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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4694
R. R. DONNELLEY & SONS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 36-1004130
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
77 West Wacker Drive,
Chicago, Illinois 60601
(Address of principal executive (ZIP Code)
offices)
Registrant's telephone number--(312) 326-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
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Common (Par Value $1.25) New York, Chicago and Pacific Stock Exchanges
Preferred Stock Purchase Rights New York, Chicago and Pacific Stock Exchanges
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 the
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information state-
ments incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [X]
As of January 31, 1999, 133,657,005 shares of common stock were outstanding,
and the aggregate market value of the shares of common stock (based on the
closing price of these shares on the New York Stock Exchange--Composite Trans-
actions on January 31, 1999) held by nonaffiliates was $4,795,177,263.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement dated February 18,
1999, are incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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Form 10-K
Item No. Name of Item Page
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<C> <S> <C>
Part I
Item 1. Business................................................. 3
Item 2. Properties............................................... 6
Item 3. Legal Proceedings........................................ 6
Item 4. Submission of Matters to a Vote of Security Holders...... 6
Executive Officers and Other Principal Officers of R.R.
Donnelley & Sons Company................................ 7
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..................................... 8
Item 6. Selected Financial Data.................................. 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 8
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk.................................................... 17
Item 8. Financial Statements and Supplementary Data.............. 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 17
Part III
Item 10. Directors and Executive Officers of the Registrant....... 17
Item 11. Executive Compensation................................... 17
Item 12. Security Ownership of Certain Beneficial Owners and
Management.............................................. 17
Item 13. Certain Relationships and Related Transactions........... 17
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K................................................ 18
Signatures............................................... 19
Index to Financial Statements and Financial Statement
Item 14(a). Schedules............................................... F-1
Index to Exhibits........................................ E-1
</TABLE>
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PART I
ITEM 1. BUSINESS
Industry and Company Overview
R.R. Donnelley & Sons Company is the largest commercial printer in North
America. Our company is a leading provider of printing and related services to
the merchandising, magazine, book, directory, financial and healthcare
markets. We use our superior skills, scale and technology to deliver solutions
that effectively meet our customers' needs. Our common stock (DNY: NYSE) has
been publicly traded since 1956. Today, the company has approximately 31,000
employees working in our core printing operations on four continents. We have
49 manufacturing plants with a broad range of capabilities to serve our
customers' needs. While 91% of our revenue is generated in the United States,
we have extended our core competencies into selected international markets.
Commercial printing in the United States is a large and fragmented industry,
and includes more than 50,000 firms that employ more than one million people
and generate approximately $150 billion in annual revenue.
The segment of commercial printing that we serve generates approximately $80
billion in annual revenue. Within this segment, we have leadership positions
in all five of our end markets:
. Merchandise Media ($1.3 billion, or 26% of 1998 consolidated net sales),
serving the consumer and business-to-business catalog, retail insert and
direct mail markets;
. Magazine Publishing Services ($1.2 billion, or 23% of 1998 consolidated
net sales), serving the consumer, trade and specialty magazine markets;
. Telecommunications ($822 million, or 16% of 1998 consolidated net sales),
serving the global directory needs of telecommunications providers;
. Book Publishing Services ($742 million, or 15% of 1998 consolidated net
sales), serving the trade, children's, religious and educational book
markets; and
. Financial Services ($532 million, or 11% of 1998 consolidated net sales),
serving the communication needs of the financial markets and healthcare
industry.
In addition to our U.S. operations, we operate in Mexico, South America,
Europe and China. For reporting purposes, revenues from our international
facilities primarily serving the directory market are reported within
Telecommunications. Revenues from our two Mexico facilities that primarily
serve the magazine market are reported within Magazine Publishing Services.
Our third Mexico facility serves the book market and is reported within Book
Publishing Services. Revenues from other international facilities serving more
than one market are included in "Other." The "Other" classification also
includes net sales from R.R. Donnelley Logistics Services (DLS), our logistics
and distribution operation. DLS serves our print services customers and others
by consolidating and sorting mail so that it is delivered to the postal system
closer to the final destination, resulting in reduced postage costs and
improved on-time delivery. Additionally, DLS delivers magazine newsstand,
newspaper inserts and financial services products. Finally, revenue from
Stream International Inc., which provides technical and help-line computer
support to its customers, is included in "Other."
While our printing plants are geographically diverse, the supporting
technologies and knowledge base are shared. Our 49 plants have a range of
production capabilities to serve the five basic commercial print markets
outlined earlier. We manufacture products for these markets with the
operational goal of optimizing the efficiency of our common manufacturing
platform. As a result, most plants produce work for customers in two or three
of our end markets.
Commercial printing remains a competitive industry. Consolidation among our
customers and in the printing industry has put pressure on prices and
increased competition among printers. We expect these industry trends to
continue. We will manage these trends by leveraging our market-leading
position, streamlining our costs and enhancing the value we deliver to our
customers.
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A significant portion of our sales are under contract with customers, with
the remainder on a single-order basis. For some customers, we print and
provide related services for different publications under different
contracts. Contracts with our larger customers normally run for a period of
years (usually three to five years, but longer in the case of contracts
requiring significant capital investment) or for an indefinite period subject
to termination on specified notice by either party. These sales contracts
generally provide for price adjustments to reflect price changes for
materials, wages and utilities. No single customer has a relationship with the
company that accounted for 10% or more of our sales in 1998.
In each of the fiscal years ended December 31, 1998, 1997 and 1996,
international operations represented less than 9% of consolidated net sales,
less than 6% of earnings from operations (excluding 1997 and 1996
restructuring charges) and less than 15% of consolidated assets.
The various markets of the commercial printing industry in which we are
involved are highly competitive. While we have contracts with many of our
customers as discussed above, there are many competing companies and renewal
of these contracts is dependent, in part, on our ability to continue to
differentiate ourself from the competition. Differentiation results, in part,
from our broad range of value-added services, which include: conventional and
digital preproduction, computerized printing, Selectronic(R) imaging and
gathering, and sophisticated pool shipping and distribution services for
printed products; information content repackaging into multiple formats,
including print, magnetic and optical media; and graphic design and editorial
services. Although we believe we are the largest commercial printer in the
United States, we estimate that our revenues represent approximately 6% of
total sales of the portion of the commercial print industry which we serve.
While our plants are well located for the global, national or regional
distribution of our products, competitors in some areas of the United States
have a competitive advantage in some instances due to such factors as freight
rates, wage scales and customer preference for local services. In addition to
location, other important competitive factors are price and quality, as well
as the range of available services.
The primary raw materials we use are paper and ink. In 1998, we spent
approximately $1.9 billion on raw materials. We are a large purchaser of paper
and our focus is to improve materials performance and total cost management
for our customers, which we believe is a competitive advantage. We negotiate
with leading suppliers to maximize our purchasing efficiencies, but we do not
rely on any one supplier. We have existing paper supply contracts (at
prevailing market prices) to cover substantially all of our requirements
through 1999; and management believes extensions and renewals of these
purchase contracts will provide adequate paper supplies in the future. Ink and
ink materials are currently available in sufficient amounts, and we believe
that we will have adequate supplies in the future. We also coordinate
purchasing activity at both the local plant and corporate levels to increase
economies of scale.
Our overriding principles in the environmental arena are to create
sustainable compliance and an injury-free workplace. Our estimated capital
expenditures for environmental controls to comply with federal, state and
local provisions, as well as expenditures, if any, for our share of costs to
clean hazardous waste sites that have received our waste, will not have a
material effect upon our earnings or our competitive position.
As of December 31, 1998, we had 31,000 employees in our core printing
operations, of whom more than 9,400 had been our employees for 10 to 24 years
and more than 3,300 for 25 years or longer. As of December 31, 1998, we
employed approximately 26,700 people in the United States, approximately
1,335, or 5%, of whom were covered by collective bargaining agreements. In
addition, we employed approximately 4,300 people in our foreign operations,
27% of whom were covered by collective bargaining agreements.
We announced two small strategic acquisitions in 1998. In October, we
purchased Ediciones Eclipse S.A. de C.V., a Mexico City-based printer of
retail inserts. In December, we purchased GTE's St. Petersburg, Florida,
directory-printing plant. In addition, we increased our investment in two
other international operations. In July, we purchased additional outstanding
shares of Editorial Lord Cochrane S.A., the largest printer in Chile, to
increase our ownership position to 78% from 55%. In November, we purchased the
interests of our partner in our Poland operation, the Polish-American Printing
Company, to take 100% ownership.
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Stream, CS&T, and MMI
In April 1995, our Global Software Services business merged with Corporate
Software, Inc. to form Stream International Holdings, Inc. (SIH). We owned
approximately 80% of SIH, which included three business units:
. Stream International--technical and help-line support,
. Corporate Software & Technology--licensing and fulfillment, customized
documentation, license administration and user training, and
. Modus Media International--software replication, documentation, and
kitting and assembly.
In December 1997, SIH was reorganized into three separate businesses. Our
interest was restructured so that we currently own 87% of the common stock of
Stream International Inc., 86% of the common stock of Corporate Software &
Technology Holdings, Inc. (CS&T) and non-voting, preferred stock of Modus
Media International Holdings, Inc. (MMI). As a result of the restructuring of
our interests in the businesses and our intention to dispose of our interest
in CS&T in 1998, we had reclassified our interests in CS&T and MMI as
discontinued operations.
We now expect to sell our interest in CS&T in 1999. Because the sale of CS&T
did not occur in 1998 as originally intended, we have eliminated the
discontinued operations presentation and restated prior years' financial
results to include previously discontinued operations in our earnings from
operations. The "Loss from operations of businesses held for sale" on the
income statement includes our pre-tax operating losses and pre-tax
restructuring and impairment charges related to these previously discontinued
operations. In 1998, the "Loss from operations of businesses held for sale"
reflects an $80 million impairment charge (with no associated tax benefit)
related to the write-down of CS&T goodwill. In 1997, operating results of CS&T
and MMI are reflected through the December restructuring. Also, in 1997, we
recorded a $100 million ($60 million after-tax) provision to adjust the
carrying values of CS&T and MMI to their estimated net realizable values. In
1996, the $123 million loss ($86 million after-tax) reflects a small operating
loss from CS&T and MMI and two restructuring charges totaling $119 million
($61 million after-tax) related to the repositioning of MMI and CS&T's
worldwide operations and the restructuring of their software, printing,
kitting and fulfillment operations.
The financial results of Stream International Inc. are reported in our
consolidated results. The net assets of CS&T are included as "Net assets of
businesses held for sale" in the year-end balance sheet presentation. The non-
voting preferred stock in MMI is included in other non-current assets.
Special Note Regarding Forward-Looking Statements. Our Annual Report to
Shareholders and this Form 10-K are among certain communications that contain
forward-looking statements, including statements regarding our financial
position, results of operations, market position, product development,
regulatory matters and Year 2000 compliance. Our expectation to be Year 2000
compliant in a timely manner and at the costs described could be adversely
affected by several factors, including our ability to attract and retain
trained personnel or third-party suppliers in this area, the costs to do so,
and the ability to identify and correct systems or applications that require
remediation. Our failure to achieve Year 2000 compliance or the failure of our
key suppliers, vendors or customers to achieve Year 2000 compliance in a
timely manner could have a material adverse effect on the company.
In addition, when used in such communications, the words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are based on our
estimates, assumptions, projections and current expectations and are subject
to a number of risks and uncertainties. Actual results in the future could
differ materially from those described in the forward-looking statements as a
result of many factors outside our control, including competition with other
printers based on pricing and other factors, fluctuations in the cost of paper
and other raw materials we use, changes in postal rates, seasonal fluctuations
in overall demand for printing, changes in customer demand, changes in the
advertising and printing markets, changes in the capital markets that affect
demand for commercial printing, the financial condition of our customers, the
general condition of the United States economy, changes in the rules
5
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and regulations to which we are subject, including environmental regulation,
and other factors set forth in this Form 10-K and other company communications
generally. We do not undertake and specifically decline any obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances
after the date of such statements or to reflect the occurrence of anticipated
or unanticipated events.
ITEM 2. PROPERTIES
Our corporate office is located in a leased office building in Chicago,
Illinois. In addition, we lease or own 51 U.S. facilities, including
manufacturing plants, which may have multiple facilities and warehouses. These
facilities encompass approximately 17.8 million square feet. We have nine
plants encompassing approximately 1.2 million square feet in South America,
Europe and Asia. Of the total manufacturing and warehouse facilities,
approximately 17.1 million square feet of space is owned, while the remaining
1.9 million square feet of space is leased. In addition, we have sales offices
across the United States, South America, Europe and Asia.
ITEM 3. LEGAL PROCEEDINGS
In November, 1996, a purported class action was brought against the company
in federal district court in Chicago, Illinois on behalf of current and former
African-American employees, alleging that the company racially discriminated
against them. The complaint seeks declaratory and injunctive relief, and asks
for actual, compensatory, consequential and punitive damages in an amount not
less than $500 million. Although the plaintiffs seek nationwide class
certification, most of the specific factual assertions of the complaint relate
to the closing of our Chicago catalog operations in 1993. Other general claims
relate to other company locations. In February, 1999, the magistrate judge
ruled that all claims relating to the Chicago catalog operations were
untimely. Plaintiffs have appealed this ruling. If the ruling of the
magistrate judge is upheld, the claims relating to other locations will still
be pending as is plaintiffs' motion for class certification.
In December, 1995, a class action was filed against the company in federal
district court in Chicago, Illinois alleging that older workers were
discriminated against in selection for termination upon closing of the Chicago
catalog operations. The suit also alleges that we violated the Employee
Retirement Income Security Act (ERISA) in determining benefits payable to
retiring or terminating employees. In August, 1997, the court certified
classes in each of the age discrimination and ERISA claims limited to former
employees of the Chicago operation.
In June, 1998, a purported class action was filed against the company in
federal district court in Chicago, Illinois on behalf of current and former
African-American employees, alleging that the company racially discriminated
against them. While making many of the same general discrimination claims
contained in the 1996 case, the plaintiffs in this case also claim retaliation
by the company for filing discrimination charges or otherwise complaining of
race discrimination. The complaint seeks the same relief and damages as sought
in the 1996 case.
