPORTANT NOTE
THIS DOCUMENT IS NOT AN IRS APPROVED PROTOTYPE PLAN. AN ADOPTING EMPLOYER MAY
NOT RELY SOLELY ON THIS PLAN TO ENSURE THAT THE PLAN IS "UNFUNDED AND MAINTAINED
PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION TO A SELECT GROUP
OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES" AND EXEMPT FROM PARTS 2 THROUGH 4
OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 WITH RESPECT
TO THE EMPLOYER'S PARTICULAR SITUATION. FIDELITY MANAGEMENT TRUST COMPANY, ITS
AFFILIATES AND EMPLOYEES MAY NOT PROVIDE YOU WITH LEGAL ADVICE IN CONNECTION
WITH THE EXECUTION OF THIS DOCUMENT. THIS DOCUMENT SHOULD BE REVIEWED BY YOUR
ATTORNEY AND/OR ACCOUNTANT PRIOR TO EXECUTION.
<PAGE> 3
CPR SELECT
BASIC PLAN DOCUMENT
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Re employment
3.03 - Cessation or Resumption of Participation Following a Change in
Status
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Matching Contributions
4.03 - Time of Making Employer Contributions
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Death
7.03 - Other Termination of Employment
7.04 - Separate Account
7.05 - Forfeitures
7.06 - Adjustment for Investment Experience
7.07 - Hardship Withdrawals
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Determination of Method of Distribution
8.03 - Notice to Trustee
8.04 - Time of Distribution
ARTICLE 9
AMENDMENT AND TERMINATION
9.01 - Amendment by Employer
9.02 - Retroactive Amendments
9.03 - Termination
9.04 - Distribution Upon Termination of the Plan
2
<PAGE> 4
ARTICLE 10
MISCELLANEOUS
10.01 - Communication to Participants
10.02 - Limitation of Rights
10.03 - Nonalienability of Benefits
10.04 - Facility of Payment
10.05 - Information between Employer and Trustee
10.06 - Notices
10.07 - Governing Law
ARTICLE 11
PLAN ADMINISTRATION
11.01 - Powers and responsibilities of the Administrator
11.02 - Nondiscriminatory Exercise of Authority
11.03 - Claims and Review Procedures
11.04 - Cost of Administration
3
<PAGE> 5
PREAMBLE
IT IS THE INTENTION OF THE EMPLOYER TO ESTABLISH HEREIN AN UNFUNDED PLAN
MAINTAINED SOLELY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION FOR A
SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES FOR PURPOSES OF TITLE
I OF ERISA.
ARTICLE 1. ADOPTION AGREEMENT.
ARTICLE 2. DEFINITIONS.
2.01. DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings set
forth below, unless a different meaning is clearly required by the
context:
(1) "Account" means an account established on the books of the
Employer for the purpose of recording amounts credited on behalf of a
Participant and any income, expenses, gains or losses included
thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01(b).
(3) "Adoption Agreement" means Article 1 under which the Employer
establishes and adopts or amends the Plan and designates the optional
provisions selected by the Employer. The provisions of the Adoption
Agreement shall be an integral part of the Plan.
(4) "Beneficiary" means the person or persons entitled under Section
7.02 to receive benefits under the Plan upon the death of a
Participant.
(5) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(6) "Compensation" shall mean for purposes of Article 4
(Contributions)wages as defined in Section 3401(a) of the Code and
all other payments of compensation to an employee by the employer (in
the course of the employers trade or business) for which the employer
is required to furnish the employee a written statement under Section
6041(d) and 6051(a)(3) of the Code, excluding any items elected by
the Employer in Section 1.04, reimbursements or other expense
allowances, fringe benefits (cash and non-cash), moving expenses,
deferred compensation and welfare benefits, but including amounts
that are not includable in the gross income of the Participant under
a salary reduction agreement by reason of the application of Sections
125, 402(a)(8), 402(h), or 403(b) of the Code. Compensation must be
determined without regard to any rules under Section 3401(a) of the
Code that limit the remuneration included in wages based on the
nature or location of the employment or the services performed (such
as the exception for agricultural labor in Section 3401(a)(2) of the
Code).
Compensation shall generally be based on the amount that would
have been actually paid to the Participant during the Plan Year but
for an election under Section 4.01.
<PAGE> 6
In the case of any Self-Employed Individual or an Owner-Employee
Compensation shall mean the Individual's Earned Income.
(7) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to which
the Plan is established and for which the personal services of such
individual are a material income-providing factor, excluding any
items not included in gross income and the deductions allocated to
such items, except that for taxable years beginning after December
31, 1989 net earnings shall be determined with regard to the
deduction allowed under Section 164(f) of the Code, to the extent
applicable to the Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan, to the extent a
deduction is allowed to the Employer for such contributions under
Section 404 of the Code.
(8) "Employee" means any employee of the Employer, Self-Employed
Individual or Owner-Employee.
(9) "Employer" means the employer named in Section 1.02(a) and any
Related Employers designated in Section 1.02(b).
(10) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(11) "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
(12) "Fidelity Fund" means any Registered Investment Company which is
made available to plans utilizing the CORPORATEplan for Retirement
Select Plan.
(13) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(14) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for
the Employer or a Related Employer, each such hour to be
credited to the Employee for the computation period in which
the duties were performed;
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related
Employer (including payments made or due from a trust fund or
insurer to which the Employer contributes or pays premiums) on
account of a period of time during which no duties are
performed (irrespective of whether the employ-ment relationship
has terminated) due to vacation, holiday, illness, incapacity,
disability, layoff, jury duty, military duty, or leave of
absence, each such hour to be credited to the Employee for the
Eligibility Computation Period in which such period of time
occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (B) on account of any single
contin-uous period during which the Employee performs no
duties;
2
<PAGE> 7
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made
or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws;
and
(iii) If the period during which the Employee performs no
duties falls within two or more computation periods and if
the payment made on account of such period is not
calculated on the basis of units of time, the Hours of
Service credited with respect to such period shall be
allocated between not more than the first two such
computation periods on any reasonable basis consistently
applied with respect to similarly situated Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been
either awarded or agreed to be paid by the Employer or a
Related Employer, each such hour to be credited to the Employee
for the computation period to which the award or agreement
pertains rather than the computation period in which the award
agreement or payment is made.
For purposes of determining Hours of Service, Employees of
the Employer and of all Related Employers will be treated as
employed by a single employer. For purposes of paragraphs (B)
and (C) above, Hours of Service will be calculated in
accordance with the provisions of Section 2530.200b-2(b) of the
Department of Labor regulations which are incorporated herein
by reference.
Solely for purposes of determining whether a break in
service for participation purposes has occurred in a
computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for the
hours of service which would otherwise been credited to such
individual but for such absence, or in any case in which such
hours cannot be determined, 8 hours of service per day of such
absence. For purposes of this paragraph, an absence from work
for maternity reasons means an absence (1) by reason of the
pregnancy of the individual, (2) by reason of a birth of a
child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of
such child by such individual, or (4) for purposes of caring
for such child for a period beginning immediately following
such birth or placement. The hours of service credited under
this paragraph shall be credited (1) in the computation period
in which the absence begins if the crediting is necessary to
prevent a break in service in that period, or (2) in all other
cases, in the following computation period.
(15) "Normal Retirement Age" means the normal retirement age specified in
Section 1.06(a) of the Adoption Agreement.
(16) "Owner-Employee" means, if the Employer is a sole proprietorship,
the individual who is the sole proprietor, or if the Employer is a
partnership, a partner who owns more than 10 percent of either the
capital interest or the profits interest of the partnership.
3
<PAGE> 8
(17) "Participant" means any Employee who participates in the Plan in
accordance with Article 3 hereof.
(18) "Plan" means the plan established by the Employer as set forth
herein as a new plan or as an amendment to an existing plan, by executing
the Adoption Agreement, together with any and all amendments hereto.
(19) "Plan Year" means the 12-consecutive month period designated by the
Employer in Section 1.01(d).
(20) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of
1940 for which Fidelity Management and Research Company serves as
investment advisor.
(21) "Related Employer" means any employer other than the Employer named
in Section 1.02(a), if the Employer and such other employer are members
of a controlled group of corporations (as defined in Section 414(b) of
the Code) or an affiliated service group (as defined in Section 414(m)),
or are trades or businesses (whether or not incorporated) which are under
common control (as defined in Section 414(c)), or such other employer is
required to be aggregated with the Employer pursuant to regulations
issued under Section 414(o).
(22) "Self-Employed Individual" means an individual who has Earned Income
for the taxable year from the Employer or who would have had Earned
Income but for the fact that the trade or business had no net profits for
the taxable year.
(23) "Trust" means the trust created by the Employer.
(24) "Trust Agreement" means the agreement between the Employer and the
Trustee, as set forth in a separate agreement, under which assets are
held, administered, and managed subject to the claims of the Employer's
creditors in the event of the Employer's insolvency, until paid to Plan
Participants and their Beneficiaries as specified in the Plan.
(25) "Trust Fund" means the property held in the Trust by the Trustee.
(26) "Trustee" means the corporation or individuals appointed by the
Employer to administer the Trust in accordance with the Trust Agreement.
(27) "Years of Service for Vesting" means, with respect to any Employee,
the number of whole years of his periods of service with the Employer or
a Related Employer (the elapsed time method to compute vesting service),
subject to any exclusions elected by the Employer in Section 1.07(b). An
Employee will receive credit for the aggregate of all time period(s)
commencing with the Employee's Employment Commencement Date and ending on
the date a break in service begins, unless any such years are excluded by
Section 1.07(b). An Employee will also receive credit for any period of
severance of less than 12 consecutive months. Fractional periods of a
year will be expressed in terms of days.
4
<PAGE> 9
In the case of a Participant who has 5 consecutive 1-year breaks in
service, all years of service after such breaks in service will be
disregarded for the purpose of vesting the Employer-derived account
balance that accrued before such breaks, but both pre-break and
post-break service will count for the purposes of vesting the
Employer-derived account balance that accrues after such breaks. Both
accounts will share in the earnings and losses of the fund.
In the case of a Participant who does not have 5 consecutive 1-year
breaks in service, both the pre-break and post-break service will count
in vesting both the pre-break and post-break employer-derived account
balance.
A break in service is a period of severance of at least 12
consecutive months. Period of severance is a continuous period of time
during which the Employee is not employed by the Employer. Such period
begins on the date the Employee retires, quits or is discharged, or if
earlier, the 12 month anniversary of the date on which the Employee was
otherwise first absent from service.
In the case of an individual who is absent from work for maternity
or paternity reasons, the 12-consecutive month period beginning on the
first anniversary of the first date of such absence shall not constitute
a break in service. For purposes of this paragraph, an absence from work
for maternity or paternity reasons means an absence (1) by reason of the
pregnancy of the individual, (2) by reason of the birth of a child of the
individual, (3) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or (4)
for purposes of caring for such child for a period beginning immediately
following such birth or placement.
If the Plan maintained by the Employer is the plan of a predecessor
employer, an Employee's Years of Service for Vesting shall include years
of service with such predecessor employer. In any case in which the Plan
maintained by the Employer is not the plan maintained by a predecessor
employer, service for such predecessor shall be treated as service for
the Employer to the extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
ARTICLE 3. PARTICIPATION.
3.01. DATE OF PARTICIPATION. An eligible Employee (as set forth in Section
1.03(a)) will become a Participant in the Plan on the first Entry Date after
which he becomes an eligible Employee if he has filed an election pursuant to
Section 4.01. If the eligible Employee does not file an election pursuant to
Section 4.01 prior to his first Entry Date, then the eligible Employee will
become a Participant in the Plan as of the first day of a Plan Year for which he
has filed an election.
3.02. RESUMPTION OF PARTICIPATION FOLLOWING RE EMPLOYMENT. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will again become a Participant as of an Entry Date following the date on which
he completes an Hour of Service for the Employer following his re employment, if
he is an eligible Employee as defined in Section 1.03(a), and has filed an
election pursuant to Section 4.01.
5
<PAGE> 10
3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be an eligible Employee as defined in Section 1.03(a), the individual
shall continue to be a Participant until the entire amount of his benefit is
distributed; however, the individual shall not be entitled to make Deferral
Contributions or receive an allocation of Matching contributions during the
period that he is not an eligible Employee. Such Participant shall continue to
receive credit for service completed during the period for purposes of
determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes an eligible Employee, the individual shall
resume full participation in accordance with Section 3.01.
ARTICLE 4. CONTRIBUTIONS.
4.01. DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary
reduction agreement with the Employer to reduce his Compensation by a specified
percentage not exceeding the percentage set forth in Section 1.05(a) and equal
to a whole number multiple of one (1) percent. Such agreement shall become
effective on the first day of the period as set forth in the Participant's
election. The election will be effective to defer Compensation relating to all
services performed in a Plan Year subsequent to the filing of such an election.
An election once made will remain in effect until a new election is made. A new
election will be effective as of the first day of the following Plan Year and
will apply only to Compensation payable with respect to services rendered after
such date. Amounts credited to a Participant's account prior to the effective
date of any new election will not be affected and will be paid in accordance
with that prior election. The Employer shall credit an amount to the account
maintained on behalf of the Participant corresponding to the amount of said
reduction. Under no circumstances may a salary reduction agreement be adopted
retroactively. A Participant may not revoke a salary reduction agreement for a
Plan year during that year.