The 1996 and 1995 cases relate primarily to the circumstances surrounding
the closing of the Chicago catalog operations. The company believes that it
acted properly in the closing of the operations. The company also believes
that it has a number of valid defenses to all of the claims made and it will
vigorously defend its actions. However, because the cases are in the
preliminary stages, management cannot make a meaningful estimate of any loss
that could result from an unfavorable outcome of any of the pending cases.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1998.
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EXECUTIVE OFFICERS AND OTHER PRINCIPAL OFFICERS OF R. R. DONNELLEY & SONS
COMPANY
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Name, Age and Officer Business Experience During
Positions with the Company(1) Since Past Five Years(2)
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Haven E. Cockerham, 1998 Management responsibilities for
51, Senior Vice President, Compensation; Benefits; Employee
Human Resources Relations, Diversity and Corporate
Human Resources; Recruiting; and
Management and Organizational
Development. Prior experience as Vice
President, Human Resources, at
Detroit Edison Company, a provider of
electrical utilities, and as
President, Cockerham, McCain &
Associates, Inc., a provider of
management consulting services.
William L. Davis 1997 Management responsibilities as
55, Chairman of the Chairman of the Board and Chief
Board and Chief Executive Officer. Prior experience
Executive Officer(1) as Senior Executive Vice President at
Emerson Electric Company,
manufacturer of electrical,
electronic and related products.
James R. Donnelley 1983 Management responsibilities as Vice
63, Director, Vice Chairman of the Board and for
Chairman of the Board Corporate Communication, Community
Relations and Government Affairs.
Prior management responsibility for
Corporate Development.
Monica M. Fohrman 1988 Management responsibilities for Legal
49, Senior Vice President, Department and Secretary's Office.
General Counsel and Secretary(1)
Cheryl A. Francis 1995 Management responsibilities for
45, Executive Vice President Corporate Development, Investor
and Chief Financial Officer(1) Relations, Treasury, Financial
Reporting and Accounting, Real
Estate, Internal Audit and Taxes.
Prior management responsibilities for
Purchasing. Prior experience as
Treasurer at FMC Corporation, a
diversified manufacturer of chemicals
and machinery.
Gary L. Sutula, 1997 Management responsibilities for
54, Senior Vice President Technology Planning and Operations;
and Chief Information Officer Applications Solutions Delivery; and
the Year 2000 Program. Prior
experience as Senior Vice President
and Chief Information Officer at
Transamerica Financial Services, a
provider of international consumer
lending services.
Jonathan P. Ward 1985 Management responsibilities for
43, President and Merchandise Media, Magazine
Chief Operating Officer(1) Publishing Services,
Telecommunications, Financial
Services, Book Publishing Services,
Worldwide Procurement, Donnelley
Logistic Services and International
Operations. Prior sales and
manufacturing responsibility for
Merchandise Media and Financial
Services.
Michael W. Winkel 1999 Management responsibilities for
53, Executive Strategy Planning. Prior experience
Vice President, Strategy(1) as Corporate Vice President
responsible for corporate planning
and global operations at Monsanto
Company, a diversified manufacturer
of chemicals, pharmaceuticals and
agricultural products.
</TABLE>
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(1) Executive officer of the Company.
(2) Each officer named has carried on his or her principal occupation and
employment in the company for more than five years with the exception of
Haven E. Cockerham, William L. Davis, Cheryl A. Francis, Gary L. Sutula,
and Michael W. Winkel as noted in the table above.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock is listed and traded on the New York Stock Exchange,
Chicago Stock Exchange and Pacific Exchange, Inc.
As of January 29, 1999, there were 9,695 stockholders of record. Information
about the quarterly prices of the common stock, as reported on the New York
Stock Exchange-Composite Transactions, and dividends paid during the two years
ended December 31, 1998, is contained in the chart below:
<TABLE>
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Common Stock Prices
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Dividends
Paid 1998 1997
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1998 1997 High Low High Low
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First Quarter.................. $0.20 $0.19 $42 1/8 $35 1/8 $36 7/8 $29 5/8
Second Quarter................. 0.20 0.19 46 1/4 42 1/16 39 3/4 32 5/8
Third Quarter.................. 0.21 0.20 47 3/4 34 13/16 41 1/16 34 3/8
Fourth Quarter................. 0.21 0.20 44 11/16 34 37 5/8 32 5/8
Full Year...................... 0.82 0.78 47 3/4 34 41 1/16 29 5/8
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
(Not Covered by Auditors' Report)
(Thousands of dollars, except per-share data)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Net sales............... $5,018,436 $4,892,944 $5,063,821 $5,080,775 $4,227,496
Net income (loss)*...... 294,580 130,631 (157,625) 298,793 268,603
Net income (loss) per
common share*.......... 2.08 0.89 (1.04) 1.92 1.73
Total assets............ 3,787,819 4,134,166 4,443,828 5,030,680 4,318,787
Non-current liabilities. 1,588,641 1,730,047 2,044,818 2,012,635 1,669,984
Cash dividends per
common share........... 0.82 0.78 0.74 0.68 0.60
</TABLE>
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* Net income (loss) includes the following one-time items: 1998 gains on the
sale of the company's remaining interest in two former subsidiaries of $169
million ($101 million after-tax, or $0.71 per diluted share) and loss from
operations of businesses held for sale of $80 million (with no associated
tax benefit, or $0.56 per diluted share); 1997 restructuring and impairment
charges of $71 million ($42 million after-tax, or $0.29 per diluted share)
and loss from operations of businesses held for sale of $114 million ($76
million after-tax, or $0.51 per diluted share); 1996 restructuring and
impairment charges of $442 million ($374 million after taxes and minority
interest, or $2.45 per diluted share), gains on partial divestiture of
subsidiaries of $80 million ($48 million after-tax, or $0.31 per diluted
share) and loss from operations of businesses held for sale of $123 million
($86 million after-tax, or $0.56 per diluted share).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operating Results
One-Time Items--We refer to the following one-time items throughout
Management's Discussion and Analysis of Operations:
1998 reported net income included:
. a gain on the sale of our remaining interest in Metromail Corporation of
$146 million ($87 million after-tax),
. a gain on the sale of our remaining interest in Donnelley Enterprise
Solutions Incorporated (DESI) of $23 million ($14 million after-tax), and
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. a loss from operations of businesses held for sale of $80 million (with
no associated tax benefit).
1997 reported net income included:
. a restructuring and impairment charge of $71 million ($42 million after-
tax), and
. a loss from operations of businesses held for sale of $114 million ($76
million after-tax).
1996 reported net income included:
. a gain on the initial public offering of Metromail of $44 million ($26
million after-tax),
. a gain on the initial public offering of DESI of $36 million ($22 million
after-tax),
. a restructuring and impairment charge of $442 million ($374 million after
taxes and minority interest benefit), and
. a loss from operations of businesses held for sale of $123 million ($86
million after-tax).
Highlights--Excluding one-time items, 1998 net income rose to $273 million,
or $1.93 per diluted share, from $249 million, or $1.69 per diluted share, a
year ago. The improved results primarily reflect the benefits of our
productivity initiatives. Including one-time items, in 1998 we earned $295
million in net income compared with $131 million in 1997.
Excluding one-time items, the $92 million earned in the fourth quarter of
1998 compares with $88 million in the same period of 1997. On a diluted per-
share basis, adjusted earnings were $0.67 in this fourth quarter compared with
$0.60 in the fourth quarter of 1997. Including one-time items, the $92 million
earned in the fourth quarter of 1998 compares with a net loss of $9 million in
the fourth quarter of 1997. In the fourth quarter of 1997 we recognized the
$71 million ($42 million after-tax) restructuring and impairment charge
referred to above and the loss from operations of businesses held for sale
that included a $100 million ($60 million after-tax) provision to adjust the
carrying values of CS&T and MMI.
Excluding one-time items, 1996 net income was $255 million, or $1.66 per
diluted share. Including one-time items, the net loss was $158 million.
Revenue
Net sales in 1998 were $5.0 billion, up 2.6% from 1997's net sales of $4.9
billion. Value-added revenue, or net sales less the cost of materials
(primarily paper and ink), was $3.1 billion, up 3.8% from 1997.
Volume in most of our markets was higher than a year ago. During most of
1998, we benefited from strong magazine advertising; high consumer confidence,
which created more demand for catalogs and retail inserts; and strong capital
markets. Also, a directory customer moved production from late 1997 into early
1998. These favorable factors were partially offset by lower book sales as the
industry continued to work through inventory management issues. Pricing
pressure continued in many of our markets, but to a lesser degree than in past
years as we continue to differentiate our services.
In addition to the growth in sales from a year ago, the composition of
revenue was also more favorable. Compared with last year, fewer pass-through
sales, or sales of materials and services purchased on our customers' behalf,
reduced revenue in 1998 but enhanced margins. Lower paper prices and reduced
paper sales to some customers, where our markup for buying the paper for the
customer did not cover our costs of financing and storage, resulted in lower
pass-through revenue. In addition, we encouraged some customers to buy
services directly from third parties rather than through us at a slight
markup. With these changes, both the sales and expense are no longer recorded
in our financial results. These factors primarily affected Merchandise Media.
While net sales were down in Merchandise Media compared with last year, value-
added revenue increased.
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Net sales for 1996 were 3.5% higher than 1997 but included revenue from
Metromail and DESI ($206 million), which were consolidated at that time due to
our ownership interest, as well as our discontinued commercial printing
operations in the United Kingdom ($59 million). Despite 1997's sales being
lower than in 1996, value-added revenue was essentially equal to 1996 levels.
Expenses
Gross profit in 1998 grew by $108 million. This 11% increase over 1997 came
from our focus on productivity initiatives, as well as higher volume. Gross
profit as a percentage of sales improved to 21.1% in 1998 compared with 19.4%
in 1997. The gross profit ratio in 1996 was 19.2%.
Our cost of materials in both 1998 and 1997 was $1.9 billion compared with
$2.1 billion in 1996. The primary raw materials we use are paper and ink.
Because the price of paper can be volatile, in periods of rising prices the
company's revenues and costs for materials increase; in periods of falling
prices, revenues and material costs decline. The company purchases or
customers supply paper used in the printing process. Customer-supplied paper
is reflected in neither our revenues nor cost of materials. If we purchase
paper for the customer, we recover the cost as a pass-through cost, at a
margin that is lower than the margin we earn for printing and related
services.
In 1998, the price of paper for grades employed in our manufacturing process
declined approximately 6% from the prior year due to oversupply and price
competition. We reduced the amount of paper purchased on behalf of customers
in selected cases where the markup recovered on the paper did not cover our
associated costs. In 1997, the cost of paper ranged from 5% to 10% per short
ton higher than 1996 prices.
Our results also are affected by the price of scrap (by-product) paper,
which we sell. In 1997, the company began to record income from the sale of
by-products as a recovery of the cost of materials and reclassified prior-year
financial results to more accurately reflect the impact of by-products on
operations. In 1998, by-products recovery increased by less than $1 million.
In 1997, by-products recovery declined by $1 million from 1996.
Selling and administrative expense increased by 11% to $570 million in 1998
compared with the prior year. In addition to volume-related increases and
higher consolidated Stream International expenses, most of the increase was
related to information systems-related expenditures. (See "Year 2000"
discussion on page 15.) The ratio of selling and administrative expense to net
sales was 11.4% in 1998 compared with 10.4% in 1997 and 10.2% in 1996.
Operating earnings, excluding the loss from operations of businesses held
for sale and the $71 million ($42 million after-tax) restructuring and
impairment charge in 1997, increased by $49 million from a year ago to reach
$488 million in 1998. The 11% increase reflects the company's focus on
productivity in our core business. Operating margins, excluding the loss from
operations of businesses held for sale and the 1997 restructuring and
impairment charge, were 9.7% in 1998 compared with 9.0% in 1997 and 8.9% in
1996.
Non-Operating Items
Net interest expense for 1998 declined 14% to $78 million due to lower
average debt balances associated with improvements in balance sheet
management. In 1997, net interest expense declined 5% from the prior year to
$91 million, reflecting lower average interest rates and lower average debt
balances.
Other income for 1998 decreased by $16 million to $10 million. The decline
is due to non-recurring gains in 1997 on the sale of investments in our
venture-capital portfolio. Other income for 1997 was $9 million higher than in
1996 due to lower corporate-owned life insurance expense, partially offset by
lower gains on the sale of non-core investments.
10
<PAGE>
Events Affecting Comparability
Restructuring/Impairment Charges Excluding Charges for Operations of
Businesses Held for Sale--In December 1997, the company announced a $71
million ($42 million after-tax) restructuring and impairment charge related to
the discontinuation of activities no longer aligned with our strategic focus,
including:
. the sale of our Coris content-management software operation,
. the shutdown of our Crawfordsville, Indiana, book fulfillment operations,
. the closing of a development office in Singapore, and
. the development of certain manufacturing information systems.
During 1996, the company recorded two restructuring charges--totaling $442
million ($374 million after taxes and minority interest benefit)--to
restructure various operations and write down certain impaired assets,
including equipment, intangibles and investments in non-core businesses.
Approximately $195 million of the charge related to restructuring and
realigning our gravure operations in North America, including the costs of
closing facilities in Casa Grande, Arizona, and Newton, North Carolina.
Approximately $122 million was related to other manufacturing restructuring,
including:
. discontinuing catalog and magazine printing in the United Kingdom,
leading to the consolidation of two facilities into a single directory
printing facility,
. discontinuing book prepress operations in Barbados, and
. consolidating a stand-alone book bindery in Scranton, Pennsylvania, into
an existing facility.
The remaining $125 million was for write-downs of equipment, intangibles and
investments in non-core businesses in accordance with Statement of Financial
Accounting Standards (SFAS) 121, Accounting for Impairment of Long-Lived
Assets.
Restructuring/Impairment Charges for Operations of Businesses Held for
Sale--In the second quarter of 1998, the company recorded an $80 million
impairment charge related to the write-down of goodwill on the books of CS&T.
We did not recognize a tax benefit from this charge because we were unable to
absorb the unrealized capital loss.
In the fourth quarter of 1997, we recognized a $100 million ($60 million
after-tax) provision to adjust the carrying costs of CS&T and MMI to their
estimated net realizable values. (See "Stream, CS&T and MMI" discussion on
page 5 for additional details.)