4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in Section 1.05(b),
the Employer shall make a Matching Contribution to be credited to the account
maintained on behalf of each Participant who had Deferral Contributions made on
his behalf during the year and who meets the requirement, if any, of Section
1.05(b)(3). The amount of the Matching Contribution shall be determined in
accordance with Section 1.05(b).
4.03. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will from time to time
make a transfer of assets to the Trustee for each Plan Year. The Employer shall
provide the Trustee with information on the amount to be credited to the
separate account of each Participant maintained under the Trust.
ARTICLE 5. PARTICIPANTS' ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Matching and Deferral
Contributions credited to the Account on behalf of the Participant and earnings,
expenses, gains and losses credited thereto, and deemed investments made with
amounts in the Participant's Account. The Administrator will establish and
maintain such other accounts and records as it decides in its discretion to be
reasonably required or appropriate in order to discharge its duties under the
Plan. Participants will be furnished statements of their Account values at least
once each Plan Year.
6
<PAGE> 11
ARTICLE 6. INVESTMENT OF CONTRIBUTIONS.
6.01. MANNER OF INVESTMENT. All amounts credited to the Accounts of Participants
shall be treated as though invested and reinvested only in eligible investments
selected by the Employer in Section 1.11(b).
6.02. INVESTMENT DECISIONS. Investments in which the Accounts of Participants
shall be treated as invested and reinvested shall be directed by the Employer or
by each Participant, or both, in accordance with the Employer's election in
Section 1.11(a).
(a) All dividends, interest, gains and distributions of any nature
earned in respect of Fund Shares in which the Account is treated as
investing shall be credited to the Account as though reinvested in
additional shares of that Fidelity Fund.
(b) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
ARTICLE 7. RIGHT TO BENEFITS.
7.01. NORMAL OR EARLY RETIREMENT. If provided by the Employer in Section
1.07(d), each Participant who attains his Normal Retirement Age or Early
Retirement Age will have a nonforfeitable interest in his Account in accordance
with the vesting schedule elected in Section 1.07. If a Participant retires on
or after attainment of Normal or Early Retirement Age, such retirement is
referred to as a normal retirement. On or after his normal retirement, the
balance of the Participant's Account, plus any amounts thereafter credited to
his Account, subject to the provisions of Section 7.06, will be distributed to
him in accordance with Article 8.
If provided by the Employer in Section 1.06, a Participant who separates
from service before satisfying the age requirements for early retirement, but
has satisfied the service requirement will be entitled to the distribution of
his Account, subject to the provisions of Section 7.06, in accordance with
Article 8, upon satisfaction of such age requirement.
7.02. DEATH. If a Participant dies before the distribution of his Account has
commenced, or before such distribution has been completed, his Account shall
become vested in accordance with the vesting schedule elected in Section 1.07
and his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.06. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change
any prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form.
7
<PAGE> 12
A copy of the death notice or other sufficient documentation must be
filed with and approved by the Administrator. If upon the death of the
Participant there is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account, such amount will be
paid to his surviving spouse or, if none, to his estate (such spouse or estate
shall be deemed to be the Beneficiary for purposes of the Plan). If a
Beneficiary dies after benefits to such Beneficiary have commenced, but before
they have been completed, and, in the opinion of the Administrator, no person
has been designated to receive such remaining benefits, then such benefits shall
be paid to the deceased Beneficiary's estate.
7.03. OTHER TERMINATION OF EMPLOYMENT. If provided by the Employer in Section
1.06, if a Participant terminates his employment for any reason other than death
or normal retirement, he will be entitled to a termination benefit equal to (i)
the vested percentage(s) of the value of the Matching Contributions to his
Account, as adjusted for income, expense, gain, or loss, such percentage(s)
determined in accordance with the vesting schedule(s) selected by the Employer
in Section 1.07, and (ii) the value of the Deferral Contributions to his Account
as adjusted for income, expense, gain or loss. The amount payable under this
Section 7.03 will be subject to the provisions of Section 7.06 and will be
distributed in accordance with Article 8.
7.04. SEPARATE ACCOUNT. If a distribution from a Participant's Account has been
made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Matching Contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.05, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.05; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.05 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.
7.05. FORFEITURES. If a Participant terminates his employment, any portion of
his Account (including any amounts credited after his termination of employment)
not payable to him under Section 7.03 will be forfeited by him. For purposes of
this paragraph, if the value of a Participant's vested account balance is zero,
the Participant shall be deemed to have received a distribution of his vested
interest immediately following termination of employment. Such forfeitures will
be applied to reduce the contributions of the Employer under the Plan (or
administrative expenses of the Plan).
8
<PAGE> 13
7.06. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount remaining in the Account
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
treated as invested and any expenses properly charged under the Plan and Trust
to such amounts.
7.07. HARDSHIP WITHDRAWALS. Subject to the provisions of Article 8, a
Participant shall not be permitted to withdraw his Account (and earnings
thereon) prior to retirement or termination of employment, except if permitted
under Section 1.09, a Participant may apply to the Administrator to withdraw
some or all of his Account if such withdrawal is made on account of a hardship
as determined by the Employer.
ARTICLE 8. DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE.
8.01. DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES.
(a) Distributions under the Plan to a Participant or to the
Beneficiary of the Participant shall be made in a lump sum in cash or, if
elected by the Employer in Section 1.10 and specified in the
Participant's deferral election, under a systematic withdrawal plan
(installment(s))not exceeding 10 years upon retirement, death or other
termination of employment.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash, over
a period certain which does not extend 10 years. The period certain
specified in a Participant's first deferral election specifying
distribution under a systematic withdrawal plan shall apply to all
subsequent elections of distributions under a systematic withdrawal plan
made by the Participant.
8.02. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
the method of distribution of benefits to himself and the method of distribution
to his Beneficiary. Such determination will be made at the time the Participant
makes a deferral election. If the Participant does not determine the method of
distribution to him or his Beneficiary, the method shall be a lump sum.
8.03. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form, amount and
frequency of benefits that such Participant or Beneficiary shall receive.
8.04. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made later than the date specified by the Participant in his salary reduction
agreement.
9
<PAGE> 14
ARTICLE 9. AMENDMENT AND TERMINATION.
9.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority to amend the
Plan by filing with the Trustee an amended Adoption Agreement, executed by the
Employer only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on the
effective date of such amended Adoption Agreement. Any such change
notwithstanding, no Participant's Account shall be reduced by such change below
the amount to which the Participant would have been entitled if he had
voluntarily left the employ of the Employer immediately prior to the date of the
change. The Employer may from time to time make any amendment to the Plan that
may be necessary to satisfy the Code or ERISA. The Employer's board of directors
or other individual specified in the resolution adopting this Plan shall act on
behalf of the Employer for purposes of this Section 9.01.
9.02 RETROACTIVE AMENDMENTS. An amendment made by the Employer in accordance
with Section 9.01 may be made effective on a date prior to the first day of the
Plan Year in which it is adopted if such amendment is necessary or appropriate
to enable the Plan and Trust to satisfy the applicable requirements of the Code
or ERISA or to conform the Plan to any change in federal law or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 9.01.
9.03. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
9.04. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan,
no further Deferral Contributions or Matching Contributions shall be made under
the Plan, but Accounts of Participants maintained under the Plan at the time of
termination shall continue to be governed by the terms of the Plan until paid
out in accordance with the terms of the Plan.
ARTICLE 10. MISCELLANEOUS.
10.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
10 02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby.
10.03. NONALIENABILITY OF BENEFITS. The benefits provided hereunder will not be
subject to alienation, assignment, garnishment, attachment, execution or levy of
any kind, either voluntarily or involuntarily, and any attempt to cause such
benefits to be so subjected will not be recognized, except to such extent as may
be required by law.
10
<PAGE> 15
10 04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under State law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
10.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code or ERISA and any regulations
issued or forms adopted thereunder.
10.06. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
(a) If to the Employer or Administrator, to it at the address set forth
in the Adoption Agreement, to the attention of the person specified to
receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Trust
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
ARTICLE 11. PLAN ADMINISTRATION.
11.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the applicable requirements of ERISA. The
Administrator's powers and responsibilities include, but are not limited to, the
following:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to be
final and conclusive on all persons claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan;
11
<PAGE> 16
(d) To administer the claims and review procedures specified in Section
11.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be
paid;
(g) To authorize the payment of benefits;
(h) To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as may
be required to assist in administering the Plan;
(j) By written instrument, to allocate and delegate its responsibilities,
including the formation of an Administrative Committee to administer the
Plan;
11.02. NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the administration
of the Plan, any discretionary action by the Administrator is required, the
Administrator shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.
11.03. CLAIMS AND REVIEW PROCEDURES.
(a) Claims Procedure. If any person believes he is being denied any
rights or benefits under the Plan, such person may file a claim in
writing with the Administrator. If any such claim is wholly or partially
denied, the Administrator will notify such person of its decision in
writing. Such notification will contain (i) specific reasons for the
denial, (ii) specific reference to pertinent Plan provisions, (iii) a
description of any additional material or information necessary for such
person to perfect such claim and an explanation of why such material or
information is necessary, and (iv) information as to the steps to be
taken if the person wishes to submit a request for review. Such
notification will be given within 90 days after the claim is received by
the Administrator (or within 180 days, if special circumstances require
an extension of time for processing the claim, and if written notice of
such extension and circumstances is given to such person within the
initial 90-day period). If such notification is not given within such
period, the claim will be considered denied as of the last day of such
period and such person may request a review of his claim.
(b) Review Procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60
days after the date on which such denial is considered to have occurred),
such person (or his duly authorized representative) may (i) file a
written request with the Administrator for a review of his denied claim
and of pertinent documents and (ii) submit written issues and comments to
the Administrator. The Administrator will notify such person of its
decision in writing. Such notification will be written in a manner
calculated to be understood by such person and will contain specific
reasons for the decision as well as specific references to pertinent Plan
provisions. The decision on review will be made within 60 days after the
request for review is received by the Administrator (or within 120 days,
if special circumstances require an extension of time for processing the
request, such as an
12
<PAGE> 17
election by the Administrator to hold a hearing, and if written notice of
such extension and circumstances is given to such person within the
initial 60-day period). If the decision on review is not made within such
period, the claim will be considered denied.
11.04. COSTS OF ADMINISTRATION. Unless some or all costs and expenses are paid
by the Employer, all reasonable costs and expenses (including legal, accounting,
and employee communication fees) incurred by the Administrator and the Trustee
in administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.05, then from the remaining Trust Fund. All such
costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a prorata basis or in such other reasonable manner as may be
directed by the Employer.
13
<PAGE> 18
EXHIBIT 10.41b
THE CORPORATEPLAN FOR RETIREMENT SELECT PLAN
AMENDMENT TO BASIC PLAN DOCUMENT
This Amendment to the Basic Plan Document of the USEC Inc.
CORPORATEplan for Retirement Select Plan (the "Plan") is to effect certain
modifications to the Plan as provided hereunder:
1. Section 2.01(a)(6) is hereby amended to read in its entirety:
(6) "Compensation" shall mean wages as defined in Section 3401(a) of
the Code and all other payments of compensation to an Employee by the Employer
(in the course of the employer's trade or business) for which the Employer is
required to furnish the Employee a written statement under Section 6041(d) and
6051(a)(3) of the code, excluding reimbursements or other expense allowances,
fringe benefits (cash and non-cash), moving expenses and welfare benefits, but
including (A) amounts deferred by an Employee under the terms of this Plan, the
Qualified Plan and any other nonqualified deferred compensation plans maintained
by the Employer, and (B) amounts included in an Employee's taxable income upon
the lapse of restrictions on shares of restricted common stock of the Employer
awarded under the USEC, Inc. Annual Incentive Program and governed by the USEC,
Inc. 1999 Equity Incentive Plan.
2. Section 2.01(a) is hereby amended to add the following definitions:
(28) "Disabled/Disability" shall have the same meaning as "Disabled"
and "Disability" as provided in the Employer's Long-Term Disability Plan.
(29) "Qualified Plan" shall mean U.S. Enrichment Corporation's 401(k)
plan as in effect on the date of the adoption of this Plan and as amended from
time to time, titled The USEC Inc. Plan.
3 Section 4.03 shall be amended to read in its entirety:
4.03. Time of Making Employer Contributions. The Employer shall make a
transfer of assets to the Trustee on each pay period in accordance with Section
1.05(b). The Employer shall provide the Trustee with information on the amount
to be credited to the separate account of each Participant maintained under the
Trust.
4 Section 7.02 shall be amended to read in its entirety:
7.02. Death or Disability. If a Participant dies or is Disabled before
the distribution of his Account has commenced, or before such distribution has
been completed, his Account shall become fully vested in accordance with the
vesting schedule elected in Section 1.07 and, in the event of Participant's
death, his designated Beneficiary or Beneficiaries, or, in the event of
Participant's Disability, the Participant,
<PAGE> 19
will be entitled to receive the balance or remaining balance of his Account,
plus any amounts thereafter credited to his Account, subject to the provisions
of Section 7.06. Distribution to the Disabled Participant or to the Beneficiary
or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change
any prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form.