In 1996, we recognized two restructuring charges to reposition the worldwide
operations of CS&T and MMI that totaled $119 million ($61 million after taxes
and minority interest benefit). In March 1996, we recorded an $86 million
charge ($44 million after taxes and minority interest benefit), which included
provisions for the closing of a plant in Wetherby, England, and MMI's
Crawfordsville, Indiana, documentation printing and diskette replication
operations. In July 1996, we took an additional $33 million charge ($17
million after taxes and minority interest benefit) to further restructure
MMI's operations.
Divestitures--Metromail, which had been wholly owned by the company,
completed an initial public offering of its common stock in June 1996, which
reduced our interest in Metromail to approximately 38%. In March 1998,
Metromail entered into a merger agreement with The Great Universal Stores,
P.L.C. (GUS), and we committed to sell our remaining interest in Metromail to
GUS. In April 1998, we received approximately $297 million, or $238 million
after-tax, for our remaining interest in Metromail.
DESI, which had been wholly owned by the company, completed an initial
public offering of its common stock in November 1996, which reduced our
interest in DESI to approximately 43%. In May 1998, DESI entered into a merger
agreement with Bowne & Co., Inc. (Bowne), and we committed to sell our
remaining interest in DESI to Bowne. In July 1998, we received approximately
$45 million, or $36 million after-tax, for our remaining interest in DESI.
11
<PAGE>
We used proceeds from the Metromail and DESI transactions to repurchase
shares. (See "Share Repurchase" discussion below.)
Corporate-Owned Life Insurance (COLI)--We have used COLI to fund employee
benefits for several years. In 1996, the United States Health Care Reform Act
eliminated the deduction for interest from loans borrowed against COLI
programs. 1998 was the final year of the phase-out period for deductions.
Without the COLI deduction, we anticipate a higher effective tax rate in 1999
and future years.
The Internal Revenue Service (IRS), in its routine audit of the company, has
disallowed the COLI interest deductions we claimed in our 1990 to 1992 tax
returns. The company has challenged this position in a formal protest filed
with the IRS Appeals division. We expect to resolve the issue eventually in a
manner that does not materially affect our financial position and results of
operations.
Share Repurchase--In 1998, we purchased 13.2 million shares of our stock for
approximately $544 million in open-market and privately negotiated
transactions. These repurchases were part of two share repurchase programs we
announced in 1998. In January 1998, the Board of Directors authorized the
repurchase of up to $500 million of company stock, and in September the board
authorized the repurchase of up to $300 million of additional company stock.
These programs were authorized to be completed by December 1999; the first was
completed in 1998. Both programs include shares purchased to issue under our
various stock option plans.
In 1997, we purchased approximately 2.3 million shares to issue under
various stock option plans. The number of diluted shares outstanding as of
December 31, 1997, was 147 million, while the full-year average number of
diluted shares outstanding was 148 million.
In 1996, we repurchased $250 million of common stock in addition to
purchasing approximately 2.3 million shares to issue under various stock
option plans. The number of diluted shares outstanding as of December 31,
1996, was 147 million, while the full-year average number of diluted shares
outstanding was 154 million.
Loss from Operations of Businesses Held for Sale--In 1998, the loss from
operations of businesses held for sale was $80 million (with no associated tax
benefit), or $0.56 per diluted share, which reflects the second-quarter
impairment charge recorded to write down CS&T's goodwill. In 1997, the after-
tax loss from operations of businesses held for sale was $76 million, or $0.51
per diluted share. This amount includes the $100 million ($60 million after-
tax) provision to adjust the carrying values of CS&T and MMI to their net
realizable values. In 1997, there were also $16 million in after-tax operating
losses from CS&T and MMI.
In 1996, the after-tax loss from operations of businesses held for sale was
$86 million, or $0.56 per diluted share. This amount includes the two
restructuring and impairment charges to reposition the worldwide operations of
CS&T and MMI that totaled $119 million ($61 million after taxes and minority
interest benefit). The 1996 loss also includes $25 million of after-tax
operating losses related to CS&T and MMI.
Cash Flow
Operating Activities--The company's main source of liquidity is cash from
operating activities. In 1998, cash provided from operating activities was
$733 million, down slightly from 1997's $742 million, which was principally
driven by the initial success of our program begun in 1997 to reduce working
capital.
The 1998 levels of working capital were lower than a year ago despite higher
sales. The cash conversion cycle (days sales outstanding plus days inventory
on hand minus days payables outstanding) continued to improve to 38 days from
43 days a year ago and 47 days in 1996. The ratio of working capital to sales
has also continued to improve to 6.3% in 1998 from 8.0% in 1997 and 10.3% in
1996.
12
<PAGE>
Investing Activities--Our principal recurring investing activities are
capital expenditures to improve our productivity of operations and to expand
in specific markets. In 1998, capital expenditures totaled $225 million, a
$135 million decline from 1997. Spending levels in 1998 reflect our
disciplined investment process, which includes evaluating a broad range of
alternatives, and our focus on productivity, which tends to emphasize less
costly process-enhancement investments. In 1998, we also invested in some
systems-related and other improvements that were expensed rather than
capitalized. In 1999 and future years, we expect annual capital spending to
increase to between $300 million and $350 million, still well below levels of
recent years, reflecting the improved discipline and process supporting our
investment activities.
During 1998, we continued our initiative to sell operations and assets no
longer aligned with our strategic priorities. In 1998, we generated $301
million net of taxes from these activities, which included selling our
remaining interests in Metromail and DESI, in addition to $26 million
associated with the sale of other assets. In 1997, we generated $51 million
net of taxes from selling our interest in three European joint ventures and
disposing of interests from our venture-capital portfolio. In 1996, the
company generated, net of taxes, $277 million and $23 million from
transactions related to its partial disposition of its ownership in Metromail
and DESI, respectively, and an additional $32 million from other dispositions.
During 1998, we increased our investment in two of our international
operations. In July, we purchased additional outstanding shares of Editorial
Lord Cochrane S.A., the largest printer in Chile, to increase our ownership
position to 78% from 55%. In November, we purchased the interests of our
partner in our Poland operation, the Polish-American Printing Company, to take
100% ownership. Previously, we owned 51%. These actions give us the ability to
better control the future direction of these growing operations, which are
strategically important. Results historically have been consolidated for both
entities, as our ownership was higher than 50%.
We announced two small, strategic acquisitions in 1998. In October, we
purchased Ediciones Eclipse S.A. de C.V., a Mexico City-based printer of
retail inserts. This acquisition complements our existing capabilities in
nearby San Juan del Rio, Mexico, and makes us the largest commercial printer
in this emerging country. In December, we purchased GTE's St. Petersburg,
Florida, directory-printing plant. The agreement included a long-term contract
to print certain GTE directories. This acquisition brings us important
geographic and operating benefits by extending our core directory-printing
capabilities into the southeastern United States. This allows us to reposition
work within our U.S. operations and produce directories closer to final
distribution points, simplifying logistics and accelerating delivery for
directory publishers.
Financing Activities--Financing activities include net borrowings, dividend
payments and share repurchases. The company's net borrowings declined by $156
million in 1998, $226 million in 1997 and $160 million in 1996. The decline in
1998 was a result of strong working capital management, lower capital spending
and cash generated from the disposition of assets no longer aligned with the
company's strategic priorities, partially offset by share repurchase activity.
Commercial paper is our primary source of short-term financing. On December
31, 1998, we had $122 million outstanding in commercial paper borrowing. In
addition, at December 31, 1998, we had a $400 million unused revolving credit
facility with a number of banks. This facility provides support for issuing
commercial paper and other credit needs. Management believes the company's
cash flow and borrowing capability are sufficient to fund its operations.
Cash used to repurchase common stock, net of dispositions, was $457 million
in 1998 (see "Share Repurchase" discussion on page 12). In 1997, $36 million
of net cash was used to purchase common stock, primarily to cover options
granted to employees. In 1996, $274 million of net cash was used to repurchase
shares.
Dividends to shareholders totaled $115 million in 1998, $115 million in 1997
and $113 million in 1996.
13
<PAGE>
Financial Condition--Our financial position remains strong as evidenced by
our year-end balance sheet. Our total assets were $3.8 billion, $346 million
lower than in 1997, due to the increased focus on managing capital. We have
reduced capital expenditures through disciplined investing while more
aggressively managing working capital and disposing of assets no longer
aligned with our strategic focus. 1998 average invested capital (total debt
and equity, less our investment in businesses held for sale, computed on a 12-
month average) was $2.5 billion, a $197 million decline from 1997. Increased
earnings, excluding one-time items, in conjunction with the decrease in
invested capital, have contributed to a 150 basis point improvement in return
on average invested capital to 12.9% in 1998.
At year-end 1998, the debt-to-capital ratio increased to 45%, from 43% in
1997. The company's year-end debt-to-total-market-value decreased to 19% from
22% a year ago. Over long periods of time, our goal for an optimal capital
structure is to manage this ratio within a range of 20% to 25%.
Other Information
Human Resources--As of December 31, 1998, approximately 31,000 full-time
employees worked for the company in our core printing operations. Stream
International employed another 5,300 people. In our core printing operations,
approximately 86% of our employees work in the United States, and
approximately 5% of those are covered by collective bargaining agreements. Of
the approximately 4,300 people working in our international operations, 27%
are covered by collective bargaining agreements.
While the number of U.S. employees decreased slightly from a year ago,
minority and female representation among professionals, officials and managers
increased by 26% and 18%, respectively. Minority representation is now 12%
among our U.S. professionals, officials and managers while female
representation is now 34%. Minorities represent 14% of our U.S. workforce and
females represent 33%.
Technology--We remain a technology leader, investing not only in print-
related technologies such as computer-to-plate, customer connectivity and
digital imaging capabilities, but also in Internet-based business models, such
as our SelectSource(R) and HouseNet(R) services. These businesses help our
customers effectively deliver their content on the Internet.
SelectSource and HouseNet address the online needs of catalogers and
publishers, respectively. SelectSource offers content conversion and site
development services for catalog and retail customers. HouseNet, an online
community of interest focused on home improvement topics, aggregates content
around the themes of home, garden, crafts and money management to offer a one-
stop information resource for consumers. HouseNet was recently named Yahoo's
number-one site for home improvement information for 1998.
Book Publishing Services also applies technology to create solutions that
enable our customers to manage and distribute content in multiple media
formats. In 1998, we signed a contract with a major customer to create a
global, digital archive, as well as a new custom publishing solution allowing
education customers to build books online. In addition, Book Publishing
Services is the leading supplier of conversion services to the emerging
electronic book marketplace.
In the production process for print, increased digitization allows us to
implement world-class manufacturing techniques. Digital workflows, coupled
with on-press instrumentation and advanced statistical process control
techniques, will allow us to more effectively manage both our manufacturing
assets and our raw material inputs. Additionally, new digital imaging
capabilities are allowing higher levels of customization, enabling highly
personalized printed products to be delivered to consumers.
We are focused on investing in technologies that help us deliver products,
services and solutions that are valued by our customers and thereby contribute
to our financial performance.
14
<PAGE>
Year 2000
Process control and information systems are becoming increasingly important
to the effective management of the company. Increased spending on new systems
and updating of existing systems will be necessary. In the near term, we are
focusing these efforts on ensuring that processes and systems are Year 2000
compliant. In addition, the company is focused on an initiative to upgrade and
standardize the company's information technology infrastructure, which has the
incidental effect of addressing certain of the company's Year 2000 compliance
issues. We have deferred a number of other infrastructure and systems
initiatives that would support continuous productivity improvements and
enhanced service capabilities until after the company completes its Year 2000
efforts.
The Year 2000 compliance issue stems from the computer industry's practice
of conserving data storage by using two digits to represent a year. Systems
and hardware using this format may process data incorrectly or fail with the
use of dates in the next century. These types of failures can influence
applications that rely on dates to perform calculations (such as an accounts
receivable aging report), as well as facility systems (such as building
security and heating) and manufacturing equipment.
The company's efforts to address Year 2000 compliance issues in our core
business include:
. evaluating internal computing infrastructure, business applications and
shop-floor systems for Year 2000 compliance,
. replacing or renovating systems and applications as necessary to assure
such compliance, and
. testing the replaced or renovated systems and applications.
Our efforts in these respects are well under way, and we currently expect
that all phases of such efforts will be completed by mid-1999. In addition to
our internal remediation activities, we are continuing to evaluate compliance
by key suppliers, vendors and other external companies, including customers
whose systems interact with ours. We expect to substantially complete this
evaluation in early 1999. Separate Year 2000 compliance programs are in
progress at Stream International and CS&T.
Although the company expects internal systems to be Year 2000 compliant as
described above, we intend to prepare a contingency plan that will specify
what we plan to do if critical systems, processes, suppliers, vendors and
external companies encounter Year 2000 issues. We have launched a contingency
planning effort focused on these areas and the establishment of processes,
structures and procedures for coordinating our contingency response efforts.
Specific plans will be developed throughout the course of the year.
Company employees, assisted by the expertise of external consultants where
necessary, staff the Year 2000 compliance efforts. Actual spending on our Year
2000 initiative in 1998 was $45 million, which is reflected in administrative
expense. Management expects 1999 expenses to be similar. These estimated
expenses do not include costs being capitalized with respect to the company's
information and technology infrastructure upgrade and standardization
initiative or estimated costs associated with Year 2000 initiatives at Stream
International or CS&T.
Litigation
In 1996, a purported class action was brought against the company on behalf
of current and former African-American employees alleging that the company
racially discriminated against them. The complaint seeks declaratory and
injunctive relief, and asks for actual, compensatory, consequential and
punitive damages in an amount not less than $500 million. Although the
plaintiffs seek nationwide class certification, most of the specific factual
assertions of the complaint relate to the closing of our Chicago catalog
operations in 1993. Other general claims relate to other company locations. In
February, 1999, the magistrate judge ruled that all claims relating to the
Chicago catalog operations were untimely. Plaintiffs have appealed this
ruling. If the ruling of the magistrate judge is upheld, the claims relating
to other facilities will still be pending as is plaintiffs' motion for class
certification.
15
<PAGE>
In 1995, a class action was filed against the company alleging that older
workers were discriminated against in selection for termination upon closing
of the Chicago catalog operations. The suit also alleges that we violated the
Employee Retirement Income Security Act (ERISA) in determining benefits
payable to retiring or terminating employees. In August, 1997, the court
certified classes in each of the age discrimination and ERISA claims limited
to former employees of the Chicago operation.
In 1998, a purported class action was filed against the company on behalf of
current and former African-American employees, alleging that the company
racially discriminated against them. While making many of the same general
discrimination claims contained in the 1996 case, the plaintiffs in this case
also claim retaliation by the company for the filing of discrimination charges
or otherwise complaining of race discrimination. The complaint seeks the same
relief and damages as sought in the 1996 case.
The 1996 and 1995 cases relate primarily to the circumstances surrounding
the closing of the Chicago catalog operations. The company believes that it
acted properly in the closing of the operations. The company also believes
that it has a number of valid defenses to all of the claims made and it will
vigorously defend its actions. However, because the cases are in the
preliminary stages, management cannot make a meaningful estimate of any loss
that could result from an unfavorable outcome of any of the pending cases.
Environmental Regulations
Our business is subject to various laws and regulations relating to employee
health and safety and to environmental protection. Our policy is to comply
with all laws and regulations that govern protection of the environment and
employee health and safety. Our overriding principles are to create
sustainable compliance and an injury-free workplace. We do not anticipate that
compliance will have a material adverse effect on our competitive or
consolidated financial positions.
Outlook
The commercial printing industry in the United States (our primary
geographic market) is highly competitive in most product categories and
geographic regions. Competition is largely based on price, quality and
servicing the special needs of customers. Industry analysts believe that there
is overcapacity in most commercial printing markets. Therefore, competition is
fierce.
We are a large user of paper, bought by us or supplied to us by our
customers. The cost and supply of certain paper grades used in the
manufacturing process will continue to affect our financial results. However,
management currently does not see any disruptive conditions affecting prices
and supply of paper in 1999.
Postal costs are a significant component of our customers' cost structure.
Changes in postal rates, which became effective in January 1999, are not
expected to negatively affect the company. In fact, postal rate increases
enhance the value of Donnelley Logistic Services to our customers, as we are
able to improve the cost and efficiency of mail processing and distribution.
This ability to deliver mail on a more precise schedule and at a lower cost
should enhance our position in the marketplace.
In addition to paper and postage costs, consumer confidence and economic
growth are key drivers of print demand. While current economic conditions
remain favorable, there is uncertainty around 1999's business environment. A
significant change in the economic outlook could affect demand for the
company's products, particularly in the financial printing market.
In the longer term, technological changes, including the electronic
distribution of information, present both risks and opportunities for the
company. We believe that with our competitive strengths, including our
comprehensive service offerings, technology leadership, depth of management
experience, customer relationships and economies of scale, we can develop the
most valuable solutions for our customers, which should result in growth in
shareholder value throughout the next year and into the new millennium.
16
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company is exposed to market risk from changes in interest rates and
foreign exchange rates. However, the company generally maintains more than
half of its debt at fixed rates (approximately 70% at December 1998), and
therefore its exposure to short-term interest rate fluctuations is immaterial
to the consolidated financial statements of the company as a whole. The
company's exposure to adverse changes in foreign exchange rates also is
immaterial to the consolidated financial statements of the company as a whole,
and the company occasionally uses financial instruments to hedge exposures to
foreign exchange rate changes. The company does not use financial instruments
for trading purposes and is not a party to any leveraged derivatives. Further
disclosure relating to financial instruments is included in the Debt Financing
and Interest Expense note in the Notes to Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is contained in Item 14 of Part
IV and listed on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors and officers of the company is
contained on pages 6 and 14-15 of the company's definitive Proxy Statement
dated February 18, 1999, and is incorporated herein by reference. See also the
list of the company's officers and related information under "Executive
Officers and Principal Officers of R.R. Donnelley & Sons Company" at the end
of Part I of this annual report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation for the year ended December
31, 1998, and, with respect to certain of such information, prior years, is
contained on pages 21-24 and 28-30 of the company's definitive Proxy Statement
dated February 18, 1999, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning the beneficial ownership of the company's common
stock is contained on pages
18-20 of the company's definitive Proxy Statement dated February 18, 1999, and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The financial statements listed in the accompanying index (page F-1) to
the financial statements are filed as part of this annual report.
2. Financial Statement Schedule
The financial statement schedule listed in the accompanying index (page
F-1) to the financial statements is filed as part of this annual
report.
3. Exhibits
The exhibits listed on the accompanying index to exhibits (pages E-1
through E-2) are filed as part of this annual report.
(b)Reports on Form 8-K
No current Report on Form 8-K was filed during the quarter ended
December 31, 1998.
(c)Exhibits
The exhibits listed on the accompanying index (pages E-1 through E-2)
are filed as part of this annual report.
(d)Financial Statements omitted--
Certain schedules have been omitted because the required information is
included in the consolidated financial statements or notes thereto or
because they are not applicable or not required.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 31st day
of March, 1999.
R. R. DONNELLEY & SONS COMPANY
/s/ Gregory A. Stoklosa
By __________________________________
Gregory A. Stoklosa,
Vice President and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated, on the 31st day of March, 1999.
Signature and Title Signature and Title
/s/ William L. Davis /s/ Thomas S. Johnson
- ------------------------------------- -------------------------------------
William L. Davis Thomas S. Johnson
Chairman of the Board and Director
Chief Executive Officer, Director
(Principal Executive Officer) /s/ George A. Lorch
-------------------------------------
/s/ Cheryl A. Francis George A. Lorch
- ------------------------------------- Director
Cheryl A. Francis
Executive Vice President and /s/ M. Bernard Puckett
Chief Financial Officer -------------------------------------
(Principal Financial Officer) M. Bernard Puckett
Director
/s/ Gregory A. Stoklosa
- ------------------------------------- /s/ Oliver R. Sockwell
Gregory A. Stoklosa -------------------------------------
Vice President and Controller Oliver R. Sockwell
(Principal Accounting Officer) Director
/s/ Joseph B. Anderson, Jr. /s/ Bide L. Thomas
- ------------------------------------- -------------------------------------
Joseph B. Anderson, Jr. Bide L. Thomas
Director Director
/s/ Martha Layne Collins /s/ Stephen M. Wolf
- ------------------------------------- -------------------------------------
Martha Layne Collins Stephen M. Wolf
Director Director
/s/ James R. Donnelley
- -------------------------------------
James R. Donnelley
Director
/s/ Judith H. Hamilton
- -------------------------------------
Judith H. Hamilton
Director
19
<PAGE>
ITEM 14(a). INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Consolidated Statements of Income for each of the three years ended
December 31, 1998..................................................... F-2
Consolidated Balance Sheets at December 31, 1998 and 1997.............. F-3
Consolidated Statements of Cash Flows for each of the three years ended
December 31, 1998..................................................... F-4
Consolidated Statements of Shareholders' Equity for each of the three
years ended December 31, 1998......................................... F-5
Notes to Consolidated Financial Statements............................. F-6
Report of Independent Public Accountants............................... F-21
Unaudited Interim Financial Information, Dividend Summary and Financial
Summary............................................................... F-22
Report of Independent Public Accountants on Financial Statement
Schedule.............................................................. F-23
Financial Statement Schedule
II--Valuation and Qualifying Accounts................................ F-24
</TABLE>
F-1
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per-Share Data
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................. $5,018,436 $4,892,944 $5,063,821
Cost of sales.............................. 3,960,239 3,942,339 4,092,895
---------- ---------- ----------
Gross profit............................... 1,058,197 950,605 970,926
Selling and administrative expenses........ 569,779 511,115 518,288
Restructuring and impairment charge........ -- 70,702 441,709
Loss from operations of businesses held for
sale...................................... 80,067 113,594 122,789
---------- ---------- ----------
Earnings from operations................... 408,351 255,194 (111,860)
Other income (expense):
Interest expense......................... (78,166) (90,765) (95,482)
Gain on sale of investments and stock
offerings of subsidiaries............... 168,903 -- 80,041
Other, net............................... 10,217 25,742 16,821
---------- ---------- ----------
Earnings (loss) before income taxes........ 509,305 190,171 (110,480)
Income taxes............................... 214,725 59,540 47,145
---------- ---------- ----------
Net Income (Loss)...................... $ 294,580 $ 130,631 $ (157,625)
========== ========== ==========
Net Income (Loss) per Share of Common Stock
Basic.................................... $ 2.11 $ 0.90 $ (1.04)
Diluted.................................. 2.08 0.89 (1.04)
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-2
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Thousands of Dollars, Except Share Data
<TABLE>
<CAPTION>
December 31
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Assets
Cash and equivalents................................. $ 66,226 $ 47,814
Receivables, less allowances for doubtful accounts of
$14,279 in 1998 and $16,259 in 1997................. 843,094 814,664
Inventories.......................................... 182,931 201,402
Prepaid expenses..................................... 52,742 82,691
---------- ----------
Total Current Assets............................... 1,144,993 1,146,571
========== ==========
Net property, plant and equipment, at cost, less
accumulated depreciation of $2,667,827 in 1998 and
$2,426,649 in 1997.................................. 1,700,927 1,788,116
Goodwill and other intangibles, net of accumulated
amortization of $183,589 in 1998 and $150,563 in
1997................................................ 381,394 396,604
Other non-current assets............................. 515,029 648,168
Net assets of businesses held for sale............... 45,476 154,707
---------- ----------
Total Assets....................................... $3,787,819 $4,134,166
========== ==========
Liabilities
Accounts payable..................................... $ 331,257 $ 291,666
Accrued compensation................................. 188,187 152,235
Short-term debt...................................... 60,000 45,000
Current and deferred income taxes.................... 76,605 58,888
Other accrued liabilities............................ 242,251 264,833
---------- ----------
Total Current Liabilities.......................... 898,300 812,622
========== ==========
Long-term debt....................................... 998,978 1,153,226
Deferred income taxes................................ 284,908 229,538
Other non-current liabilities........................ 304,755 347,283
---------- ----------
Total Non-current Liabilities...................... 1,588,641 1,730,047
========== ==========
Shareholders' Equity
Common stock at stated value ($1.25 par value)
Authorized shares: 490,000,000; Issued: 140,889,050
in 1998 and 150,889,050 in 1997..................... 308,462 320,962
Retained earnings.................................... 1,325,634 1,528,406
Cumulative translation adjustments................... (55,050) (45,782)
Unearned compensation................................ (6,118) (9,414)
Reacquired common stock, at cost..................... (272,050) (202,675)
---------- ----------
Total Shareholders' Equity......................... 1,300,878 1,591,497
---------- ----------
Total Liabilities and Shareholders' Equity......... $3,787,819 $4,134,166
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows provided by (used for) operating
activities:
Net income (loss)........................... $ 294,580 $ 130,631 $(157,625)
Loss from operations of businesses held for
sale, net of tax........................... 80,067 75,894 86,142
Gain on sale of investments and stock
offerings of subsidiaries, net of tax...... (101,342) -- (80,041)
Restructuring and impairment charges, net of
tax and minority interest.................. -- 42,421 374,449
Depreciation................................ 317,432 327,770 316,290
Amortization................................ 50,371 50,160 48,986
Gain on sale of assets...................... (13,446) (16,028) (17,758)
Net change in operating working capital..... 79,146 117,386 (20,355)
Net change in other assets and liabilities.. 40,657 20,023 30,735
Other....................................... (14,630) (6,019) (12,856)
--------- --------- ---------
Net Cash Provided by Operating Activities. 732,835 742,238 567,967
========= ========= =========
Cash flows provided by (used for) investing
activities:
Capital expenditures........................ (225,222) (360,195) (370,906)
Proceeds from collection of advances to
affiliates................................. -- -- 277,013
Proceeds from stock offering of subsidiary.. -- -- 23,492
Other investments including acquisitions,
net of cash acquired....................... (91,184) (47,526) (24,165)
Disposition of assets....................... 26,498 51,276 31,563
Disposition of investments, net of tax...... 274,079 -- --
--------- --------- ---------
Net Cash Used For Investing Activities.... (15,829) (356,445) (63,003)
========= ========= =========
Cash flows provided by (used for) financing
activities:
Net decrease in borrowings.................. (155,545) (225,967) (160,329)
Disposition of reacquired common stock...... 82,710 45,762 53,058
Acquisition of common stock................. (539,434) (82,041) (327,130)
Cash dividends paid......................... (114,898) (114,934) (112,645)
--------- --------- ---------
Net Cash Used for Financing Activities.... (727,167) (377,180) (547,046)
========= ========= =========
Effect of exchange rate changes on cash and
equivalents.................................. (592) (775) (395)
--------- --------- ---------
Net Increase in Cash from Businesses Held for
Sale......................................... 29,165 18,659 41,551
--------- --------- ---------
Net Increase (Decrease) in Cash and
Equivalents.................................. 18,412 26,497 (926)
--------- --------- ---------
Cash and Equivalents at Beginning of Year..... 47,814 21,317 22,243
--------- --------- ---------
Cash and Equivalents at End of Year........... $ 66,226 $ 47,814 $ 21,317
========= ========= =========
Changes in operating working capital, net of acquisitions and divestitures:
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Decrease (increase) in assets:
Receivables--net............................ $ (27,041) $ 103,077 $ 149,048
Inventories--net............................ 18,846 (3,496) 42,919
Prepaid expenses............................ 29,972 5,116 (78,086)
Increase (decrease) in liabilities:
Accounts payable............................ 37,352 6,249 (81,477)
Accrued compensation........................ 30,049 30,347 17,606
Other accrued liabilities................... (10,032) (23,907) (70,365)
--------- --------- ---------
Net Change in Operating Working Capital....... $ 79,146 $ 117,386 $ (20,355)
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Thousands of Dollars, Except Share Data
<TABLE>
<CAPTION>
Reacquired Common Unearned
Common Stock Stock Compensation Other
--------------------- ---------------------- Restricted Retained Comprehensive
Shares Amount Shares Amount Stock Earnings Income Total
----------- -------- ----------- --------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... 158,608,800 $330,612 (4,656,261) $(142,243) $(9,297) $2,023,131 $(29,033) $2,173,170
Net loss................ (157,625) (157,625)
Translation adjustments. 2,453 2,453
----------
Comprehensive income.... (155,172)
Treasury stock
purchases.............. (2,333,691) (77,131) (77,131)
Cash dividends.......... (112,645) (112,645)
Common shares issued
under stock programs... 1,654,697 48,880 3,895 283 53,058
Common shares retired
under repurchase plan.. (7,719,750) (9,650) (240,349) (249,999)
----------- -------- ----------- --------- ------- ---------- -------- ----------
Balance at December 31,
1996................... 150,889,050 320,962 (5,335,255) (170,494) (5,402) 1,512,795 (26,580) 1,631,281
Net income.............. 130,631 130,631
Translation adjustments. (19,202) (19,202)
----------
Comprehensive income.... 111,429
Treasury stock
purchases.............. (2,293,757) (82,041) (82,041)
Cash dividends.......... (114,934) (114,934)
Common shares issued
under stock programs 1,857,792 49,860 (4,012) (86) 45,762
----------- -------- ----------- --------- ------- ---------- -------- ----------
Balance at December 31,
1997................... 150,889,050 320,962 (5,771,220) (202,675) (9,414) 1,528,406 (45,782) 1,591,497
Net income.............. 294,580 294,580
Translation adjustments. (9,268) (9,268)
----------
Comprehensive income.... 285,312
Treasury stock
purchases.............. (13,196,393) (543,743) (543,743)
Cash dividends.......... (114,898) (114,898)
Common shares issued
under stock programs 2,400,991 78,444 3,296 970 82,710
Common shares retired
under repurchase plan (10,000,000) (12,500) 10,000,000 395,924 (383,424) --
----------- -------- ----------- --------- ------- ---------- -------- ----------
Balance at December 31,
1998................... 140,889,050 $308,462 (6,566,622) $(272,050) $(6,118) $1,325,634 $(55,050) $1,300,878
=========== ======== =========== ========= ======= ========== ======== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting Policies
Basis of Consolidation--The consolidated financial statements include the
accounts of the company and its majority-owned subsidiaries. Minority
interests in the income (loss) of consolidated subsidiaries ($4 million of
expense, $6 million of expense and $2 million of income in 1998, 1997 and
1996, respectively) are included in other expense on the Consolidated
Statements of Income. Intercompany items and transactions are eliminated in
consolidation. The company held investments in unconsolidated affiliates,
including the net assets of businesses held for sale, of $132 million and $430
million at December 31, 1998 and 1997, respectively.