A copy of the death notice or other sufficient documentation must be
filed with and approved by the Administrator. If upon the death of the
Participant there is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account, such amount will be
paid to his surviving spouse or, if none, to his estate (such spouse or estate
shall be deemed to be the Beneficiary for purposes of the Plan). If a
Beneficiary dies after benefits to such Beneficiary have commenced, but before
they have been completed, and, in the opinion of the Administrator, no person
has been designated to receive such remaining benefits, then such benefits shall
be paid to the deceased Beneficiary's estate.
5. Section 7.07 shall be amended to include the following:
For purposes of this Plan, a hardship shall mean an unanticipated
emergency caused by an event beyond the control of the Participant that would
result in sever financial hardship to the Participant resulting from (i) a
sudden and unexpected illness or accident of the Participant or a dependent of
the Participant, (ii) a loss of the Participant's property due to casualty, or
(iii) such other extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, all as determined in the
sole discretion of the Employer.
6. Section 11.03 shall be amended to read in its entirely:
11.03. Claims and Review Procedure.
(a) Claims Procedure. Benefits shall be paid in accordance with the
provisions of this Plan. The Participant, or a designated recipient or any other
person claiming through the Participant (hereinafter referred to as the
"Claimant") shall make a written request for benefits under this Plan. This
written claim shall be mailed or delivered to the Administrator. Such claim
shall be reviewed by the Administrator or a delegate.
(b) Denied Claim. If the claim is denied, either wholly or partially,
notice of the decision shall be mailed to the Claimant within a reasonable time
period. This time period shall not exceed more than 90 days after the receipt of
the claim by the Administrator.
<PAGE> 20
(c) Written Notice. The Plan Administrator shall provide such written
notice to every Claimant who is denied a claim for benefits under this Plan. The
notice shall set forth the following information:
(a) the specific reasons for the denial;
(b) the specific reference to pertinent plan provisions on which
the denial is based;
(c) a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) appropriate information and explanation of the claims
procedure under this Plan to permit the Claimant to submit his claim for review.
(d) Review Procedure. The claims procedure under the Plan shall allow the
Claimant a reasonable opportunity to appeal a denied claim and to get a full and
fair review of that decision from the Committee.
(i) The Claimant shall exercise his right of appeal by
submitting a written request for a review of the denied claim to the
Administrator. This written request for review must be submitted to the
Administrator within sixty (60) days after receipt by the Claimant of the
written notice of denial.
(ii) The Claimant shall have the following rights under this
appeal procedure:
(1) to request a review by the Committee upon written
application to the Administrator;
(2) to review pertinent documents with regard to the
employee benefit plan created under this Plan;
(3) the right to submit issues and comments in writing;
(4) to request an extension of time to make a written
submission of issues and comments; and
(5) to request that a hearing be held to consider
Claimant's appeal.
(e) COMMITTEE REVIEW. The Committee shall promptly provide the decision on
the review of the denied claim:
<PAGE> 21
(i) within forty-five (45) days after the receipt of the request for
review if no hearing is held; or
(ii) within ninety (90) days after the receipt of the request for review,
if an extension of time is necessary in order to hold a hearing.
(1) If an extension of time is necessary in order to hold a hearing,
the Committee shall give the Claimant written notice of the extension of time
and of the hearing. This notice shall be given prior to any extension.
(2) The written notice of extension shall indicate that an extension
of time will occur in order to hold a hearing on Claimant's appeal. The notice
shall also specify the place, date and time of that hearing and the Claimant's
opportunity to participate in the hearing. It may also include any other
information the Claimant believes may be important or useful to the Claimant in
connection with the appeal.
(f) Hearing. The decision to hold a hearing to consider the Claimant's
appeal of the denied claim shall be within the sole discretion of the Committee,
whether or not the Claimant requests such a hearing.
(g) Written Decision.The Committee's decision on review shall be made in
writing and provided to the Claimant within the specified time periods. This
written decision on review shall contain the following information:
(i) the decision(s);
(ii) the reasons for the decision(s); and
(iii)specific references to the provisions of the Plan on which the
decision(s) is/are based.
All of this information shall be written in a manner calculated to be understood
by the Claimant.
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this
27th day of October, 1999.
Employer USEC Inc.
By /s/ Henry Z Shelton, Jr.
-----------------------------------
Title Senior Vice President & Chief Financial Officer
-----------------------------------------------
<PAGE> 22
EXHIBIT 10.41c
THE CORPORATEPLAN FOR RETIREMENT SELECT PLAN
SECOND AMENDMENT TO BASIC PLAN DOCUMENT
(401(K) RESTORATION PLAN)
This Second Amendment to the Basic Plan Document of the USEC Inc.
CORPORATEplan for Retirement Select Plan (401(k) Restoration Plan) (the "Plan")
is to effect certain modifications to the Plan as provided hereunder:
1. Section 4.04 is hereby added to the Plan:
4.04. Discretionary Contributions. Employer may elect to contribute any
amount to the Plan to any Participant's Account before the end of each Plan
year. Such Discretionary Contributions shall be subject to the same terms and
conditions as the Matching Contributions provided under Section 4.02 of the
Plan.
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this
22nd day of December, 1999.
Employer
USEC Inc.
By /s/ Henry Z Shelton, Jr.
------------------------------------------------------
Title: Senior Vice President and Chief Financial Officer
---------------------------------------------------
<PAGE> 23
EXHIBIT 10.41d
CPR SELECT
THE CORPORATEPLAN FOR RETIREMENT SELECT PLAN
ADOPTION AGREEMENT
IMPORTANT NOTE
THIS DOCUMENT IS NOT AN IRS APPROVED PROTOTYPE PLAN. AN ADOPTING EMPLOYER MAY
NOT RELY SOLELY ON THIS PLAN TO ENSURE THAT THE PLAN IS "UNFUNDED AND MAINTAINED
PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION TO A SELECT GROUP
OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES" AND EXEMPT FROM PARTS 2 THROUGH 4
OF TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 WITH RESPECT
TO THE EMPLOYER'S PARTICULAR SITUATION. FIDELITY MANAGEMENT TRUST COMPANY, ITS
AFFILIATES AND EMPLOYEES MAY NOT PROVIDE YOU WITH LEGAL ADVICE IN CONNECTION
WITH THE EXECUTION OF THIS DOCUMENT. THIS DOCUMENT SHOULD BE REVIEWED BY YOUR
ATTORNEY AND/OR ACCOUNTANT PRIOR TO EXECUTION.
<PAGE> 24
ADOPTION AGREEMENT
ARTICLE 1
1.01 PLAN INFORMATION
(a) NAME OF PLAN:
This is the USEC Inc. 401(k) Restoration Plan
-------------------------------------------------
Plan (the "Plan").
--------------------------------------------
(b) NAME OF PLAN ADMINISTRATOR, IF NOT THE EMPLOYER:
Vice President, Human Resources and Administration
Address: USEC Inc.
6903 Rockledge Drive
Bethesda, Maryland 20817
Phone Number: 301-564-3306
The Plan Administrator is the agent for service of legal
process for the Plan.
(c) THREE DIGIT PLAN NUMBER:
---------------------------
(d) PLAN YEAR END (month/day):December 31
(e) PLAN STATUS (check one):
(1) X Effective Date of new Plan: January 1, 2000.
(2) [ ] Amendment Effective Date:
The original effective date of the Plan:
-----------
1
<PAGE> 25
1.02 EMPLOYER
(a) THE EMPLOYER IS: USEC Inc.
Address: 6903 Rockledge Drive
Bethesda, Maryland 20817
Contact's Name: Richard Rowland
Telephone Number: (301) 564-3328
(1) Employer's Tax Identification Number: 52-2107911
(2) Business form of Employer (check one):
(A) X Corporation
(B) [ ] Sole proprietor or partnership
(C) [ ] Subchapter S Corporation
(3) Employer's fiscal year end: June 30
(b) THE TERM "EMPLOYER" INCLUDES THE FOLLOWING RELATED EMPLOYER(s)
(as defined in Section 2.01(a)(21)):
Any subsidiary of affiliated companies that adopt
the Plan, with the "Employer's approval.
-----------------------------------------------
-----------------------------------------------
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2
<PAGE> 26
1.03 COVERAGE
(a) ONLY THOSE EMPLOYEES LISTED IN ATTACHMENT A WILL BE ELIGIBLE
TO PARTICIPATE IN THE PLAN.
(b) THE ENTRY DATE(s) SHALL BE (check one):
(1) [ ] the first day of each Plan Year.
(2) [ ] the first day of each Plan Year and the date
six months later.
(3) X the first day of each Plan Year and the first
day of the fourth, seventh, and tenth months.
(4) [ ] the first day of each month.
1.04 COMPENSATION
FOR PURPOSES OF DETERMINING CONTRIBUTIONS UNDER THE PLAN, COMPENSATION
SHALL BE AS DEFINED IN SECTION 2.01(A)(6), BUT EXCLUDING (check the
appropriate box(es)):
(a) [ ] Overtime Pay.
(b) [ ] Bonuses.
(c) [ ] Commissions.
(d) [ ] The value of a qualified or a non-qualified stock option
granted to an Employee by the Employer to the extent such
value is includable in the Employee's taxable income.
(e) X No exclusions.
1.05 CONTRIBUTIONS
(a) DEFERRAL CONTRIBUTIONS THE EMPLOYER SHALL MAKE A
DEFERRAL CONTRIBUTION IN ACCORDANCE WITH SECTION 4.01 ON
BEHALF OF EACH PARTICIPANT WHO HAS AN EXECUTED SALARY
REDUCTION AGREEMENT IN EFFECT WITH THE EMPLOYER FOR THE PLAN
YEAR (OR PORTION OF THE PLAN YEAR) IN QUESTION, NOT TO EXCEED
_________% OF COMPENSATION FOR THAT PLAN YEAR.
3
<PAGE> 27
(b) [ ] MATCHING CONTRIBUTIONS
(1) THE EMPLOYER SHALL MAKE A MATCHING CONTRIBUTION ON
BEHALF OF EACH PARTICIPANT IN AN AMOUNT EQUAL TO THE
FOLLOWING PERCENTAGE OF A PARTICIPANT'S DEFERRAL
CONTRIBUTIONS DURING THE PLAN YEAR (check one):
(A) [ ] 50%
(B) [ ] 100%
(C) [ ] ___%
(D) [ ] (Tiered Match)_________ % of the first
_______ % of the Participant's
Compensation contributed to the Plan,
___________ % of the next ________ %
of the Participant's Compensation
contributed to the Plan,
________ % of the next _________ % of
the Participant's Compensation
contributed to the Plan.
(E) [ ] The percentage declared for the year,
if any, by a Board of Directors' resolution.
(F) X Other: With respect to amounts contributed
under Section 1.05(a) above, the Employer
shall make a Matching Contribution on behalf
of each Participant equal to the excess, if
any, of ( i) over (ii) each pay period, when
(i) and (ii) have the following values:
(i) The amount equal to the matching
contribution the Employer would make to the
Employer's Qualified Plan based on the
Participant's Compensation for such pay
period if the participant made a pre-tax
contribution to the Employer's Qualified
Plan in the amount of (1) the contributions
under Section 1.05(a) above, plus (2) the
actual pre-tax contributions made by the
Participant to the Employer's Qualified Plan
for that pay period.
(ii) The amount equal to the
Employer's actual matching contribution to
the Employer's Qualified Plan for such pay
period.
(2) [ ] MATCHING CONTRIBUTION LIMITS (check the
appropriate box(es)):
4
<PAGE> 28
(A) [ ] Deferral Contributions in excess of
___________% of the Participant's
Compensation for the period in question
shall not be considered for Matching
Contributions.
Note: If the Employer elects a percentage
limit in (A) above and requests the
Trustee to account separately for
matched and unmatched Deferral
Contributions, the Matching
Contributions allocated to each
Participant must be computed, and the
percentage limit applied, based upon
each period.
(B) [ ] Matching Contributions for each
Participant for each Plan Year shall be
limited to $___________.
(3) ELIGIBILITY REQUIREMENT(S) FOR MATCHING CONTRIBUTIONS
A Participant who makes Deferral Contributions during
the Plan Year under Section 1.05(a) shall be entitled
to Matching Contributions for that Plan Year if the
Participant satisfies the following requirement(s)
(Check the appropriate box(es). Options (B) and (C)
may not be elected together):
(A) [ ] Is employed by the Employer on the last day
of the Plan Year.
(B) [ ] Earns at least 500 Hours of Service during
the Plan Year.
(C) [ ] Earns at least 1,000 Hours of Service during
the Plan Year.
(D) X No requirements.
NOTE: If option (A), (B) or (C) above is
selected then Matching Contributions can
only be MADE by the Employer AFTER the
Plan Year ends. Any Matching Contribution
made before Plan Year end shall not be
subject to the eligibility requirements of
this Section 1.05(b)(3)).
1.06 DISTRIBUTION DATES
A Participant may elect to receive a distribution or commence
distributions from his Account pursuant to Section 8.02 upon
the following date(s) (check the appropriate box(es). If
Option (c) is elected, then options (a) and (b) may not be
elected):
5
<PAGE> 29
(a) [ ] ATTAINMENT OF NORMAL RETIREMENT AGE. NORMAL
RETIREMENT AGE UNDER THE PLAN IS (check one):
(1) [ ] age 65.
(2) [ ] age ____ (specify from 55
through 64).