Nature of Operations--The company provides a wide variety of print and
print-related services and products for specific customers, primarily under
contract. Some contracts provide for progress payments from customers as
certain phases of the work are completed; however, revenue is not recognized
until the earnings process has been completed in accordance with the terms of
the contracts. Some customers furnish paper for their work, while in other
cases the company purchases the paper and resells it to the customer.
Cash and Equivalents--The company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.
Inventories--Inventories include material, labor and factory overhead and
are stated at the lower of cost or market. The cost of approximately 78% and
80% of the inventories at December 31, 1998 and 1997, respectively, has been
determined using the Last-In, First-Out (LIFO) method. This method reflects
the effect of inventory replacement costs in earnings; accordingly, charges to
cost of sales reflect recent costs of material, labor and factory overhead.
The remaining inventories are valued using the First-In, First-Out (FIFO) or
specific identification methods.
Capitalization, Depreciation and Amortization--Property, plant and equipment
are stated at cost. Depreciation is computed principally on the straight-line
method based on useful lives of 15 to 33 years for buildings and 3 to 15 years
for machinery and equipment. Maintenance and repair costs are charged to
expense as incurred. Major overhauls are capitalized as reductions to
accumulated depreciation. When properties are retired or disposed, the costs
and accumulated depreciation are eliminated and the resulting profit or loss
is recognized in income. Goodwill ($174 million and $156 million, net of
accumulated amortization, at December 31, 1998 and 1997, respectively) is
amortized over periods ranging from 10 to 40 years. Other intangibles
represent primarily the cost of acquiring print contracts and volume
guarantees and are amortized over the periods in which benefits will be
realized.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Comprehensive Income--In 1998, the company adopted SFAS 130, Reporting
Comprehensive Income. This statement establishes rules for the reporting of
comprehensive income and its components. Comprehensive income consists of net
income and foreign currency translation adjustments and is presented in the
Consolidated Statements of Shareholders' Equity. The adoption of SFAS 130 had
no impact on total shareholders' equity.
Reclassifications--Certain prior year amounts have been reclassified to
conform to the 1998 presentation.
F-6
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Businesses Held for Sale
During 1996, Stream International Holdings, Inc. (SIH), an 80%-owned equity
investment of the company, reorganized into three independent businesses:
Stream International, which provides outsource technical support services;
Corporate Software & Technology (CS&T), a software distribution company; and
Modus Media International (MMI), a global manufacturing and fulfillment
business. CS&T and MMI comprised substantially all of the company's investment
and net income in SIH.
On December 15, 1997, SIH's businesses became separate companies and the
company's ownership interest in SIH was restructured. The company converted
its equity and debt positions in Stream International into 87% of the common
stock of that business. Additionally, the company converted its equity and
debt positions in CS&T into 86% of the common stock of CS&T and sold its
equity and debt positions in MMI for non-voting preferred stock of MMI. The
disposition of the company's interest in CS&T will be effected through the
sale of the business, which is planned to occur during 1999.
In connection with the planned disposition of CS&T and the restructuring of
the company's interest in MMI, the company has reported its interests in CS&T
and MMI as businesses held for sale. During December 1998, the net assets and
results of operations of businesses held for sale were reclassified from
discontinued operations because the planned sale of CS&T did not occur in
1998, as originally intended. The net assets of CS&T were included in net
assets of businesses held for sale, as of December 31, 1998 and 1997. The non-
voting preferred stock in MMI was included in other non-current assets as of
December 31, 1998 and 1997.
During 1998, the company recorded an $80 million (with no associated tax
benefit) impairment charge related to the write-down of goodwill on the books
of CS&T. Additionally, the company recorded a fourth-quarter 1997 impairment
charge of $100 million ($60 million after-tax) to adjust the carrying costs of
CS&T and MMI to their estimated net realizable values.
As part of the restructuring program announced in the first half of 1996,
the company recorded restructuring and impairment charges of $119 million ($61
million after-tax) for businesses held for sale. The charges primarily related
to the repositioning of MMI and CS&T's worldwide operations and the
restructuring of their software manufacturing, printing, kitting and
fulfillment operations.
Summary financial information of businesses held for sale has been disclosed
within the "Industry Segment Information" footnote (see F-18).
Divestitures
On June 19, 1996, Metromail Corporation (the company's previously wholly
owned subsidiary, which is a leading provider of market-oriented consumer
information and reference services) completed an initial public offering of
13.8 million shares of its common stock at $20.50 per share. As a result of
the offering, the company's interest in Metromail was reduced to approximately
38% (37% as of December 31, 1997). Approximately $250 million of the proceeds
from the completed offering were used by Metromail to retire certain
indebtedness owed to the company. The company in turn used the payment from
Metromail to pay down debt and for general corporate purposes. The transaction
resulted in a pre-tax gain for the company of $44 million and a tax provision
of $18 million. As a result of this transaction, the company changed its
method of accounting for Metromail from consolidation to the equity method,
effective July 1, 1996. Under the equity method, the company recognizes in
income its proportionate share of the net income of Metromail. Metromail's
1996 net sales and operating earnings were $126 million and $13 million,
respectively, through the date of the initial public offering.
F-7
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In March 1998, Metromail entered into a merger agreement with The Great
Universal Stores, P.L.C. (GUS), pursuant to which GUS initiated a tender offer
for the outstanding shares of Metromail. In conjunction with the merger, the
company committed to sell its remaining interest in Metromail to GUS. On April
13, 1998, the company received $297 million, or approximately $238 million
after-tax, for its remaining interest in Metromail. The company recognized a
pre-tax gain of $146 million ($87 million after-tax) from this transaction.
On November 4, 1996, Donnelley Enterprise Solutions Incorporated (DESI),
formerly a wholly owned subsidiary of the company and a single-source provider
of integrated information-management services to professional service
organizations, completed an initial public offering of 2.9 million shares of
its common stock at $25.00 per share, of which 1.0 million were offered by the
company. As a result of the offering, the company's interest in DESI was
reduced to approximately 43%. The company received approximately $52 million
from the net proceeds of the shares sold and from repayment of amounts owed by
DESI, which was used for general corporate purposes. The transaction resulted
in a pre-tax gain of $36 million, or $22 million after taxes. As a result of
this transaction, the company changed its method of accounting for DESI from
consolidation to the equity method, effective November 1, 1996.
In May 1998, DESI entered into a merger agreement with Bowne & Co., Inc.
(Bowne), pursuant to which Bowne initiated a tender offer to acquire all
outstanding shares of DESI. In conjunction with the merger, the company
committed to sell its remaining interest in DESI to Bowne. On July 7, 1998,
the company received $45 million, or approximately $36 million after-tax, for
its remaining interest in DESI. The company recognized a pre-tax gain of $23
million ($14 million after-tax) from this transaction.
Acquisitions
During 1998, the company increased its investment in subsidiaries located in
South America and Poland, in addition to acquiring other smaller, print-
related businesses. The aggregate cost of these investments was $86 million in
cash, of which $69 million was paid in 1998 and $17 million will be paid in
1999. All of these acquisitions have been accounted for as purchases.
Restructuring and Impairment Charges
In the first half of 1996, the company provided for the restructuring and
realignment of its gravure printing operations in North America, the
repositioning of other businesses, the write-down of certain equipment and the
impairment of intangible assets and investments in non-core businesses. These
actions resulted in pre-tax charges of $442 million ($374 million after taxes
and minority interest benefit). Approximately $195 million of the charges were
related to its gravure platform realignment and approximately $122 million
were related to other manufacturing restructuring. The charges also included
$125 million in write-downs of equipment, intangibles and investments in non-
core businesses.
In December 1997, the company provided for the impairment of assets and
restructuring costs related primarily to the elimination of activities that no
longer support the company's strategic focus. These included the impaired
development costs of certain manufacturing systems, the sale of Coris, the
company's content-management software subsidiary, and the shutdown of book
fulfillment operations in Crawfordsville, Indiana.
Impairment losses related to the 1996 and 1997 charges totaled $385 million
pre-tax and were calculated based on the excess of the carrying amount of
assets over the assets' fair values. The fair value of an asset is generally
determined as the discounted estimate of future cash flows generated by the
asset.
As of December 31, 1998, the company's restructuring programs are
substantially complete.
F-8
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Inventories
The components of the company's inventories were as follows:
<TABLE>
<CAPTION>
December 31
------------------
1998 1997
-------- --------
In thousands
<S> <C> <C>
Raw materials and manufacturing supplies.................... $121,490 $123,280
Work in process............................................. 150,775 153,142
Finished goods.............................................. 1,220 1,047
Progress billings........................................... (42,217) (31,715)
LIFO reserve................................................ (48,337) (44,352)
-------- --------
Total................................................... $182,931 $201,402
======== ========
</TABLE>
The company's cost of sales was increased by LIFO provisions of $4.5 million
in 1998 and $0.6 million in 1997, and decreased by $7.5 million in 1996. The
company uses the external-index method of valuing LIFO inventories.
Property, Plant and Equipment
The following table summarizes the components of property, plant and
equipment (at cost):
<TABLE>
<CAPTION>
December 31
---------------------
1998 1997
---------- ----------
In thousands
<S> <C> <C>
Land...................................................... $ 32,336 $ 33,755
Buildings................................................. 617,029 634,114
Machinery and equipment................................... 3,719,389 3,546,896
---------- ----------
Total................................................. $4,368,754 $4,214,765
========== ==========
</TABLE>
Commitments and Contingencies
As of December 31, 1998, authorized expenditures on incomplete projects for
the purchase of property, plant and equipment totaled $233 million. Of this
total, $93 million has been contractually committed. The company has a variety
of commitments with suppliers for the purchase of paper, ink and other
materials for delivery in future years at prevailing market prices.
The company has operating lease commitments totaling $322 million extending
through various periods to 2009. The lease commitments total $54 million for
1999, range from $34 million to $47 million in each of the years 2000-2003 and
total $108 million for years 2004 and thereafter.
The company also has future annual commitments totaling $32 million to
invest in various affordable housing limited partnerships that provide
cumulative annual tax benefits and credits in amounts greater than the
investments.
The company is not exposed to significant accounts receivable credit risk,
due to its customer diversity with respect to industry classification,
distribution channels and geographic locations.
On November 25, 1996, a purported class action was brought against the
company in federal district court in Chicago, Illinois, on behalf of all
current and former African-American employees, alleging that the company
racially discriminated against them in violation of the Civil Rights Act of
1871, as amended, and the U.S.
F-9
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Constitution (Jones, et al. v. R.R. Donnelley & Sons Co.). The complaint seeks
declaratory and injunctive relief, and asks for actual, compensatory,
consequential and punitive damages in an amount not less than $500 million.
Although plaintiffs seek nationwide class certification, most of the specific
factual assertions of the complaint relate to the closing by the company of
its Chicago catalog operations in 1993. Other general claims relate to other
company locations. On February 11, 1999, the magistrate judge ruled that all
claims relating to the Chicago catalog operations were untimely. Plaintiffs
have appealed this ruling. If the ruling of the magistrate judge is upheld,
the claims relating to other locations will still be pending as is plaintiffs'
motion for class certification.
On December 18, 1995, a class action was filed against the company in
federal district court in Chicago alleging that older workers were
discriminated against in selection for termination upon the closing of the
Chicago catalog operations (Gerlib, et al. v. R.R. Donnelley & Sons Co.). The
suit also alleges that the company violated the Employee Retirement Income
Security Act (ERISA) in determining benefits payable to retiring or terminated
employees. On August 14, 1997, the court certified classes in both the age
discrimination and ERISA claims limited to former employees of the Chicago
catalog operations.
On June 30, 1998, a purported class action was filed against the company in
federal district court in Chicago on behalf of current and former African-
American employees, alleging that the company racially discriminated against
them in violation of Title VII of the Civil Rights Act of 1964 (Adams, et al.
v. R.R. Donnelley & Sons Co.). While making many of the same general
discrimination claims contained in the Jones complaint, the Adams plaintiffs
are also claiming retaliation by the company for the filing of discrimination
charges or otherwise complaining of race discrimination. The complaint seeks
the same relief and damages as sought in the Jones case.
Both the Jones and Gerlib cases relate primarily to the circumstances
surrounding the closing of the Chicago catalog operations. The company
believes that it acted properly in the closing of the operations. Further,
with regard to all three cases, the company believes it has a number of valid
defenses to all of the claims made and will vigorously defend its actions.
However, management is unable to make a meaningful estimate of any loss that
could result from an unfavorable outcome of any of the pending cases.
In addition, the company is a party to certain litigation arising in the
ordinary course of business which, in the opinion of management, will not have
a material adverse effect on the operations or financial condition of the
company.
Retirement Plans
The company's restated Retirement Benefit Plan (the Plan) is a non-
contributory defined benefit plan. Substantially all U.S. employees age 21 or
older are covered by the Plan. Normal retirement age is 65, but reduced early
retirement benefits are paid to fully vested participants at or after age 55.
As required, the company uses the projected unit credit actuarial cost method
to determine pension cost for financial reporting purposes. In conjunction
with this method, the company amortizes deferred gains and losses (using the
corridor method) and prior service costs over the average remaining service
life of its active employee population. In addition, a transition credit (the
excess of Plan assets plus balance sheet accruals over the projected
obligation as of January 1, 1987) is amortized over 19 years. For tax and
funding purposes, the entry age normal actuarial cost method is used. Plan
assets include primarily government and corporate debt securities, marketable
equity securities, commingled funds and group annuity contracts purchased from
a life insurance company. In the event of Plan termination, the Plan provides
that no funds can revert to the company and any excess assets over Plan
liabilities must be used to fund retirement benefits.
F-10
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition to pension benefits, the company provides certain healthcare and
life insurance benefits for retired employees. Substantially all of the
company's regular full-time U.S. employees become eligible for these benefits
upon reaching age 55 while working for the company and having 10 years of
continuous service at retirement. The company funds a portion of the
liabilities associated with these plans through a tax-exempt trust. The assets
of the trust are invested primarily in life insurance covering some of the
company's employees.
The following represents the obligations and plan assets at fair value for
the company's pension and postretirement plans at December 31:
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
-------------------- ------------------
1998 1997 1998 1997
---------- -------- -------- --------
In Thousands
<S> <C> <C> <C> <C>
Benefit obligation at end of prior
year.................................. $ 950,223 $838,005 $233,437 $220,970
Service cost........................... 38,030 31,886 9,508 8,585
Interest cost.......................... 65,317 61,337 15,626 16,010
Plan participants' contributions....... -- -- 1,848 1,618
Amendments............................. 9,651 (1,640) -- --
Actuarial loss/(gain).................. 33,794 70,610 (1,894) 3,616
Acquisitions/plan
initiations/curtailments.............. 3,008 -- 244 380
Expected benefits paid................. (50,794) (49,975) (18,115) (17,742)
---------- -------- -------- --------
Benefit obligation at end of year.. $1,049,229 $950,223 $240,654 $233,437
========== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
---------------------- -----------------
1998 1997 1998 1997
---------- ---------- -------- --------
In Thousands
<S> <C> <C> <C> <C>
Fair value of plan assets at end of
prior year.......................... $1,421,849 $1,238,315 $262,813 $219,719
Actual return on plan assets......... 100,024 233,509 54,773 43,094
Acquisition.......................... 4,099 -- -- --
Employer contribution................ -- -- -- --
Plan participants' contributions..... -- -- -- --
Expected benefits paid............... (50,794) (49,975) -- --
---------- ---------- -------- --------
Fair value of plan assets at end
of year......................... $1,475,178 $1,421,849 $317,586 $262,813
========== ========== ======== ========
</TABLE>
The following represents the funded status of these plans at December 31:
<TABLE>
<CAPTION>
Postretirement
Pension Benefits Benefits
-------------------- ------------------
1998 1997 1998 1997
--------- --------- -------- --------
In Thousands
<S> <C> <C> <C> <C>
Funded status........................ $ 425,949 $ 471,626 $ 76,933 $ 29,376
Unrecognized transition obligation... (68,948) (78,798) -- --
Unrecognized net actuarial
(gain)/loss......................... (143,023) (192,562) (77,739) (43,638)
Unrecognized prior service cost...... 29,219 22,908 (18,215) (24,950)
--------- --------- -------- --------
Prepaid (accrued) benefit cost... $ 243,197 $ 223,174 $(19,021) $(39,212)
========= ========= ======== ========
</TABLE>
The weighted average assumptions used in the actuarial computations that
derived the above amounts were as follows:
<TABLE>
<CAPTION>
Pension Postretirement
Benefits Benefits
---------------- ----------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate............................... 6.75% 7.00% 7.50% 6.75% 7.00% 7.50%
Expected return on plan assets.............. 9.50 9.50 9.50 9.00 9.00 9.00
Average rate of compensation increase....... 4.00 4.00 4.00 4.00 4.00 4.00
</TABLE>
F-11
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the measurement purposes of other retirement benefits, a 7.6% annual
rate of increase in the per-capita cost of covered healthcare benefits was
assumed for 1999. The rate was assumed to decrease gradually to 5.0% for 2008
and remain at that level thereafter.
The components of the net periodic benefit cost and total income and expense
were as follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------------------ ----------------------------
1998 1997 1996 1998 1997 1996
--------- --------- -------- -------- -------- --------
In thousands
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $ 38,030 $ 31,886 $ 32,619 $ 9,508 $ 8,584 $ 8,626
Interest cost........... 65,317 61,337 58,121 15,626 16,010 14,712
Expected return on plan
assets................. (115,769) (104,516) (96,497) (20,671) (18,304) (16,509)
Amortization of
transition obligation.. (9,850) (9,850) (9,850) -- -- --
Amortization of prior
service cost........... 2,249 1,803 1,804 (6,345) (6,463) (6,754)
--------- --------- -------- -------- -------- --------
Net periodic benefit
cost............... (20,023) (19,340) (13,803) (1,882) (173) 75
Curtailment (gain)/loss. -- (1,400) (1,426) 244 -- (4,166)
--------- --------- -------- -------- -------- --------
Total
(income)/expense... $ (20,023) $ (20,740) $(15,229) $ (1,638) $ (173) $ (4,091)
========= ========= ======== ======== ======== ========
</TABLE>
Assumed healthcare cost trend rates have a significant effect on the amounts
reported for postretirement benefits. A 1-percentage-point change in assumed
healthcare cost trend rates would have the following effects for the year
ended December 31, 1998:
<TABLE>
<CAPTION>
1% Increase 1% Decrease
----------- -----------
In Thousands
<S> <C> <C>
Effect on total of service and interest cost
components..................................... $ 526 $ (514)
Effect on postretirement benefit obligation..... 7,460 (7,236)
</TABLE>
Income Taxes
Cash payments for income taxes were $152 million, $60 million and $76
million in 1998, 1997 and 1996, respectively. The components of income tax
expense for the years ending December 31, 1998, 1997 and 1996, were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
In Thousands
<S> <C> <C> <C>
Federal
Current.......................................... $139,180 $ 68,909 $ 84,340
Deferred......................................... 35,222 (17,675) (38,720)
State.............................................. 40,323 8,306 1,525
-------- -------- --------
Total.......................................... $214,725 $ 59,540 $ 47,145
======== ======== ========
</TABLE>
F-12
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The significant deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
December 31
-----------------
1998 1997
-------- --------
In Thousands
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation................................... $170,343 $160,779
Investments................................................ 67,122 61,303
Pensions................................................... 83,521 84,710
Other...................................................... 60,183 42,290
-------- --------
Total deferred tax liabilities........................... 381,169 349,082
-------- --------
Deferred tax assets:
Postretirement benefits.................................... 15,685 15,685
Accrued liabilities........................................ 64,726 78,832
Investments................................................ 73,301 49,036
Other...................................................... 29,689 49,679
-------- --------
Total deferred tax assets................................ 183,401 193,232
-------- --------
Valuation allowance.......................................... 44,949 15,980
-------- --------
Net deferred tax liabilities................................. $242,717 $171,830
======== ========
</TABLE>
The company has used corporate-owned life insurance (COLI) to fund employee
benefits for several years. In 1996, the United States Health Care Reform Act
was passed, eliminating the deduction for interest from loans borrowed against
COLI programs. 1998 was the final year of the phase-out period for deductions.
Without the COLI deduction, the company anticipates a higher effective tax
rate in 1999 and future years.
The Internal Revenue Service (IRS), in its routine audit of the company, has
disallowed the $34 million of tax benefit that resulted from the COLI interest
deductions claimed by the company in its 1990 to 1992 tax returns. The company
has challenged this position in a formal protest filed with the IRS Appeals
division. The company expects to resolve the issue eventually in a manner that
does not materially impact its financial position and results of operations.
The following table outlines the reconciliation of differences between the
U.S. statutory tax rates and the rates used by the company in determining net
income:
<TABLE>
<CAPTION>
1998 1997 1996
---- ----- -----
<S> <C> <C> <C>
Federal statutory rate.................................... 35.0% 35.0% (35.0)%
Restructuring and impairment charges...................... -- -- 78.9
Foreign tax rates......................................... -- (2.6) (3.0)
State and local income taxes, net of U.S. federal income
tax benefit.............................................. 5.1 2.8 12.8
Goodwill amortization..................................... 0.3 0.3 5.6
Benefits resulting from corporate-owned life insurance
programs................................................. (1.5) (7.0) (7.5)
Affordable housing investment credits..................... (3.9) (10.4) (17.6)
Change in valuation allowance............................. 5.3 6.6 11.0
Other..................................................... 1.9 6.6 (2.5)
---- ----- -----
Total................................................. 42.2% 31.3% 42.7%
==== ===== =====
</TABLE>
F-13
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Debt Financing and Interest Expense
The company's debt consisted of the following:
<TABLE>
<CAPTION>
December 31
---------------------
1998 1997
---------- ----------
In Thousands
<S> <C> <C>
Commercial paper......................................... $ 121,500 $ 258,020
Medium-term notes due 1999-2005 at a weighted average
interest rate of 6.93%.................................. 370,000 409,000
9.125% debentures due December 1, 2000................... 199,862 199,790
8.875% debentures due April 15, 2021..................... 80,807 149,692
8.82% debentures due April 15, 2031...................... 68,898 --
7.0% notes due January 1, 2003........................... 109,843 109,804
Other.................................................... 108,068 71,920
---------- ----------
Total................................................ $1,058,978 $1,198,226
========== ==========
</TABLE>
Based upon the interest rates currently available to the company for
borrowings with similar terms and maturities, the fair value of the company's
debt exceeds its book value at December 31, 1998, by approximately $87
million. The company's notes and debentures are not actively traded and
contain no call provisions.
At December 31, 1998, the company had available credit facilities of $400
million with a group of domestic and foreign banks, of which $200 million
expires December 10, 1999. The remaining $200 million expires December 10,
2003. The credit arrangements provide support for the issuance of commercial
paper and other credit needs. As of December 31, 1998, there has been no
borrowing under these credit facilities. The company pays an annual commitment
fee on the total unused credit facilities of 0.06% for the 364-day facility
and 0.08% for the 5-year facility.
At December 31, 1998, the company had $283 million of commercial paper and
short-term debt outstanding, of which $223 million is classified as long-term
since the company has the ability and intent to maintain such debt on a long-
term basis. The weighted average interest rate on all commercial paper debt
outstanding during 1998 was 5.44% (4.92% at December 31, 1998). Annual
maturities of long-term debt (excluding commercial paper and short-term debt)
are as follows: 2000--$248 million, 2001--$9 million, 2002--$72 million,
2003--$128 million and thereafter $319 million.
The following table summarizes interest expense included in the Consolidated
Statements of Income:
<TABLE>
<CAPTION>
1998 1997 1996
------- -------- --------
In Thousands
<S> <C> <C> <C>
Interest incurred................................. $83,162 $100,724 $107,198
Amount capitalized as property, plant and
equipment........................................ (4,996) (9,959) (11,716)
------- -------- --------
Total......................................... $78,166 $ 90,765 $ 95,482
======= ======== ========
</TABLE>
Interest paid, net of capitalized interest, was $79 million, $90 million and
$93 million in 1998, 1997 and 1996, respectively.
F-14
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Earnings per Share
In accordance with SFAS 128, Earnings per Share, the company has computed
basic and diluted earnings per share (EPS) using the treasury stock method.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- ---------
In Thousands, Except Per-
Share Data
<S> <C> <C> <C>
Average shares outstanding........................ 139,624 145,929 151,830
Effect of dilutive securities--options............ 2,241 1,579 1,811
-------- -------- ---------
Average shares outstanding, adjusted for dilutive
effects.......................................... 141,865 147,508 153,641
======== ======== =========
Net income (loss)................................. $294,580 $130,631 $(157,625)
Basic EPS....................................... $ 2.11 $ 0.90 $ (1.04)
Diluted EPS..................................... 2.08 0.89 (1.04)
======== ======== =========
</TABLE>
Stock and Incentive Programs for Employees
Restricted Stock Awards--At December 31, 1998 and 1997, respectively, the
company had outstanding 400,000 and 542,000 restricted shares of its common
stock granted to certain officers. These shares are registered in the names of
the recipients, but are subject to conditions of forfeiture and restrictions
on sale or transfer for one to seven years from the grant date. Dividends on
the restricted shares are paid currently to the recipients and, accordingly,
the restricted shares are treated as outstanding shares. The expense of the
grant is recognized evenly over the vesting period.
The value of the restricted stock awards was $18 million and $20 million
based on the closing price of the company's stock at each year-end ($43.81 and
$37.25 at December 31, 1998 and 1997, respectively). During 1998, a total of
33,000 shares of restricted stock were issued with a grant date fair value of
$2 million. Charges to expense for this stock plan were $4 million, $5 million
and $2 million in 1998, 1997 and 1996, respectively.
Stock Purchase Plan--The company has a stock purchase plan for selected
managers and key staff employees. Under the plan, the company is required to
contribute an amount equal to 70% of participants' contributions, of which 50%
is applied to the purchase of stock and 20% is paid in cash. Amounts charged
to expense for this plan were $9 million in 1998. In 1996 and 1997, the
company failed to meet performance targets required under the plan, and no
expenses were incurred.