(3) [ ] later of the age ___ (can not
exceed 65) or the fifth
anniversary of the Participant's
Commencement Date.
(b) [ ] ATTAINMENT OF EARLY RETIREMENT AGE. EARLY RETIREMENT
AGE IS THE FIRST DAY OF THE MONTH AFTER THE
PARTICIPANT ATTAINS AGE ____ (SPECIFY 55 OR
GREATER) AND COMPLETES _______ YEARS OF SERVICE FOR
VESTING.
(c) X TERMINATION OF EMPLOYMENT WITH THE EMPLOYER.
1.07 VESTING SCHEDULE
(a) THE PARTICIPANT'S VESTED PERCENTAGE IN MATCHING CONTRIBUTIONS
ELECTED IN SECTION 1.05(b) SHALL BE BASED UPON THE SCHEDULE(s)
SELECTED BELOW.
(1) [ ] N/A - No Matching Contributions
(2) [ ] 100% Vesting immediately
(3) [ ] 3 year cliff (see C below)
(4) [ ] 5 year cliff (see D below)
(5) [ ] 6 year graduated (see E below)
(6) [ ] 7 year graduated (see F below)
(7) X G below
(8) [ ] Other (Attachment "B")
<TABLE>
<CAPTION>
YEARS OF VESTING SCHEDULE
SERVICE FOR
VESTING C D E F G
------- - - - - -
<S> <C> <C> <C> <C> <C> <C>
0 0% 0% 0% 0% _0%__
1 0% 0% 0% 0% _0%__
2 0% 0% 20% 0% _50%__
3 100% 0% 40% 20% _75%__
4 100% 0% 60% 40% 100%___
5 100% 100% 80% 60% 100%___
6 100% 100% 100% 80% 100%
7 100% 100% 100% 100% 100%
</TABLE>
6
<PAGE> 30
(b) [ ] YEARS OF SERVICE FOR VESTING SHALL EXCLUDE (check one):
(1) [ ] for new plans, service prior to the Effective
Date as defined in Section 1.01(e)(1).
(2) [ ] for existing plans converting from another plan
document, service prior to the original Effective
Date as defined in Section 1.01(e)(2).
(c) [ ] A PARTICIPANT WILL FORFEIT HIS MATCHING CONTRIBUTIONS
UPON THE OCCURRENCE OF THE FOLLOWING EVENT (s):
______N/A_______________________________________
---------------------------------------------
---------------------------------------------
(d) A PARTICIPANT WILL BE 100% VESTED IN HIS MATCHING
CONTRIBUTIONS UPON (CHECK THE APPROPRIATE BOX(ES), IF ANY):
(1) [ ] Normal Retirement Age (as defined in Section
1.06(a)).
(2) [ ] Early Retirement Age (as defined in Section
1.06(b)).
(3) X Death
1.08 PREDECESSOR EMPLOYER SERVICE
[ ] SERVICE FOR PURPOSES OF VESTING IN SECTION 1.07(a) SHALL INCLUDE
SERVICE WITH THE FOLLOWING EMPLOYER(s):
(a)
-------------------------------------------------------------
(b)
-------------------------------------------------------------
(c)
-------------------------------------------------------------
(d)
-------------------------------------------------------------
1.09 HARDSHIP WITHDRAWALS
PARTICIPANT WITHDRAWALS FOR HARDSHIP PRIOR TO TERMINATION OF EMPLOYMENT
(check one):
7
<PAGE> 31
(a) X WILL BE ALLOWED IN ACCORDANCE WITH SECTION 7.07, SUBJECT
TO A $_1,000________ MINIMUM AMOUNT. (MUST BE AT LEAST
$1,000)
(b) [ ] WILL NOT BE ALLOWED.
1.10 DISTRIBUTIONS
SUBJECT TO ARTICLES 7 AND 8, DISTRIBUTIONS UNDER THE PLAN WILL BE PAID
(check the appropriate box(es)):
(a) X AS A LUMP SUM.
(b) [ ] UNDER A SYSTEMATIC WITHDRAWAL PLAN (INSTALLMENTS) NOT TO EXCEED
10 YEARS.
1.11 INVESTMENT DECISIONS
(a) INVESTMENT DIRECTIONS
Investments in which the Accounts of Participants shall be
treated as invested and reinvested shall be directed (check
one):
(1) [ ] by the Employer among the options listed in (b)
below.
(2) X by each Participant among the options listed in (b)
below.
(3) [ ] by each Participant with respect to Deferral
Contributions and by the Employer with respect to
Employer Matching Contributions. The Employer must
direct the Employer Matching Contributions among the
same investment options made available for
Participant directed sources listed in (b) below.
(b) PLAN INVESTMENT OPTIONS
Participant Accounts will be treated as invested among the
Fidelity Funds listed below pursuant to Participant and/or
Employer directions.
<TABLE>
<CAPTION>
Fund Name Fund Number
--------- -----------
<S> <C> <C>
(1) Fidelity Money Market Portfolio 0630
(2) Fidelity Intermediate Bond Fund 0032
(3) Fidelity Asset Manager 0314
(4) Fidelity Contrafund 0022
</TABLE>
8
<PAGE> 32
<TABLE>
<S> <C> <C>
(5) Fidelity Diversified International Fund 0325
(6) Spartan US Equity Index Fund 0650
(7) Fidelity Equity-Income II Fund 0319
(8) Fidelity Freedom Income Fund (SM) 0369
(9) Fidelity Freedom 2000 Fund (SM) 0370
(10) Fidelity Freedom 2010 Fund (SM) 0371
(11) Fidelity Freedom 2020 Fund (SM) 0372
(12) Fidelity Freedom 2030 Fund (SM) 0373
(13) Aggressive Growth Fund 0324
(14) USEC Inc. Company Stock TCJQ*
</TABLE>
NOTE: An additional annual recordkeeping fee will be charged for each
fund in excess of ten funds.
* To be managed by USEC Inc. or its designee.
9
<PAGE> 33
NOTE: The method and frequency for change of investments
will be determined under the rules applicable to the
selected funds. Information will be provided
regarding expenses, if any, for changes in investment
options.
1.12 RELIANCE ON PLAN
An adopting Employer may not rely solely on this Plan to ensure that
the Plan is "unfunded and maintained primarily for the purpose of
providing deferred compensation for a select group of management or
highly compensated employees" and exempt from Parts 2 through 4 of
Title I of the Employee Retirement Income Security Act of 1974 with
respect to the Employer's particular situation. This Agreement must be
reviewed by your attorney and/or accountant before it is executed.
This Adoption Agreement may be used only in conjunction with the
CORPORATEplan for Retirement Select Basic Plan Document.
10
<PAGE> 34
EXECUTION PAGE
(FIDELITY'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this 22nd day of October, 1999.
Employer USEC Inc.
By /s/ Henry Z Shelton, Jr.
------------------------
Title Senior Vice President & Chief Financial Officer
-----------------------------------------------
Employer
----------------------------------------------
By
----------------------------------------------
Title
----------------------------------------------
11
<PAGE> 35
EXECUTION PAGE
(EMPLOYER'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this 22nd day of October, 1999.
Employer USEC Inc.
By /s/ Henry Z Shelton, Jr.
------------------------
Title Senior Vice President & Chief Financial Officer
-----------------------------------------------
Employer
----------------------------------------------
By
----------------------------------------------
Title
----------------------------------------------
12
<PAGE> 36
ATTACHMENT A
PURSUANT TO SECTION 1.03(a), THE FOLLOWING ARE THE EMPLOYEES WHO ARE ELIGIBLE TO
PARTICIPATE IN THE PLAN:
The executive officer group as identified by the Board of Directors, including:
William H. Timbers, Jr., President and Chief Executive Officer
James H. Miller, Executive Vice President
Jeffry E. Sterba, Executive Vice President
Robert J. Moore, Senior Vice President and General Counsel
Henry Z Shelton, Jr., Senior Vice President and Chief Financial Officer
James N. Adkins, Jr., Vice President
J. William Bennett, Vice President
William J. Bruttaniti, Vice President and Chief Information Officer
Gary Ellsworth, Vice President
Richard O. Kingdon, Vice President
Philip J. Sewell, Vice President
Robert Van Namen, Vice President
Charles B. Yulish, Vice President
TBD, Vice President, Human Resources
EMPLOYER USEC Inc.
BY /s/ Henry Z Shelton, Jr.
------------------------
TITLE Senior Vice President & Chief Financial Officer
DATE October 22, 1999
NOTE: The Employer must revise Attachment A to add employees as they become
eligible or delete employees who are no longer eligible.
13
<PAGE> 37
EXHIBIT 10.41e
CPR SELECT
THE CORPORATEPLAN FOR RETIREMENT
SELECT PLAN
AMENDMENT TO ADOPTION AGREEMENT
This Amendment to the Adoption Agreement (the "Adoption
Agreement") for the USEC Inc. (the "Employer") CorporatePlan for Retirement
Select Plan is to effect certain modifications to the Adoption Agreement as
provided hereunder:
1. Section 1.05(a) is hereby amended to read in its entirety:
(a) Deferred Contributions. The Employer shall make a Deferral
Contribution each pay period in accordance with Section 4.01 on behalf of each
Participant who has an executed salary reduction agreement in effect with the
Employer for the Plan Year (or portion of the Plan Year) in question, of any
whole percentage from 1% to 15% of Compensation for that Plan Year, less amounts
actually deferred before taxes in the applicable pay period to the Employer's
Qualified Plan.
2. Section 1.07(b) is hereby amended to add an election (3), which
election shall be the operative selection of the Employer for the Adoption
Agreement, so that years of Service for Vesting shall exclude only:
(3) X Years of service prior to January 1, 1994.
3. Section 1.07(d) is hereby amended to add an election (4), which
election shall be, in addition to election (3), one of the operation selections
of the Employer for the Adoption Agreement, so that a participant will be 100%
vested in his Matching Contribution upon:
(3) Death
(4) Disability (as defined in Section 2.01(a)(28).
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this
22nd day of October, 1999.
Employer USEC Inc.
By /s/ Henry Z Shelton, Jr.
-----------------------------------------------
Title Senior Vice President & Chief Financial Officer
<PAGE> 38
EXHIBIT 10.41f
THE CORPORATEPLAN FOR RETIREMENT SELECT PLAN
SECOND AMENDMENT TO ADOPTION AGREEMENT
(401(K) RESTORATION PLAN)
This Second Amendment to the Adoption Agreement of the USEC Inc.
CORPORATEplan for Retirement Select Plan (401(k) Restoration Plan)(the "Plan")
is to effect certain modifications to the Adoption Agreement as provided
hereunder:
1. Section 1.05(a) as previously amended pursuant to the Amendment to Adoption
Agreement dated January 1, 2000 is hereby superseded and amended to read in its
entirety:
(a) Deferred Contributions. In accordance with Section 4.01, the
Employer shall make a Deferral Contribution each pay period of any whole
percentage from 1% to 15% of Compensation for that Plan Year, less amounts
actually deferred before taxes in the applicable pay period to the Employer's
Qualified Plan, on behalf of each Participant who (1) has an executed salary
reduction agreement in effect with the Employer for the Plan Year (or portion of
the Plan Year) in question, and (2) has made the maximum elective contributions
permitted under the terms of the Employer's Qualified Plan.
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this
22nd day of December, 1999.
Employer USEC Inc.
By /s/Henry Z Shelton, Jr.
---------------------------------
Title_Senior Vice President and Chief
Financial Officer
<PAGE> 1
Exhibit 10.42
USEC INC
SYNDICATED REVOLVING PROMISSORY NOTE
$100,000,000 November 15, 1999
Los Angeles, California
1. FOR VALUE RECEIVED, USEC INC., a Delaware corporation ("Borrower")
hereby promises to pay to the order of each of the undersigned lenders (each a
"Lender" and collectively, the "Lenders") on the dates specified herein, in
lawful money of the United States, the amount of its Note Commitment, or such
lesser amount as shall equal the aggregate unpaid principal amount of each loan
(each a "Loan," and collectively, the "Loans")) made by such Lender under this
revolving promissory note (this "Note," and together with the Guaranty hereafter
referred to, the "Note Documents"), together with interest thereon at the times
and at the rates specified in this Note. Terms not defined herein shall have the
meanings assigned to them in that certain Revolving Loan Agreement dated as of
July 27, 1999 (together with amendments permitted hereunder, the "Loan
Agreement"), by and among Borrower, the lending institutions identified therein,
Bank of America, N.A., as administrative agent, First Union National Bank, as
syndication agent and Wachovia Bank, National Association, as documentation
agent.
2. (a) Subject to the terms and conditions set forth herein, each
Lender hereby severally agrees to make revolving Loans to Borrower under this
Note in such amounts as Borrower may from time to time request in an aggregate
amount not to exceed at any time outstanding the amount set forth opposite such
Lender's name on Schedule 1 hereto (such Lender's "Note Commitment"). Borrower
may, at its discretion, request Loans on a nonratable basis from each Lender or
on a ratable basis from the Lenders; provided, however, that, after giving
effect to any borrowing, the aggregate principal amount of all outstanding Loans
made by any Lender shall not at any time exceed its Note Commitment and the
aggregate principal amount of all outstanding Loans made by all Lenders shall
not at any time exceed the combined Note Commitments. This is a revolving
credit, and within the limits of each Lender's Note Commitment and subject to
the other terms and conditions hereof, Borrower may reborrow amounts repaid or
prepaid until the Termination Date (as defined below).