Incentive Compensation Plans--In 1998, the company implemented a new
management incentive plan designed to provide incentive compensation to
executive officers that is closely tied to the creation of value for company
shareholders. Awards under the new plan are largely based on the achievement
of Economic Value Added (EVA) improvement targets, along with earnings per
share objectives and other individual and strategic targets. The new plan
combines aspects of both an annual and long-term plan by adding a "banking"
feature, in which a portion of the amount earned in the year is paid out to
participants and a portion is deferred for payout in subsequent years. The
company has accrued for both the portion currently payable and the deferred
component. Prior to 1998, the company had both an annual incentive plan and a
long-term incentive plan for its executive officers. The company's incentive
compensation plans for other officers, managers and supervisors are primarily
based on annual improvements in EVA.
Stock Options--The company has incentive stock option plans for its
employees. Under these plans, the options vest from three to nine and one-half
years after date of grant and may be exercised, once vested, up to 10 years
from the date of grant. Under authorized Stock Incentive Plans, a maximum of
5.4 million shares were
F-15
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
available for future grants of stock options and restricted stock awards as of
December 31, 1998. The company accounts for employee stock options under
Accounting Principles Board (APB) Opinion 25, Accounting for Stock Issued to
Employees, under which no compensation cost has been recognized. Had
compensation cost been determined consistent with SFAS 123, Accounting for
Stock-Based Compensation, the company's net income and respective earnings per
share would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- ---------
In Thousands, Except Per-
Share Data
<S> <C> <C> <C>
Net income
As reported..................................... $294,580 $130,631 $(157,625)
Pro forma....................................... 278,924 115,437 (171,333)
Basic earnings per share:
As reported..................................... $ 2.11 $ 0.90 $ (1.04)
Pro forma....................................... 2.00 0.79 (1.13)
Diluted earnings per share:
As reported..................................... $ 2.08 $ 0.89 $ (1.04)
Pro forma....................................... 1.97 0.78 (1.13)
</TABLE>
The fair value of each option granted during the year is estimated on the
date of grant using the Black Scholes option-pricing model with the following
range of assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Dividend yield.................................... 1.98% 2.24% 2.16%
Expected volatility............................... 26.51% 25.10% 22.92%
Risk-free interest rate........................... 5.28% 6.32% 6.39%
Expected life..................................... 10 Years 10 Years 10 Years
</TABLE>
A summary of the status of the company's option activity is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(thousands) Price (thousands) Price (thousands) Price
----------- -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year...... 13,958 $33.04 14,916 $31.68 14,246 $30.98
Options granted......... 1,627 41.81 1,485 40.28 3,320 34.09
Options exercised....... (2,387) 29.77 (1,535) 25.25 (1,245) 21.41
Options forfeited....... (800) 33.47 (908) 35.60 (1,405) 39.39
------ ------ ------ ------ ------ ------
Options outstanding at
end of year............ 12,398 $34.80 13,958 $33.05 14,916 $31.68
====== ====== ====== ====== ====== ======
Options exercisable at
end of year............ 7,344 $31.93 6,397 $28.57 6,618 $27.18
====== ====== ====== ====== ====== ======
Weighted average fair
value of options
granted with:
Exercise price equal
to stock price on
grant date........... $15.01 $11.20 $11.64
Exercise price
exceeding stock price
on grant date........ N/A $ 8.10 $ 7.74
</TABLE>
F-16
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following summarizes information about stock options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------- --------------------
Average Weighted Weighted
Remaining Average Average
Shares Contractual Exercise Shares Exercise
(thousands) Life Price (thousands) Price
----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$17.72-$38.06............. 9,284 6.00 Years $31.24 6,524 $30.29
$38.07-$76.96............. 3,114 8.40 Years $45.40 820 $44.93
------ ---------- ------ ----- ------
$17.72-$76.96............. 12,398 6.61 Years $34.80 7,344 $31.93
====== ========== ====== ===== ======
</TABLE>
Other Information--Under the stock programs, authorized unissued shares or
treasury shares may be used. The company intends to reacquire shares of its
common stock to meet the stock requirements of these programs in the future.
Preferred Stock
The company has 2 million shares of $1.00 par value preferred stock
authorized for issuance. The Board of Directors may divide the preferred stock
into one or more series and fix the redemption, dividend, voting, conversion,
sinking fund, liquidation and other rights. The company has no present plans
to issue any preferred stock. One million of the shares are reserved for
issuance under the "Shareholder Rights Plan" discussed below.
Shareholder Rights Plan
The company maintains a Shareholder Rights Plan (the Plan) designed to deter
coercive or unfair takeover tactics, to prevent a person or group from gaining
control of the company without offering fair value to all shareholders and to
deter other abusive takeover tactics that are not in the best interest of
shareholders.
Under the terms of the Plan, each share of common stock is accompanied by
one right; each right entitles the shareholder to purchase from the company
one one-thousandth of a newly issued share of Series A Junior Preferred Stock
at an exercise price of $140.
The rights become exercisable 10 days after a public announcement that an
acquiring person (as defined in the Plan) has acquired 15% or more of the
outstanding common stock of the company (the Stock Acquisition Date), 10
business days after the commencement of a tender offer that would result in a
person owning 15% or more of such shares or 10 business days after an adverse
person (as defined in the Plan) has acquired 10% or more of such shares and
such ownership interest is likely to have a material adverse impact on the
company. The company can redeem the rights for $0.01 per right at any time
until 10 days following the Stock Acquisition Date (under certain
circumstances, the 10-day period can be shortened or lengthened by the
company). The rights will expire on August 8, 2006, unless redeemed earlier by
the company.
If, subsequent to the rights becoming exercisable, the company is acquired
in a merger or other business combination at any time when there is a 15% or
more holder, the rights will then entitle a holder (other than a 15% or more
shareholder or an adverse person) to buy shares of the acquiring company with
a market value equal to twice the exercise price of each right. Alternatively,
if a 15% holder acquires the company by means of a merger in which the company
and its stock survives, if any person acquires 15% or more of the company's
common stock or if an adverse person acquires 10% or more of the company's
common stock and such ownership is likely to have a material adverse impact on
the company, each right not owned by a 15% or more shareholder or an adverse
person would become exercisable for common stock of the company (or, in
certain circumstances, other consideration) having a market value equal to
twice the exercise price of the right.
F-17
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Industry Segment Information
The company operates exclusively in the commercial printing industry.
Substantially all revenues result from the sale of printed products to
customers in the following markets: Book Publishing Services, Financial
Services, Magazine Publishing Services, Merchandise Media and
Telecommunications. The company's management has aggregated its commercial
print businesses as one reportable segment due to strong similarities in the
economic characteristics, nature of products and services, production
processes, class of customer and distribution methods used. The company's
investment in businesses held for sale has been disclosed as a separate
reportable segment, as the revenues generated from these businesses are
unrelated to the commercial printing industry. (See the "Businesses Held for
Sale" footnote (F-7) for additional information.)
The company has disclosed earnings (loss) from operations as the primary
measure of segment earnings (loss). This is the measure of profitability used
by the company's chief operating decision-maker that is most consistent with
the presentation of profitability reported within the consolidated financial
statements. The accounting policies of the business segments reported are the
same as those described in the "Summary of Significant Accounting Policies"
(F-6).
F-18
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Commercial Businesses Consolidated
Print Held for Sale(3) Corporate(1) Other(2) Combined Adjustments(3) Total
---------- ---------------- ------------ -------- ---------- -------------- ------------
In Thousands
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Sales................... $4,804,824 $ 881,473 $ -- $213,612 $5,899,909 $ (881,473) $5,018,436
Restructuring and
impairment charges..... -- 80,067 -- -- 80,067 (80,067) --
Earnings (loss) from
operations............. 497,337 (80,067) (7,246) (1,673) 408,351 -- 408,351
Earnings (loss) before
income taxes........... 519,070 (80,067) 71,663 (1,361) 509,305 -- 509,305
Assets.................. 3,152,190 294,782 499,067 91,086 4,037,125 (249,306) 3,787,819
Depreciation and
amortization........... 351,061 10,745 -- 16,742 378,548 (10,745) 367,803
Capital expenditures.... 198,822 5,664 9,700 16,700 230,886 (5,664) 225,222
1997
Sales................... $4,706,098 $1,547,765 $ -- $186,846 $6,440,709 $(1,547,765) $4,892,944
Restructuring and
impairment charges..... 70,702 100,000 -- -- 170,702 (100,000) 70,702
Earnings (loss) from
operations............. 332,602 (113,594) 28,850 7,336 255,194 -- 255,194
Earnings (loss) before
income taxes........... 343,210 (113,594) (45,741) 6,296 190,171 -- 190,171
Assets.................. 3,502,461 348,252 389,849 87,149 4,327,711 (193,545) 4,134,166
Depreciation and
amortization........... 363,537 40,344 -- 14,393 418,274 (40,344) 377,930
Capital expenditures.... 319,249 43,597 21,500 19,446 403,792 (43,597) 360,195
1996
Sales................... $4,908,323 $1,526,369 $ -- $155,498 $6,590,190 $(1,526,369) $5,063,821
Restructuring and
impairment charges..... 435,209 118,924 -- 6,500 560,633 (118,924) 441,709
(Loss) earnings from
operations............. (4,665) (122,789) 23,015 (7,421) (111,860) -- (111,860)
Earnings (loss) before
income taxes........... 11,339 (122,789) 7,326 (6,356) (110,480) -- (110,480)
Assets.................. 3,496,768 690,864 483,940 76,987 4,748,559 (304,731) 4,443,828
Depreciation and
amortization........... 352,652 44,033 -- 12,624 409,309 (44,033) 365,276
Capital expenditures.... 348,792 35,258 2,100 20,014 406,164 (35,258) 370,906
</TABLE>
- --------
(1) Corporate earnings primarily consist of the following unallocated items:
net earnings of benefit plans (excluding service cost) of $74 million, $71
million and $61 million in 1998, 1997 and 1996, respectively, which were
offset by general corporate, management and information technology costs.
In addition to earnings from operations, corporate earnings before income
taxes include: 1998 interest expense of $83 million and gains on the sale
of the company's remaining interest in two former subsidiaries of $169
million; 1997 interest expense of $101 million and gains on the sale of
assets of $16 million; and 1996 interest expense of $107 million, gains on
the sale of assets of $18 million and gains on the partial divestitures of
subsidiaries of $80 million.
Corporate assets primarily consist of the following unallocated items at
December 31: 1998 benefit plan assets of $285 million and investments in
affordable housing of $120 million; 1997 benefit plan assets of $289
million and investments in affordable housing of $102 million; 1996 benefit
plan assets of $298 million and investments in affordable housing of $81
million.
(2) Represents other operating segments of the company.
(3) Refer to "Businesses Held for Sale" footnote (F-7), which describes the
separate presentation of the net assets and the results of operations of
businesses held for sale.
F-19
<PAGE>
R.R. DONNELLEY & SONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Geographic Area Information
<TABLE>
<CAPTION>
Domestic International Combined(1)
---------- ------------- -----------
In Thousands
<S> <C> <C> <C>
1998
Sales...................................... $5,118,959 $ 780,950 $5,899,909
Long-lived assets(2)....................... 2,250,739 364,962 2,615,701
1997
Sales...................................... 5,407,617 1,033,092 6,440,709
Long-lived assets(2)....................... 2,584,285 354,583 2,938,868
1996
Sales...................................... 5,582,266 1,007,924 6,590,190
Long-lived assets(2)....................... 2,618,086 480,246 3,098,332
</TABLE>
- --------
(1) Includes net sales and long-lived assets of the company and businesses held
for sale. Refer to "Businesses Held for Sale" footnote (F-7), which
describes the separate presentation of the net assets and the results of
operations of businesses held for sale.
(2) Includes net property, plant and equipment, goodwill and other intangibles,
and other non-current assets.
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated balance sheets of R.R.
Donnelley & Sons Company (a Delaware corporation) and Subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of R.R. Donnelley & Sons
Company and Subsidiaries as of December 31, 1998 and 1997, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chicago, Illinois
January 28, 1999
(except with respect to the matter discussed in paragraph 5 in the commitments
and contingencies footnote, as to which the date is February 11, 1999)
F-21
<PAGE>
UNAUDITED INTERIM FINANCIAL INFORMATION, DIVIDEND
SUMMARY AND FINANCIAL SUMMARY
In Thousands, Except Per-Share Data
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Full Year
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1998
Net sales............... $1,173,598 $1,155,963 $1,274,479 $1,414,396 $5,018,436
Gross profit............ 218,059 240,748 294,020 305,370 1,058,197
Net income.............. 44,206 58,737 99,244 92,393 294,580
Net income per diluted
share.................. 0.30 0.41 0.71 0.67 2.08
Stock market high....... 42 1/8 46 1/4 47 3/4 44 11/16 47 3/4
Stock market low........ 35 1/8 42 1/16 34 13/16 34 34
Stock market closing
price.................. 41 1/16 45 3/4 35 3/16 43 13/16 43 13/16
1997
Net sales............... $1,111,438 $1,146,521 $1,221,743 $1,413,242 $4,892,944
Gross profit............ 193,103 208,837 260,529 288,136 950,605
Net income (loss)....... 29,341 37,676 72,157 (8,543) 130,631
Net income (loss) per
diluted share.......... 0.20 0.25 0.49 (0.06) 0.89
Stock market high....... 36 7/8 39 3/4 41 1/16 37 5/8 41 1/16
Stock market low........ 29 5/8 32 5/8 34 3/8 32 5/8 29 5/8
Stock market closing
price.................. 34 7/8 36 5/8 35 7/16 37 1/4 37 1/4
</TABLE>
Stock prices reflect New York Stock Exchange composite quotes.
Dividend Summary
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Quarterly rate per common share*............ $0.205 $0.195 $0.185 $0.170 $0.150
Yearly rate per common share................ 0.82 0.78 0.74 0.68 0.60
</TABLE>
- --------
* Averages (1998--$0.20 first two quarters and $0.21 last two quarters;
1997--$0.19 first two quarters and $0.20 last two quarters; 1996--$0.18
first two quarters and $0.19 last two quarters; 1995--$0.16 first two
quarters and $0.18 last two quarters; 1994--$0.14 first two quarters and
$0.16 last two quarters).