Each borrowing of Loans may be comprised of Base Rate Loans or
Eurodollar Rate Loans as selected by Borrower. Each borrowing of Eurodollar Rate
Loan shall be in the minimum amount of $5,000,000 with any additional amounts in
integral multiples of $1,000,000. Each borrowing of Base Rate Loan shall be in
the minimum amount of $1,000,000 with any additional amounts in integral
multiples of $1,000,000. Not more than five Eurodollar Periods may be
outstanding at any time. Each borrowing of Loans shall be made pursuant to a
Request for Loan delivered to Administrative Agent substantially in the form of
Exhibit A hereto which shall specify the requested (i) date of such Loan, (ii)
type of Loan, (iii) amount of each Lender's Loan, and (iv) in the case of a
Eurodollar Rate Loan, the Eurodollar Period for such Loan.
Unless Administrative Agent has notified, in its sole and absolute
discretion, Borrower to the contrary, a Loan may be requested by telephone by a
Responsible Official of Borrower, in which case Borrower shall confirm such
request to Administrative Agent by promptly delivering
- 1 -
<PAGE> 2
a Request for Loan in person or by telecopier conforming to the preceding
sentence to Administrative Agent. Neither Administrative Agent nor any Lender
shall incur any liability whatsoever hereunder in acting upon any telephonic
request for a Loan purportedly made by a Responsible Official of Borrower, and
Borrower hereby agrees to indemnify Administrative Agent and each Lender from
any loss, reasonable cost, out-of-pocket expense or liability as a result of so
acting.
Borrower may request a borrowing of Base Rate Loans by delivering a
Request for Loan to Administrative Agent not later than 10:00 a.m. California
time on the date of any requested Base Rate Loan, and Borrower may request a
borrowing of Eurodollar Rate Loan by delivering a Request for Loan to
Administrative Agent not later than 11:00 a.m. California time at least three
Eurodollar Banking Days prior to any requested Eurodollar Rate Loan.
Administrative Agent shall promptly notify each Lender of each Request for Loan,
and each Lender shall make its Loan in immediately available funds to
Administrative Agent at its office indicated on Schedule 2 hereto not later than
10:00 a.m. California time on the date specified for any Loan (which must be a
Banking Day). Upon satisfaction or waiver by all Lenders of the applicable
conditions set forth in Paragraph 9, such Loans shall be made available to
Borrower on that date by such means as it may request in immediately available
funds. Administrative Agent may assume that all conditions set forth in
Paragraph 9 will be satisfied on any borrowing date unless otherwise notified by
any Lender or Borrower.
(b) If, upon the expiration of any Eurodollar Period applicable to any
Eurodollar Rate Loan, Borrower has failed to select a new Eurodollar Period to
be applicable thereto, or if any Default or Event of Default shall then exist,
Borrower shall be deemed to have elected to convert such Eurodollar Rate Loan
into a Base Rate Loan effective as of the expiration date of such current
Eurodollar Period. No Lender shall be obligated to make or continue any
Eurodollar Rate Loan when any Default or Event of Default has occurred and is
continuing.
3. (a) Upon notice to Administrative Agent, Borrower may at any time
prepay any Loan, in full or in part, in the manner and in the minimum amounts
and multiples thereof set forth in Section 3.1(f) of the Loan Agreement.
Prepayments may be made nonratably. Any prepayment of a Loan bearing interest at
the Eurodollar Rate shall be accompanied by the amount of accrued interest on
the amount prepaid, together with any amounts of the type specified in Section
3.8(e) of the Loan Agreement. Borrower may at any time permanently reduce or
terminate the Note Commitment upon five (5) Banking Days' notice to
Administrative Agent and, in the case of a reduction to an amount not less than
the outstanding principal amount of Loans. Reductions in Note Commitments may be
made nonratably.
(b) The principal amount of all Loans shall be due and payable not
later than the earlier of (i) May 15, 2000 and (ii) the date the Note Commitment
is terminated by Borrower pursuant to Paragraph 3(a) above or by Lenders
pursuant to Paragraph 11 below (the "Termination Date").
4. (a) Interest accrued on each Base Rate Loan shall be due and payable
on each Quarterly Payment Date and the Termination Date. Except as otherwise
provided in Paragraph 4(c) below, the unpaid principal amount of any Base Rate
Loan shall bear interest at a fluctuating rate per annum equal to the Base Rate.
Each change in the interest rate under this
- 2 -
<PAGE> 3
subparagraph due to a change in the Base Rate shall take effect simultaneously
with the corresponding change in the Base Rate.
(b) Interest accrued on each Eurodollar Rate Loan which is for a term
of three months or less shall be due and payable on the earlier of the last day
of the related Eurodollar Period and the Termination Date. Interest accrued on
each other Eurodollar Rate Loan shall be due and payable on the date which is
three months after the date such Eurodollar Rate Loan was made and on the last
day of the related Eurodollar Period. Except as otherwise provided in Paragraph
4(c) below, the unpaid principal amount of any Eurodollar Rate Loan shall bear
interest at a rate per annum equal to the Eurodollar Rate for that Eurodollar
Rate Loan plus the Applicable Eurodollar Margin.
(c) If any installment of principal or interest or any fee or cost or
other amount payable under this Note to Administrative Agent or any Lender is
not paid when due, it shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the sum of the Base Rate plus 2%, to the
fullest extent permitted by applicable Laws. Accrued and unpaid interest on past
due amounts (including, without limitation, interest on past due interest) shall
be compounded monthly, on the last day of each calendar month, to the fullest
extent permitted by applicable Laws.
(d) Sections 3.10 through and including 3.17 of the Loan Agreement
shall apply hereunder.
5. (a) From the date hereof, Borrower shall pay to Administrative Agent
for the account of each Lender a facility fee equal to the Applicable Facility
Fee Rate during the continuance of any Applicable Pricing Level per annum times
such Lender's Note Commitment in effect on each day during a fiscal quarter. The
facility fee shall be payable quarterly in arrears on each Quarterly Payment
Date and on the Termination Date.
(b) Borrower shall pay to Administrative Agent for the account of each
Lender a utilization fee equal to .125% (12.5 basis points) per annum times the
aggregate unpaid principal amount of such Lender's Loans for each day (or
portion thereof) that its Loans are in excess of 33-1/3% of such Lender's Note
Commitment. The utilization fee shall be payable quarterly in arrears on each
Quarterly Payment Date and on the Termination Date.
6. Fees and interest hereunder shall be calculated in the same manner
as provided by Section 3.10 of the Loan Agreement (Computation of Interest and
Fees) and payments shall be made by Borrower to Administrative Agent and by
Administrative Agent to each Lender in the same manner as provided by Section
3.12 of the Loan Agreement (Manner and Treatment of Payments). Subject to the
last sentence of Paragraph 19(a), Lenders shall comply with Section 11.10 of the
Loan Agreement (Sharing of Setoffs). Administrative Agent shall be entitled to
the benefits of Section 2.9 of the Loan Agreement (Administrative Agent's right
to Assume Funds Available for Advances) and Section 3.15 of the Loan Agreement
(Administrative Agent's right to Assume Payments Will be Made).
7. Upon demand of any Lender, Borrower shall pay costs of the type set
forth in Sections 3.7 and 3.8 of the Loan Agreement (subject to the terms and
conditions set forth in
- 3 -
<PAGE> 4
Section 3), and availability of Eurodollar Rate Loans shall be subject to
matters of the type set forth in Sections 3.8(c) and (d) of the Loan Agreement.
8. Administrative Agent must receive the following items (with a
copy for each Lender) in form and content acceptable to Administrative Agent,
before it extends any credit to Borrower under this Note:
(a) this Note, duly executed by Borrower and each Lender and,
if requested by any Lender, a separate promissory note executed by
Borrower in favor of such Lender;
(b) a certificate of the Secretary or an Assistant Secretary
of Borrower dated the date hereof as to (i) the resolution of the Board
of Directors of Borrower or its Executive Committee in connection with
this Note, and (ii) the incumbency and signatures of the person
authorized to execute and deliver this Note and any other instrument,
document or other agreement required hereunder on the date hereof;
(c) the favorable written opinions, dated the date hereof, of
the General Counsel or Assistant General Counsel of Borrower;
(d) a Certificate of the chief financial officer of Borrower
certifying that the conditions specified in Sections 8.1(f) and 8.1(g)
of the Loan Agreement have been satisfied as of the date hereof;
(e) the Subsidiary Note Guaranty substantially in the form of
Exhibit B hereto (the "Guaranty") executed by each of the Subsidiaries
required to be a party thereto (together with any future guarantors,
the "Subsidiary Guarantors") guarantying all present and future
obligations of every kind or nature of Borrower or any Subsidiary
Guarantor at any time and from time to time owed to Administrative
Agent and Lenders under any one or more of the Note Documents, whether
due or to become due, matured or unmatured, liquidated or unliquidated,
or contingent or noncontingent, including obligations of performance as
well as obligations of payment, and including interest that accrues
after the commencement of any proceeding under any Debtor Relief Law by
or against Borrower or any Subsidiary or Affiliate of Borrower (the
"Note Obligations"); and
(f) an upfront fee of $37,500 to each of Bank of America, N.A.
and First Union National Bank.
9. The request of Borrower for any Loan and the receipt by
Borrower of the proceeds thereof shall be deemed a certification by Borrower of
the matters set forth in Sections 8.2 (a), (b) and (c) of the Loan Agreement.
10. Borrower shall comply with all covenants contained in Article
5, Article 6 and Article 7 of the Loan Agreement.
11.1 The existence or occurrence of any one or more of the
following events, whatever the reason therefor and under any circumstances
whatsoever, shall constitute an Event of Default:
- 4 -
<PAGE> 5
(a) Borrower fails to pay any principal on any of the
Loans, or any portion thereof, on the date when due; or
(b) Borrower fails to pay any interest on any of the
Loans, or any fees under Paragraph 5 above, or any portion thereof,
within five (5) Banking Days after the date when due; or fail to pay
any other fee or amount payable to Administrative Agent or any Lender
under this Note, or any portion thereof, within two (2) Banking Days
after demand therefor; or
(c) Any representation or warranty of Borrower or any
Party made hereunder or in the Loan Agreement or in any certificate or
other writing delivered by Borrower pursuant to this Note, proves to
have been incorrect when made or reaffirmed in any respect that is
materially adverse to the interests of Administrative Agent or any
Lender; or
(d) The occurrence of an Event of Default (as such term
is or may hereafter be specifically defined in the Loan Agreement).
11.2 If any Event of Default occurs, Administrative Agent shall, at
the request of, or may, with the consent of, all Lenders,
(i) declare the commitment of each Lender to make Loans
hereunder to be terminated, whereupon such commitments shall be
terminated;
(ii) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all
other amounts owing or payable under this Note to be immediately due
and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived by Borrower; and
(iii) exercise on behalf of itself and Lenders all rights
and remedies available to it and Lenders under this Note, the Loan
Agreement or applicable law;
provided, however, that upon the occurrence of any event specified in Section
9.1(j) of the Loan Agreement, the obligation of each Lender to make Loans shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable without further act of Administrative Agent or any Lender without
protest, presentment, notice of dishonor, demand or further notice of any kind,
all of which are expressly waived by Borrower.
(c) Upon the occurrence of any Event of Default, Administrative
Agent and Lenders, without notice to or demand upon Borrower, which are
expressly waived by Borrower, may proceed to protect, exercise and enforce its
rights and remedies hereunder against Borrower and such other rights and
remedies as are provided by Law or equity.
(d) Section 9.2(d) of the Loan Agreement is incorporated herein by
reference.
12. Borrower shall pay to Administrative Agent or the requesting
Lender upon demand for all reasonable costs, out-of-pocket expenses and
reasonable attorneys' fees
- 5 -
<PAGE> 6
(including allocated costs of internal counsel) incurred by Administrative Agent
and such Lender in connection with the enforcement or attempted enforcement of
this Note to the extent set forth in Section 11.3 of the Loan Agreement.
Borrower agrees to indemnify Administrative Agent and each Lender to the extent
set forth in Section 11.11 of the Loan Agreement.
13. The loan account records maintained by each Lender shall be
conclusive in the absence of manifest error as to the amount of any Loan,
interest rate, interest payment dates and outstanding amount at such time,
absent manifest error.
14. Each Lender may assign or sell participations in this Note to
the extent assignments and participations are permitted under Sections 11.8 of
the Loan Agreement. Any such assignment shall be evidenced by a Commitment
Assignment and Acceptance in the form of Exhibit A to the Loan Agreement,
revised mutatis mutandis for this Note, or such other form reasonably acceptable
to Borrower, Administrative Agent and the assigning Lender.
15. Articles 10 and 11 of the Loan Agreement (except Sections
11.2, 11.17 and 11.21) are hereby incorporated herein by reference.
16. The notice address of each party hereto and the lending office
of Administrative Agent and each Lender is set forth on Schedule 2 hereto.
17. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK. No delay or omission on the part of
Administrative Agent or any Lender in exercising any right hereunder shall
operate as a waiver of such right. If any provision of this Note shall be held
invalid or unenforceable in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof.
18. Borrower shall cause any Subsidiary (other than an Inactive
Subsidiary) formed or acquired after the date hereof to execute and deliver an
appropriate joinder to the Guaranty.
19. (a) All articles, sections, definitions, schedules and
exhibits in the Loan Agreement incorporated herein by reference or otherwise
referred to herein (and referred to within such articles, sections, definitions,
schedules and exhibits), together with all definitions used therein, are hereby
incorporated herein by reference in this Note as though set forth in their
entirety herein. Except with respect to Paragraph 11.1(d) above (which shall be
deemed a cross default to the Loan Agreement as in effect), references in such
incorporated terms and provisions to "Lender(s)," "Requisite Lenders,"
"Administrative Agent," "Borrower," "Party," "this Agreement," "Loan Documents,"
"Commitment(s)," "Subsidiary Guaranty," "Maturity Date," "Advance(s),"
"Loan(s)," "Obligations," "Default(s)," "Event(s) of Default" "Pro Rata Share"
and other terms referring to matters specific to the Loan Documents shall be
deemed to refer mutatis mutandis to Lender(s) hereunder, all Lenders hereunder,
Administrative Agent hereunder, Borrower hereunder, this Note, the Note
Documents, the Note Commitment(s), the Guaranty, the Termination Date, the Loans
hereunder, the Note Obligations, the events set forth in Paragraph 11.1 above,
the Pro Rata Share hereunder and to analogous terms and provisions relating to
this Note. When the term "Pro Rata Share" as incorporated herein or otherwise
used
- 6 -
<PAGE> 7
herein refers to a funded or funding of Loans, it shall mean the ratable
proportion of Loans funded or to be funded hereunder by each Lender.
(b) Unless all Lenders, as Lenders under the Loan Agreement, have
affirmatively agreed or consented to any amendments to or waivers of the Loan
Agreement (in which case no additional action need be taken hereunder), such
amendments and waiver shall not operate to amend or waive such terms and
conditions as incorporated by reference herein unless all Lenders separately
agree or consent thereto herein. Incorporated terms and provisions will survive
termination, restatement or cancellation of the Loan Agreement for purposes of
this Note.
(c) To the extent Lenders receives documents and certificates
under the Loan Agreement, such documents and certificates shall be deemed
delivered hereunder.
20. No amendment, modification, supplement, extension, termination
or waiver of any provision of this Note or any other Note Document, no approval
or consent hereunder or thereunder, and no consent to any departure by Borrower
or any Subsidiary Guarantor herefrom or therefrom shall be effective unless in
writing signed by all Lenders and acknowledged by Administrative Agent, and each
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
IN WITNESS WHEREOF, Borrower, Administrative Agent and each Lender have
executed this Note as of the date first hereinabove written.
USEC INC.
By /s/ Henry Z Shelton, Jr.
----------------------------------------------------
Name Henry Z Shelton, Jr.
----------------------------------------------------
Title Senior Vice President and Chief Financial Officer
----------------------------------------------------
AGREED AND ACCEPTED:
BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT
By /s/ Gina Meador
---------------------------
Gina Meador
Vice President
LENDERS:
FIRST UNION NATIONAL BANK
BANK OF AMERICA, N.A., AS A LENDER
By /s/ Dianne J. Prust By /s/ Kimberly P. Armstrong
-------------------------------- -----------------------------
Dianne J. Prust
Vice President Name: Kimberly P. Armstrong
-------------------------
Vice President
- 7 -
<PAGE> 8
EXHIBIT A TO SYNDICATED REVOLVING PROMISSORY NOTE
REQUEST FOR LOAN
TO: Bank of America, N.A., as Administrative Agent
DATE:
Ladies and Gentlemen:
1. This Request for Loan is executed and delivered by USEC Inc.,
("Borrower") to Bank of America, N.A. ("Administrative Agent") pursuant to that
certain Syndicated Revolving Promissory Note dated as of November 15, 1999 among
Borrower, Lenders party thereto and Administrative Agent (as amended from time
to time, the "Note"). Any terms used herein and not defined herein shall have
the meanings set forth in the Note.
2. Borrower hereby request that each Lender make a Loan to it under the
Note Commitment as follows:
(a) AMOUNT OF REQUESTED LOANS:
<TABLE>
<CAPTION>
USAGE UNDER LENDER'S NOTE
AMOUNT OF REQUESTED COMMITMENT AFTER GIVING EFFECT TO
LENDER LOAN REQUESTED LOAN
- ----------------------------------------- ------------------------ ------------------------------------
<S> <C> <C>
Bank of America $ $
-------------------- --------------------
First Union $ $
==================== ====================
Total $ $
-------------------- --------------------
</TABLE>
(b) DATE OF REQUESTED LOANS: ______________
(c) TYPE OF REQUESTED LOANS (Check one box only):
[ ] BASE RATE
[ ] EURODOLLAR RATE FOR A EURODOLLAR PERIOD OF
_________ MONTHS
A - 1
Form of Request for Loan
<PAGE> 9
3. In connection with this request, Borrower represents, warrants and
certifies that, as of the date of the Loans, (a) the statements set forth in
Sections 8.2(a), (b) and (c) of the Loan Agreement as they apply mutatis
mutandis to the Note are true and correct and (b) the requirements and
conditions applicable to such Loan set forth in Paragraph 2 of the Note have
been satisfied.
4. This Request for Loan is executed on ________________, by a
Responsible Official of Borrower. The undersigned, in such capacity, hereby
certifies each and every matter contained herein to be true and correct.
USEC INC.
By
--------------------------------------
Name:
------------------------------------
Title
-----------------------------------
A - 2
Form of Request for Loan
<PAGE> 10
EXHIBIT B TO SYNDICATED REVOLVING PROMISSORY NOTE
THE OBLIGATIONS OF GUARANTORS UNDER THIS SUBSIDIARY
NOTE GUARANTY ARE NOT OBLIGATIONS OF, AND ARE NOT
GUARANTIED AS TO PRINCIPAL, INTEREST OR ANY OTHER
AMOUNT BY THE UNITED STATES OF AMERICA
SUBSIDIARY NOTE GUARANTY
This SUBSIDIARY NOTE GUARANTY ("Guaranty"), dated as of November 15,
1999, is made by the undersigned, together with each other Person who may
hereafter become a party hereto pursuant to Section 17 of this Guaranty (each a
"Guarantor" and collectively "Guarantors"), jointly and severally in favor of
Bank of America, N.A. as administrative agent("Administrative Agent") and
Lenders party to the Note hereinafter referred to, with reference to the
following facts:
RECITALS
A. Pursuant to that certain Syndicated Revolving Promissory Note of
even date among USEC Inc., a Delaware corporation, ("Borrower"), Lenders party
thereto and Administrative Agent (said Note, as it may hereafter be amended,
extended, renewed, supplemented, or otherwise modified from time to time, being
the "Note;" terms not defined herein have the meanings assigned to them in the
Note), Lenders are making certain credit facilities available to Borrower.
B. As a condition to the availability of Loans under the Note,
Guarantors are required to enter into this Guaranty and to guaranty the
Guarantied Obligations as hereinafter provided.
C. Guarantors expect to realize direct and indirect benefits as the
result of the availability of the aforementioned credit facilities to Borrower,
as the result of financial or business support which will be provided to the
Guarantors by Borrower.
AGREEMENT
NOW, THEREFORE, in order to induce the Guarantied Parties to extend the
aforementioned credit facilities, and for other good and valuable consideration,
the receipt and adequacy of which hereby are acknowledged, Guarantors hereby
represent, warrant, covenant, agree and guaranty as follows:
1. DEFINITIONS. This Guaranty is the Guaranty referred to in the Note.
Terms defined in the Note and not otherwise defined in this Guaranty shall have
the meanings given those terms in the Note or, if not defined in the Note, in
the Loan Agreement when used herein and such definitions are incorporated herein
as though set forth in full. In addition, as used herein, the following terms
shall have the meanings respectively set forth after each:
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Subsidiary Note Guaranty
<PAGE> 11
"Contribution" means any payment made by a Guarantor hereunder
or any recourse taken by any Guarantied Party against any collateral
owned by the Guarantors which secures any Guarantied Obligation.
"Guarantied Obligations" means all Note Obligations of
Borrower at any time and from time to time owed to any Guarantied Party
under one or more of the Note Documents (but not including Note
Obligations owed to any Guarantied Party under this Guaranty), whether
due or to become due, matured or unmatured, liquidated or unliquidated,
or contingent or noncontingent, including obligations of performance as
well as obligations of payment, and including interest that accrues
after the commencement of any bankruptcy or insolvency proceeding by or
against Borrower, any Guarantor or any other Person.
"Guarantied Parties" means Administrative Agent and Lenders
(each a "Guarantied Party").
"Guarantors" means the parties hereto as indicated on the
signature pages hereof, or such additional Person as may become parties
hereto pursuant to Section 17 hereof, and each of them, and any one or
more of them, jointly and severally.
"Guaranty" means this Guaranty, and any extensions,
modifications, renewals, restatements, reaffirmations, supplements or
amendments hereof, including, without limitation, any documents or
agreements by which additional Guarantors become party hereto.
2. GUARANTY OF GUARANTIED OBLIGATIONS. Guarantors hereby, jointly and
severally, irrevocably, unconditionally guaranty and promise to pay and perform
on demand the Guarantied Obligations and each and every one of them, including
all amendments, modifications, supplements, renewals or extensions of any of
them, whether such amendments, modifications, supplements, renewals or
extensions are evidenced by new or additional instruments, documents or
agreements or change the rate of interest on any Guarantied Obligation or the
security therefor, or otherwise.
3. NATURE OF GUARANTY. This Guaranty is irrevocable and continuing in
nature and relates to any Guarantied Obligations now existing or hereafter
arising. This Guaranty is a guaranty of prompt and punctual payment and
performance and is not merely a guaranty of collection.
4. RELATIONSHIP TO OTHER AGREEMENTS. Nothing herein shall in any way
modify or limit the effect of terms or conditions set forth in any other
document, instrument or agreement executed by any Guarantor or in connection
with the Guarantied Obligations, but each and every term and condition hereof
shall be in addition thereto. All provisions contained in the Note or any other
Note Document that apply to Note Documents generally are fully applicable to
this Guaranty and are incorporated herein by this reference.
5. SUBORDINATION OF INDEBTEDNESS OF BORROWER TO GUARANTORS TO THE
GUARANTIED OBLIGATIONS. Each Guarantor agrees that:
- 2 -
Subsidiary Note Guaranty
<PAGE> 12
(a) Any indebtedness of Borrower now or hereafter owed to any Guarantor
hereby is subordinated to the Guarantied Obligations.
(b) If any Guarantied Party so requests, upon the occurrence and during
the continuance of any Event of Default, any such indebtedness of Borrower now
or hereafter owed to any Guarantor shall be collected, enforced and received by
such Guarantor as trustee for the Guarantied Parties and shall be paid over to
Administrative Agent for the benefit of the Guarantied Parties in kind on
account of the Guarantied Obligations, but without reducing or affecting in any
manner the obligations of such Guarantor under the other provisions of this
Guaranty.
(c) Should such Guarantor fail to collect or enforce any such
indebtedness of Borrower now or hereafter owed to such Guarantor and pay the
proceeds thereof to Administrative Agent for the benefit of the Guarantied
Parties in accordance with Section 5(b) hereof, each Guarantied Party as such
Guarantor's attorney-in-fact may do such acts and sign such documents in such
Guarantor's name as such Guarantied Party considers necessary or desirable to
effect such collection, enforcement and/or payment.
6. STATUTES OF LIMITATIONS AND OTHER LAWS. Until the Guarantied
Obligations shall have been paid and performed in full, all the rights,
privileges, powers and remedies granted to the Guarantied Parties hereunder
shall continue to exist and may be exercised by the Guarantied Parties at any
time and from time to time irrespective of the fact that any of the Guarantied
Obligations may have become barred by any statute of limitations. Each Guarantor
expressly waives the benefit of any and all statutes of limitation, and any and
all Laws providing for exemption of property from execution or for evaluation
and appraisal upon foreclosure, to the maximum extent permitted by applicable
Laws.
7. WAIVERS AND CONSENTS. Each Guarantor acknowledges that the
obligations undertaken herein involve the guaranty of obligations of Persons
other than such Guarantor and, in full recognition of that fact, consents and
agrees that any Guarantied Party may, at any time and from time to time, without
notice or demand, and without affecting the enforceability or continuing
effectiveness hereof: (a) supplement, modify, amend, extend, renew, accelerate
or otherwise change the time for payment or the terms of the Guarantied
Obligations or any part thereof, including any increase or decrease of the
rate(s) of interest thereon; (b) supplement, modify, amend or waive, or enter
into or give any agreement, approval or consent with respect to, the Guarantied
Obligations or any part thereof, or any of the Note Documents to which such
Guarantor is not a party or any additional security or guaranties, or any
condition, covenant, default, remedy, right, representation or term thereof or
thereunder; (c) accept new or additional instruments, documents or agreements in
exchange for or relative to any of the Note Documents or the Guarantied
Obligations or any part thereof; (d) accept partial payments on the Guarantied
Obligations; (e) receive and hold additional security or guaranties for the
Guarantied Obligations or any part thereof; (f) release, reconvey, terminate,
waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer
and/or enforce any security or guaranties, and apply any security and direct the
order or manner of sale thereof as any Guarantied Party in its sole and absolute
discretion may determine; (g) release any Person from any personal liability
with respect to the Guarantied Obligations or any part thereof; (h) settle,
release on terms satisfactory to the Guarantied Parties or by operation of
applicable Laws or otherwise liquidate or enforce any
- 3 -
Subsidiary Note Guaranty
<PAGE> 13
Guarantied Obligations and any security or guaranty therefor in any manner,
consent to the transfer of any security and bid and purchase at any sale; and/or
(i) consent to the merger, change or any other restructuring or termination of
the corporate existence of Borrower, any Guarantor or any other Person, and
correspondingly restructure the Guarantied Obligations, and any such merger,
change, restructuring or termination shall not affect the liability of any
Guarantor or the continuing effectiveness hereof, or the enforceability hereof
with respect to all or any part of the Guarantied Obligations.
Upon the occurrence and during the continuance of any Event of Default,
each Guarantied Party may enforce this Guaranty independently as to each
Guarantor and independently of any other remedy or security the Guarantied
Parties at any time may have or hold in connection with the Guarantied
Obligations. Each Guarantor expressly waives any right to require any Guarantied
Party to marshal assets in favor of Borrower, and agrees that the Guarantied
Parties may proceed against Borrower, or upon or against any security or remedy,
before proceeding to enforce this Guaranty, in such order as they shall
determine in their sole and absolute discretion. Any Guarantied Party may file a
separate action or actions against Borrower and/or any Guarantor without respect
to whether action is brought or prosecuted with respect to any security or
against any other Person, or whether any other Person is joined in any such
action or actions. Guarantors agree that the Guarantied Parties and Borrower and
any Affiliates of Borrower may deal with each other in connection with the
Guarantied Obligations or otherwise, or alter any contracts or agreements now or
hereafter existing between any of them, in any manner whatsoever, all without in
any way altering or affecting the security of this Guaranty. Each Guarantied
Parties' rights hereunder shall be reinstated and revived, and the
enforceability of this Guaranty shall continue, with respect to any amount at
any time paid on account of the Guarantied Obligations which thereafter shall be
required to be restored or returned by the Guarantied Parties upon the
bankruptcy, insolvency or reorganization of Borrower or any other Person, or
otherwise, all as though such amount had not been paid. The rights of each
Guarantied Party created or granted herein and the enforceability of this
Guaranty with respect to Guarantors at all times shall remain effective to
guaranty the full amount of all the Guarantied Obligations even though the
Guarantied Obligations, or any part thereof, or any security or guaranty
therefor, may be or hereafter may become invalid or otherwise unenforceable as
against Borrower or any other guarantor or surety and whether or not Borrower
shall have any personal liability with respect thereto. Each Guarantor expressly
waives any and all defenses now or hereafter arising or asserted by reason of
(a) any disability or other defense of Borrower with respect to the Guarantied
Obligations, (b) the unenforceability or invalidity of any security or guaranty
for the Guarantied Obligations or the lack of perfection or continuing
perfection or failure of priority of any security for the Guarantied
Obligations, (c) the cessation for any cause whatsoever of the liability of
Borrower (other than by reason of the full payment and performance of all
Guarantied Obligations), (d) any failure of any Guarantied Party to marshal
assets in favor of Borrower or any other Person, (e) except as otherwise
provided in this Guaranty, any failure of any Guarantied Party to give notice of
sale or other disposition of collateral securing any Guarantied Obligations to
such Guarantor or any other Person or any defect in any notice that may be given
in connection with any sale or disposition of any collateral, (f) except as
otherwise provided in this Guaranty, any failure of any Guarantied Party to
comply with applicable Laws in connection with the sale or other disposition of
any collateral or other security for any Guarantied Obligation, including
without limitation, any failure of any
- 4 -
Subsidiary Note Guaranty
<PAGE> 14
Guarantied Party to conduct a commercially reasonable sale or other disposition
of any collateral or other security for any Guarantied Obligation, (g) any act
or omission of any Guarantied Party or others that directly or indirectly
results in or aids the discharge or release of Borrower or the Guarantied
Obligations or any security or guaranty therefor by operation of law or
otherwise, (h) any Law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation, (i) any failure of any Guarantied
Party to file or enforce a claim in any bankruptcy or other proceeding with
respect to any Person, (j) the election by any Guarantied Party, in any
bankruptcy proceeding of any Person, of the application or non-application of
Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of
credit or the grant of any Lien under Section 364 of the United States
Bankruptcy Code, (l) any use of cash collateral under Section 363 of the United
States Bankruptcy Code, (m) any agreement or stipulation with respect to the
provision of adequate protection in any bankruptcy proceeding of any Person, (n)
the avoidance of any Lien in favor of any Guarantied Party for any reason, (o)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
liquidation or dissolution proceeding commenced by or against any Person,
including any discharge of, or bar or stay against collecting, all or any of the
Guarantied Obligations (or any interest thereon) in or as a result of any such
proceeding, (p) to the extent permitted, the benefits of any form of one-action
rule, or (q) any action taken by any Guarantied Party that is authorized by this
Section or any other provision of any Note Document. Each Guarantor expressly
waives all setoffs and counterclaims and all presentments, demands for payment
or performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Guarantied Obligations, and all notices of
acceptance of this Guaranty or of the existence, creation or incurrence of new
or additional Guarantied Obligations.
8. CONDITION OF BORROWER AND ITS SUBSIDIARIES. Each Guarantor
represents and warrants to each Guarantied Party that each Guarantor has
established adequate means of obtaining from Borrower and its Subsidiaries, on a
continuing basis, financial and other information pertaining to the businesses,
operations and condition (financial and otherwise) of Borrower and its
Subsidiaries and their Properties, and each Guarantor now is and hereafter will
be completely familiar with the businesses, operations and condition (financial
and otherwise) of Borrower and its Subsidiaries and their Properties. Each
Guarantor hereby expressly waives and relinquishes any duty on the part of any
Guarantied Party (should any such duty exist) to disclose to any Guarantor any
matter, fact or thing related to the businesses, operations or condition
(financial or otherwise) of Borrower or its Subsidiaries or their Properties,
whether now known or hereafter known by any Guarantied Party during the life of
this Guaranty. With respect to any of the Guarantied Obligations, each
Guarantied Party shall be entitled to conclusively rely upon any document or
certificate that is executed by a Responsible Official of Borrower as having
been authorized by all necessary corporate, partnership and/or other action on
the part of Borrower; provided that such Responsible Official has been
designated as a Responsible Official for the purposes of the Loan Agreement or
the Note in a written notice signed by a Senior Officer and delivered to
Administrative Agent, which notice has not been cancelled or suspended, and all
Guarantied Obligations made or created thereby shall be secured hereby.
- 5 -
Subsidiary Note Guaranty
<PAGE> 15
9. LIENS ON REAL PROPERTY. In the event that all or any part of the
Guarantied Obligations at any time are secured by any one or more deeds of trust
or mortgages or other instruments creating or granting Liens on any interests in
real Property, each Guarantor authorizes each Guarantied Party, upon the
occurrence of and during the continuance of any Event of Default, at its sole
option, without notice or demand and without affecting any Guarantied
Obligations of any Guarantor, the enforceability of this Guaranty, or the
validity or enforceability of any Liens of any Guarantied Party on any
collateral securing any Guarantied Obligations, to foreclose any or all of such
deeds of trust or mortgages or other instruments by judicial or nonjudicial
sale, subject to the terms thereof. Each Guarantor expressly waives any defenses
to the enforcement of this Guaranty or any rights of any Guarantied Party
created or granted hereby or to the recovery by any Guarantied Party against
Borrower, any Guarantor or any other Person liable therefor of any deficiency
after a judicial or nonjudicial foreclosure or sale, even though such a
foreclosure or sale may impair the subrogation rights of any Guarantor or may
preclude any Guarantor from obtaining reimbursement or contribution from
Borrower. Each Guarantor expressly waives any defenses or benefits that may be
provided by California Code of Civil Procedure Sections 580a, 580b, 580d or 726,
or comparable provisions of the Laws of any other jurisdiction, and all other
suretyship defenses it otherwise might or would have under California Law or
other applicable Law.
10. WAIVER OF RIGHTS OF SUBROGATION. Notwithstanding anything to the
contrary elsewhere contained herein or in any other Note Document to which any
Guarantor is a party, Guarantors hereby expressly waive with respect to Borrower
and their successors and assigns (including any surety) and any other Person
which is directly or indirectly a creditor of Borrower or any surety for
Borrower, any and all rights at Law or in equity to subrogation, to
reimbursement, to exoneration, to contribution (except as specifically provided
in Section 11 below), to setoff or to any other rights that could accrue to a
surety against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, or to a holder or transferee
against a maker, and which Guarantors may have or hereafter acquire against
Borrower or any other such Person in connection with or as a result of
Guarantors' execution, delivery and/or performance of this Guaranty or any other
Note Document to which any Guarantor is a party until payment in full of all
Guarantied Obligations. Guarantors agree that they shall not have or assert any
such rights against Borrower or its successors and assigns or any other Person
(including any surety) which is directly or indirectly a creditor of Borrower or
any surety for Borrower, either directly or as an attempted setoff to any action
commenced against Guarantors by Borrower (as borrower or in any other capacity),
any Guarantied Party or any other such Person until such payment in full.
Guarantors hereby acknowledge and agree that this waiver is intended to benefit
Borrower and each Guarantied Party and shall not limit or otherwise affect
Guarantors' liability hereunder, under any other Note Document to which any
Guarantor is a party, or the enforceability hereof or thereof.
11. RIGHT OF CONTRIBUTION, INDEMNITY AND ALLOCATION. In order to
provide for just and equitable contribution among the Guarantors in the event
any Contribution is made by a Guarantor (a "Funding Guarantor") under this
Guaranty, that Funding Guarantor shall be entitled to a Contribution from
certain other Guarantors for all payments, damages and expenses incurred by that
Funding Guarantor in discharging any of the Obligations, in the manner and to
the extent set forth in this Guaranty. The amount of any Contribution under this
Guaranty shall be equal to
- 6 -
Subsidiary Note Guaranty
<PAGE> 16
the payment made pursuant to the Note, or the fair saleable value of such
Funding Guarantor's portion of any collateral securing any Guarantied Obligation
against which recourse is exercised, and shall be determined as of the date on
which such payment is made or recourse is exercised, as the case may be.
(a) BENEFIT AMOUNT DEFINED. For purposes of this Guaranty, the "Benefit
Amount" of any Guarantor as of any date of determination shall be the net value
of the benefits to such Guarantor from extensions of credit made by any
Guarantied Party to Borrower for the benefit of such Guarantor under the Note.
Such benefits shall include, without limitation, benefits of funds constituting
proceeds of Loans which are deposited into the account of Borrower by any
Guarantied Party which are in turn advanced or contributed by Borrower to such
Guarantor, and the benefit of any assets acquired by Borrower and transferred to
such Guarantor if the acquisition of such assets was financed by Borrower, in
whole or in part, with the proceeds of Loans reserved by Borrower (collectively,
the "Benefits").
(b) CONTRIBUTION OBLIGATION. Each Guarantor shall be liable to a
Funding Guarantor in an amount equal to the greater of (A) the product of (i) a
fraction, the numerator of which is (x) the Benefit Amount of such Guarantor,
and the denominator of which is (y) the total amount of Obligations and (ii) the
amount of Obligations paid by such Funding Guarantor and (B) 95% of the excess
of the fair saleable value of the property of such Guarantor over the total
liabilities of such Guarantor (including the maximum amount reasonably expected
to become due in respect of contingent liabilities), as the case may be,
determined as of the date on which the payment made by a Funding Guarantor is
deemed made for purposes of this Guaranty or any recourse is exercised against
any Funding Guarantor's portion of any collateral securing any Guarantied
Obligation, as the case may be (giving effect to all payments by other Funding
Guarantors and to the exercise of recourse against any other Funding Guarantor's
portion of any collateral securing any Guarantied Obligation as of such date in
a manner to maximize the amount of such Contributions).
(c) ALLOCATION. In the event that at any time there exists more than
one Funding Guarantor with respect to any Contribution (in any such case, the
"Applicable Contribution"), then payment from other Guarantors pursuant to this
Guaranty shall be allocated among such Funding Guarantors in proportion to the
total amount of the Contribution made for or on account of the Guarantors by
each such Funding Guarantor pursuant to the Applicable Contribution. In the
event that at any time any Guarantor pays an amount under this Guaranty in
excess of the amount calculated pursuant to clause (A) of Section 11(b), that
Guarantor shall be deemed and shall be entitled to Contribution from the other
Guarantors in accordance with the provisions of this Guaranty.
(d) PRESERVATION OF RIGHTS. This Guaranty shall not limit any right
which any Guarantor may have against any other Person which is not a party
hereto.
(e) EQUITABLE ALLOCATION. If as a result of any reorganization,
recapitalization, or other corporate change in a Guarantor, or as a result of
any amendment, waiver or modification of the terms and conditions governing the
Note or the Guarantied Obligations, or for any other reason, the Contributions
under this Guaranty become inequitable, the parties hereto shall promptly modify
and amend this Guaranty to provide for an equitable allocation of the
- 7 -
Subsidiary Note Guaranty
<PAGE> 17
Contributions. Any of the foregoing modifications and amendments to this
Guaranty shall be in writing and signed by all parties hereto.
(f) ASSET OF PARTY TO WHICH CONTRIBUTION IS OWING. The parties hereto
acknowledge that the right to Contribution hereunder shall constitute an asset
in favor of the party to which such Contribution is owing.
(g) INDEMNITY. Each Guarantor agrees to indemnify and hold harmless any
Funding Guarantor for the contribution Obligation of such Guarantor (as
determined in accordance with Section 11(b) of this Guaranty) paid by such
Funding Guarantor.
12. UNDERSTANDINGS WITH RESPECT TO WAIVERS AND CONSENTS. Each Guarantor
warrants and agrees that each of the waivers and consents set forth herein are
made with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Guarantor otherwise
may have against Borrower, any Guarantied Party or others, or against any
collateral securing any Guarantied Obligations and that, under the
circumstances, the waivers and consents herein given are reasonable and not
contrary to public policy or Law. Each Guarantor acknowledges that it has either
consulted with legal counsel regarding the effect of this Guaranty and the
waivers and consents set forth herein, or has made an informed decision not to
do so. If this Guaranty or any of the waivers or consents herein are determined
to be unenforceable under or in violation of applicable Law, this Guaranty and
such waivers and consents shall be effective to the maximum extent permitted by
Law.
13. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby makes each
and every representation and warranty applicable to such Guarantor set forth in
Article 4 of the Loan Agreement as if set forth in full herein referring mutatis
mutandis to the Note Documents.
14. COSTS AND EXPENSES. Each Guarantor agrees to pay to each Guarantied
Party all reasonable costs and out-of-pocket expenses (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by any
Guarantied Party in the enforcement or attempted enforcement of this Guaranty,
whether or not an action is filed in connection therewith, and in connection
with any waiver or amendment of any term or provision hereof. All advances,
charges, costs and expenses, including reasonable attorneys' fees and
disbursements (including the reasonably allocated cost of legal counsel employed
by any Guarantied Party), incurred or paid by any Guarantied Party in exercising
any right, privilege, power or remedy conferred by this Guaranty, or in the
enforcement or attempted enforcement thereof, shall be subject hereto and shall
become a part of the Guarantied Obligations and shall be paid to each Guarantied
Party by each Guarantor, immediately upon demand, together with interest thereon
at the rate(s) provided for under the Note.
15. CONSTRUCTION OF THIS GUARANTY. This Guaranty is intended to give
rise to absolute and unconditional obligations on the part of each Guarantor.
16. LIABILITY. Notwithstanding anything to the contrary elsewhere
contained herein or in any Note Document to which any Guarantor is a party, the
aggregate liability of all Guarantors hereunder for payment and performance of
the Guarantied Obligations shall not
- 8 -
Subsidiary Note Guaranty
<PAGE> 18
exceed an amount which, in the aggregate, is $1.00 less than that amount which
if so paid or performed would constitute or result in a "fraudulent transfer",
"fraudulent conveyance", or terms of similar import, under applicable state or
federal Law, including without limitation, Section 548 of the United States
Bankruptcy Code. The liability of each Guarantor hereunder is independent of any
other guaranties at any time in effect with respect to all or any part of the
Guarantied Obligations, and each Guarantor's liability hereunder may be enforced
regardless of the existence of any such guaranties. Any termination by or
release of any guarantor in whole or in part (whether it be another Guarantor
under this instrument or not) shall not affect the continuing liability of any
Guarantor hereunder, and no notice of any such termination or release shall be
required. The execution hereof by each Guarantor is not founded upon an
expectation or understanding that there will be any other guarantor of the
Guarantied Obligations.
17. ADDITIONAL GUARANTORS. Any other Person may become an additional
Guarantor under and become bound by the terms and conditions of this Guaranty by
executing and delivering to Administrative Agent an Instrument of Joinder
substantially in the form attached hereto as Exhibit A, accompanied by such
documentation as Administrative Agent may require to establish the due
organization, valid existence and good standing of such Person, its
qualification to engage in business in each material jurisdiction in which it is
required to be so qualified, its authority to execute, deliver and perform this
Guaranty, and the identity, authority and capacity of each Senior Officer
thereof authorized to act on its behalf. Upon delivery of such Instrument of
Joinder to and acceptance thereof by Administrative Agent, notice of which
acceptance is hereby waived by Guarantors, each such additional Guarantor shall
be as fully a party hereto as if such Guarantor were an original signatory
hereof. Each Guarantor expressly agrees that its obligations hereunder and under
any other Note Document shall not be affected or diminished by the addition or
release of additional Guarantors hereunder, nor by any election of any
Guarantied Party not to cause any Subsidiary of Borrower to become and
additional Guarantor hereunder. This Guaranty shall be fully effective as to any
Guarantor who is or becomes a party hereto regardless of whether any other
Person becomes or fails to become or ceases to be a Guarantor hereunder.
18. RELEASE OF GUARANTORS. This Guaranty and all obligations of
Guarantors hereunder shall be released when all Note Obligations of each Party
to any Note Document have been paid in full in cash or otherwise performed in
full and when no portion of the Note Commitment remains outstanding and as
otherwise set forth in the Note.
19. MISCELLANEOUS. Subject to Section 15 hereof, each of the Guarantors
consents and agrees to the obligations and other terms imposed upon such
Guarantor, and each of the Note Documents to which such Guarantor is party, by
the terms of the Note. Without limiting the foregoing:
(a) Neither this Guaranty nor any other Note Document to which any
Guarantor is party shall be amended, modified, supplemented, extended,
terminated or waived (explicitly or by implication) except in such manner as may
be permitted by the terms of the Note.
(b) Any Note Document to which any Guarantor is party may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which, taken together, shall constitute one and the same agreement.
- 9 -
Subsidiary Note Guaranty
<PAGE> 19
20. NOTICES. Any notice or other communication made under this Guaranty
shall be in writing and shall be deemed to be properly given if done in
accordance with Section 11.6 of the Loan Agreement. The notice address for each
Guarantor is set forth on the signature page hereof (or the Instrument of
Joinder executed by such party, if applicable).
21. COMPLETE AGREEMENT. This Guaranty, together with the other Note
Documents executed by each Guarantor, comprises the complete and integrated
agreement of the parties on the subject matter hereof and supersedes all prior
agreements, written or oral, on the subject matter hereof.
22. WAIVER OF JURY TRIAL. EACH GUARANTOR AND each Guarantied Party
EXPRESSLY WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS
GUARANTY, THE NOTE, THE OTHER NOTE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. EACH GUARANTOR AND each Guarantied Party AGREE THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS GUARANTY, THE NOTE AND
THE OTHER NOTE DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS GUARANTY, THE NOTE AND THE OTHER NOTE DOCUMENTS. ANY PARTY HERETO MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
23. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF NEW YORK.
- 10 -
Subsidiary Note Guaranty
<PAGE> 20
IN WITNESS WHEREOF, each Guarantor has executed this Guaranty by its
duly authorized officer as of the date first written above.
"Guarantor"
UNITED STATES ENRICHMENT
CORPORATION, A DELAWARE CORPORATION
By /s/ Henry Z Shelton, Jr.
----------------------------------------------------
Name Henry Z Shelton, Jr.
---------------------------------------------------
Title Senior Vice President and Chief Financial Officer
---------------------------------------------------
Notice address for Guarantor:
United States Enrichment Corporation
6903 Rockledge Drive
Bethesda, Maryland 20187
Attn: Chief Financial Officer
Telecopier: (301) 564-3211
Telephone: (301) 564-3344
- 11 -
<PAGE> 21
EXHIBIT A TO SUBSIDIARY NOTE GUARANTY
INSTRUMENT OF JOINDER
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of ___________,
by __________, a _____________ ("Joining Party"), and delivered to BANK OF
AMERICA, N.A. ("Administrative Agent"), pursuant to the Guaranty dated as of
November 15, 1999 (the "Guaranty") made by each of the initial Guarantors party
thereto (each a "Guarantor", and collectively, the "Guarantors") in favor of the
Guarantied Parties. Terms used but not defined in this Joinder shall have the
meanings defined for those terms in the Guaranty.
RECITALS
(a) The Guaranty was made by the Guarantors in favor of the Guarantied
Parties under that certain Syndicated Revolving Promissory Note of even date
herewith made in favor of Lenders by USEC Inc., a Delaware corporation,
("Borrower" (said Note, as it may hereafter be amended, extended, renewed,
supplemented, or otherwise modified from time to time, being the "Note").
(b) Joining Party has become a Subsidiary of Borrower, and as such is
required pursuant to Paragraph 18 of the Note to become an additional Guarantor.
(c) Joining Party expects to realize direct and indirect benefits as of
a result of the availability to Borrower of the credit facilities under the
Note.
NOW THEREFORE, Joining Party agrees as follows:
AGREEMENT
(1) By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 17 of the Guaranty. Joining Party agrees that, upon its
execution hereof, it will become a Guarantor under the Guaranty with respect to
all Obligations of Borrower and Guarantors heretofore or hereafter incurred
under the Note Documents, and will be bound by all terms, conditions, and duties
applicable to a Guarantor under the Guaranty.
B - A - 1
Instrument of Joinder
<PAGE> 22
(2) The effective date of this Joinder is __________________
,______ .
"Joining Party"
__________________________________________
a ________________________________________
By
---------------------------------------
Name
--------------------------------------
Title
------------------------------------
ACKNOWLEDGED:
BANK OF AMERICA, N.A., AS
ADMINISTRATIVE AGENT FOR THE LENDERS
By:
--------------------------------
Name:
------------------------------
Title:
----------------------------
B - A - 2
Instrument of Joinder
<PAGE> 23
SCHEDULE 1
NOTE COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
LENDER NOTE COMMITMENT PRO RATA SHARE(1)
------------------------------------- ------------------------- -----------------
<S> <C> <C>
Bank of America, N.A. $50,000,000 50%
First Union National Bank $50,000,000 50%
=========== ====
Total $100,0000,000 100%
</TABLE>
- --------------------
(1) Subject to last sentence of Paragraph 19(a) of the Note.
- 1 -
<PAGE> 24
SCHEDULE 2
NOTICE ADDRESS AND LENDING OFFICES
BORROWER
USEC INC.
6903 Rockledge Drive
Bethesda, Maryland 20817-1818
Attn: Chief Financial Officer
Telephone: 301.564.3237
Facsimile: 301.564.3344
ADMINISTRATIVE AGENT'S OFFICE:
Requests for Extensions of Credit:
Bank of America, N.A.
Agency Administrative Services - West
1850 Gateway Boulevard, 5th Floor
Mail Code CA4-706-05-09
Concord, California 94520
Attn: ________________
Telephone: 925.675.8447
Facsimile: 925.969.2807
Acct No.: 3750836479
Ref: USEC Inc
ABA No. 111000012
Other Notices:
Bank of America, N.A.
Agency Management-Los Angeles
555 South Flower Street, 11th Floor
Mail Code CA9-706-11-03
Los Angeles, California 90071
Attn: Gina Meador
Vice President
Telephone: 213.228.5245
Facsimile: 213.228.2299
- 1 -
<PAGE> 25
LENDERS
BANK OF AMERICA, N.A., AS A LENDER
Domestic and Offshore Lending Office:
Bank of America, N.A.
1850 Gateway Boulevard, Fifth Floor
Concord, California 94520
Mail Code C4-706-05-09
Attn: Glenis Croucher
Telephone: 925.675.8447
Facsimile: 925.969.2807
Other Notices:
Bank of America, N.A.
555 South Flower Street, 11th Floor
Mail Code CA9-706-11-07
Los Angeles, California 90071
Attn: Dianne J. Prust
Vice President
Aerospace/Defense #9848
Telephone: 213.228.2435
Facsimile: 213.623.1959
FIRST UNION NATIONAL BANK
Domestic and Offshore Lending Office:
- -----------------------------------
- -----------------------------------
Mail Code:
-----------------------
- -----------------------------------
Attn:
--------------------------
--------------------------
Telephone:
----------
Facsimile:
----------
- 2 -
<PAGE> 26
Notices (other than Requests for Extensions of Credit):
- -----------------------------------
- -----------------------------------
Mail Code:
------------------------
- -----------------------------------
Attn:
--------------------------
- -----------------------------------
Telephone:
------------
Facsimile:
------------
- 3 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20,900
<SECURITIES> 0
<RECEIVABLES> 358,700
<ALLOWANCES> 0
<INVENTORY> 983,300
<CURRENT-ASSETS> 1,397,100
<PP&E> 280,700
<DEPRECIATION> (87,800)
<TOTAL-ASSETS> 2,244,000
<CURRENT-LIABILITIES> 493,600
<BONDS> 500,000
0
0
<COMMON> 10,000
<OTHER-SE> 1,034,200
<TOTAL-LIABILITY-AND-EQUITY> 2,244,000
<SALES> 447,600
<TOTAL-REVENUES> 447,600
<CGS> 377,400
<TOTAL-COSTS> 377,400
<OTHER-EXPENSES> 13,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,800
<INCOME-PRETAX> 49,500
<INCOME-TAX> 16,900
<INCOME-CONTINUING> 32,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,600
<EPS-BASIC> .36
<EPS-DILUTED> .36
</TABLE>