Financial Summary
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
In Thousands, Except Per-Share Data
<S> <C> <C> <C> <C> <C>
Net sales............... $5,018,436 $4,892,944 $5,063,821 $5,080,775 $4,227,496
Net income (loss)**..... 294,580 130,631 (157,625) 298,793 268,603
Net income (loss) per
common share**......... 2.08 0.89 (1.04) 1.92 1.73
Total assets............ 3,787,819 4,134,166 4,443,828 5,030,680 4,318,787
Non-current liabilities. 1,588,641 1,730,047 2,044,818 2,012,635 1,669,984
</TABLE>
- --------
** Net income (loss) includes the following one-time items: 1998 gains on the
sale of the company's remaining interest in two former subsidiaries of $169
million ($101 million after-tax, or $0.71 per diluted share) and loss from
operations of businesses held for sale of $80 million (with no associated
tax benefit, or $0.56 per diluted share); 1997 restructuring and impairment
charges of $71 million ($42 million after-tax, or $0.29 per diluted share)
and loss from operations of businesses held for sale of $114 million ($76
million after-tax, or $0.51 per diluted share); 1996 restructuring and
impairment charges of $442 million ($374 million after taxes and minority
interest, or $2.45 per diluted share), gains on partial divestiture of
subsidiaries of $80 million ($48 million after-tax, or $0.31 per diluted
share) and loss from operations of businesses held for sale of $123 million
($86 million after-tax, or $0.56 per diluted share).
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders of
R.R. Donnelley & Sons Company:
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in the Company's Annual Report to
Shareholders included in this Form 10-K, and have issued our report thereon
dated January 28, 1999. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in the index
to the financial statements and financial statement schedules is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 28, 1999
F-23
<PAGE>
SCHEDULE II
Valuation and Qualifying Accounts
Transactions affecting the allowances for doubtful accounts during the years
ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
Thousands of dollars
<S> <C> <C> <C>
Allowance for trade receivable losses:
Balance, beginning of year.................. $ 16,259 $14,205 $18,059
Balance, companies (sold) acquired during
year....................................... -- -- (4,834)
Provisions charged to income................ 12,551 10,676 9,877
-------- ------- -------
28,810 24,881 23,102
Uncollectible accounts written off, net of
recoveries................................. (14,531) (8,622) (8,897)
-------- ------- -------
Balance, end of year........................ $ 14,279 $16,259 $14,205
======== ======= =======
</TABLE>
F-24
<PAGE>
INDEX TO EXHIBITS*
Description Exhibit No.
------- --------
Agreement between R. R. Donnelley & Sons Company and Bain Cap- 2
ital, Inc.(1).................................................
Restated Certificate of Incorporation(2)....................... 3(i)
By-Laws........................................................ 3(ii)(a)
Amendment to By-Laws adopted January 28, 1999 ................. 3(ii)(b)
Form of Rights Agreement, dated as of April 25, 1996 between
R. R. Donnelley & Sons Company and First Chicago Trust Com-
pany of New York(3)...........................................
4(a)
Instruments Defining the Rights of Security Holders(4)......... 4(b)
Indenture dated as of November 1, 1990 between the Company and
Citibank, N.A. as Trustee(5)..................................
4(c)
Five-Year Credit Agreement dated December 11, 1998 among R. R.
Donnelley & Sons Company, the Banks named therein and The
First National Bank of Chicago, as Administrative Agent.......
4(d)
364-Day Credit Agreement dated December 11, 1998 among R. R.
Donnelley & Sons Company, the Banks named therein and The
First National Bank of Chicago, as Administrative Agent.......
4(e)
Retirement Policy for Directors, as amended(6)**............... 10(a)
Directors' Deferred Compensation Agreement, as amended(6)**.... 10(b)
Donnelley Shares Stock Option Plan, as amended(7).............. 10(c)
1993 Stock Ownership Plan for Non-Employee Directors, as 10(d)
amended(8)**...................................................
Senior Management Annual Incentive Plan, as amended(6)**....... 10(e)
Form of Severance Agreement for Senior Officers, as amend- 10(f)
ed(9)**.......................................................
1993 Stock Purchase Plan for Selected Managers and Key Staff
Employees, as amended(8)**....................................
10(g)
1986 Stock Incentive Plan, as amended(8)**..................... 10(h)
1991 Stock Incentive Plan, as amended(8)**..................... 10(i)
1995 Stock Incentive Plan, as amended(6)**..................... 10(j)
Forms of option agreement with certain executive officers and
directors, as amended(10)**...................................
10(k)
Form of option agreement with non-employee directors, as 10(l)
amended(6)**..................................................
Unfunded Supplemental Benefit Plan(5)**........................ 10(m)
Amendment to Unfunded Supplemental Benefit Plan adopted on 10(n)
April 25, 1991(11)**..........................................
Employment Agreement between R. R. Donnelley & Sons Company
and William L. Davis(12)**....................................
10(o)
Premium-Priced Option Agreement between R. R. Donnelley & Sons
Company and William L. Davis(12)**............................
10(p)
Employment Agreement between R. R. Donnelley & Sons Company
and Cheryl A. Francis(7)**....................................
10(q)
Agreement between R. R. Donnelley & Sons Company and W. Ed Ty- 10(r)
ler(1)**......................................................
Computation of Ratio of Earnings to Fixed Charges.............. 12
Subsidiaries of R. R. Donnelley & Sons Company................. 21
Consent of Independent Public Accountants dated March 31, 23
1999..........................................................
Financial Data Schedule........................................ 27
E-1
<PAGE>
- --------
*Filed with the Securities and Exchange Commission. Each such exhibit
may be obtained by a shareholder of the Company upon payment of $5.00
per exhibit.
**Management contract or compensatory plan or arrangement.
(1) Filed as Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1997, filed on March 4, 1998, and incorporated by
reference.
(2) Filed as Exhibit to Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1996, filed on May 3, 1996, and incorporated
herein by reference.
(3) Filed as Exhibit to Form 8-A filed on June 5, 1996, and
incorporated herein by reference.
(4) Instruments, other than that described in 4(c) and 4(d), defining
the rights of holders of long-term debt not registered under the
Securities Exchange Act of 1934 of the registrant and of all
subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed are being omitted pursuant to
paragraph (4)(iii)(A) of Item 601 of Regulation S-K. Registrant agrees
to furnish a copy of any such instrument to the Commission upon
request.
(5) Filed as Exhibit with Form SE filed on March 26, 1992, and
incorporated herein by reference.
(6) Filed as Exhibit to Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1998, filed on November 12, 1998, and
incorporated herein by reference.
(7) Filed as Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1996, filed on March 10, 1997, and incorporated herein by
reference.
(8) Filed as Exhibit to Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1996, filed on November 1, 1996, and
incorporated herein by reference.
(9) Filed as Exhibit to Annual Report on Form 10-K for the year ended
December 31, 1993, filed on March 28, 1994.
(10) Filed as Exhibit to Form S-3 filed on January 15, 1998, and
incorporated herein by reference.
(11) Filed as Exhibit with Form SE filed on May 9, 1991 and
incorporated herein by reference.
(12) Filed as Exhibit to Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997, filed on May 7, 1997, and
incorporated herein by reference.
E-2
<PAGE>
Exhibit 3(ii)(a)
As Amended through March 25, 1999
BY-LAWS OF
R. R. DONNELLEY & SONS COMPANY
ARTICLE I
---------
SECTION 1.1. PRINCIPAL OFFICE. The principal office in the State of
------------ -----------------
Delaware shall be in the City of Wilmington, County of New Castle, State of
Delaware, and the name of the resident agent in charge thereof is The
Corporation Trust Company.
SECTION 1.2. OTHER OFFICES. The corporation may also have offices at such
------------ --------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
SECTION 2.1. ANNUAL MEETING. The annual meeting of the stockholders shall
------------ ---------------
be held on the fourth Thursday in March of each year for the purpose of electing
Directors of the class for which the term expires on that date and for the
transaction of such other business as may properly be brought before the
meeting. Such meeting shall be held at eight o'clock in the morning or such
other time during normal business hours as may be fixed by the Board of
Directors and stated in the notice of the meeting. If the day fixed for the
annual meeting shall be a legal holiday, the Board of Directors may, subject to
the provisions of Article X hereof, designate another day on which such meeting
shall be held. If the election of Directors shall not be held on the date
designated for any annual meeting, or any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as conveniently may be.
Except as otherwise provided by statute or the certificate of incorporation,
the only business which properly shall be conducted at any annual meeting of the
stockholders shall (i) have been specified in the written notice of the meeting
(or any supplement thereto) given as provided in Section 2.4, (ii) be brought
before the meeting by or at the direction of the Board of Directors or the
officer of the corporation presiding at the meeting or (iii) have been specified
in a written notice (a "Stockholder Meeting Notice") given to the corporation,
in accordance with all of the following requirements, by or on behalf of any
stockholder who is entitled to vote at such meeting. Each Stockholder Meeting
Notice must be delivered personally to, or
Page 1
<PAGE>
be mailed to and received by, the Secretary of the corporation at the principal
executive offices of the corporation in the City of Chicago, State of Illinois,
not less than 60 days nor more than 90 days prior to the annual meeting;
provided, however, that in the event that less than 75 days' notice or prior
public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made, whichever first occurs. Each Stockholder Meeting Notice shall set
forth: (i) a description of each item of business proposed to be brought before
the meeting and the reasons for conducting such business at the annual meeting;
(ii) the name and record address of the stockholder proposing to bring such item
of business before the meeting and the reasons for conducting such business at
the annual meeting; (iii) the class and number of shares of stock held of
record, owned beneficially and represented by proxy by such stockholder as of
the record date for the meeting (if such date shall then have been made publicly
available) and as of the date of such Stockholder Meeting Notice and (iv) all
other information which would be required to be included in a proxy statement
filed with the Securities and Exchange Commission if, with respect to any such
item of business, such stockholder were a participant in a solicitation subject
to Section 14 of the Securities Exchange Act of 1934. No business shall be
brought before any annual meeting of stockholders of the corporation otherwise
than as provided in this Section; provided, however, that nothing contained in
this Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting. The officer of the
corporation presiding at the annual meeting of stockholders shall, if the facts
so warrant, determine that business was not properly brought before the meeting
in accordance with the provisions of this Section and, if he should so
determine, he should so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted. (Amended 10/27/94)
SECTION 2.2. SPECIAL MEETINGS. Special meetings of the stockholders, for
------------ -----------------
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chief Executive Officer,
President, or the Chairman of the Board, and shall be called by the Secretary
pursuant to a resolution duly adopted by the affirmative vote of a majority of
the whole Board of Directors. Such call shall state the purposes of the proposed
meeting. Business transacted at any special meeting shall be limited to the
general objectives stated in the call. (Amended 12/15/88)
SECTION 2.3. PLACE OF MEETING. All meetings of stockholders for the
------------ -----------------
election of Directors shall be held in the City of Chicago, County of Cook,
State of Illinois and the Board of Directors is authorized to fix the place
within the City of Chicago for the holding of such meeting. Meetings of
stockholders for any other purpose may be held at such place, within or without
the State of Delaware, and time as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof. (Amended 1/9/57)
Page 2
<PAGE>
SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice stating the
------------ -------------------
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten nor more than fifty days before the date of the meeting, either
personally or by mail, by or at the direction of the Board of Directors, the
Chief Executive Officer, the Chairman of the Board or the President, to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail in a
sealed envelope addressed to the stockholder at his address as it appears on the
records of the corporation, with postage thereon prepaid. (Amended 12/15/88)
SECTION 2.5. CLOSING TRANSFER BOOKS OR FIXING RECORD DATE. The Board of
------------ ---------------------------------------------
Directors may close the stock transfer books of the corporation for a period not
exceeding fifty (50) days preceding the date of any meeting of stockholders, or
the date for payment of any dividend, or the date for the allotment of rights or
the date when any change, or conversion or exchange of capital stock shall go
into effect or for a period of not exceeding fifty (50) days in connection with
obtaining the consent of stockholders for any purpose. In lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding fifty (50) days preceding the date of any meeting of the
stockholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change, or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, or to give such consent and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed shall be entitled to such notice of and to vote at, such
meeting and any adjournment thereof, or to receive payments of such dividend, or
to receive such allotment of rights, or to exercise such rights, or to give such
consent, as the case may be notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.
SECTION 2.6. VOTING LIST. At least ten days before every election of
------------ ------------
Directors, a complete list of the stockholders entitled to vote at such
election, arranged in alphabetical order with the residence of and the number of
voting shares held by each, shall be prepared by the Secretary. Such list shall
be open at the place where said election is to be held for ten days, to the
examination of any stockholders, and shall be produced and kept at the time and
place of election during the whole time thereof, and subject to the inspection
of any stockholder who may be present.
SECTION 2.7. QUORUM. The holders of a majority of the stock issued and
------------ -------
Page 3
<PAGE>
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at any meeting of stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
SECTION 2.8. PROXIES. At all meetings of stockholders a stockholder may
------------ --------
vote by proxy properly submitted by the stockholder or his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy. (Amended 1/28/99)
SECTION 2.9. VOTING. When a quorum is present at any meeting of
------------ -------
stockholders, the affirmative vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall decide any question brought before such meeting, unless
the question is one upon which, by express provision of the statutes, the
certificate of incorporation or these by-laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question. Every stockholder having the right to vote shall be entitled to vote
in person, or by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than eleven months prior to voting,
unless such instrument provides for a longer period. Every such stockholder
shall have one vote for each share of stock having voting power registered in
his name on the books of the corporation. Except where the transfer books of the
corporation shall have been closed or a date shall have been fixed as a record
date for the determination of its stockholders entitled to vote, no share of
stock shall be voted on at any election for Directors which has been transferred
on the books of the corporation within twenty days next preceding such election
of Directors. (Amended 1/28/93)
SECTION 2.10. VOTING OF STOCK OF CERTAIN HOLDERS. Shares standing in the
------------- -----------------------------------
name of another corporation, domestic or foreign, may be voted by such officer,
agent or proxy as the by-laws of such corporation may prescribe or, in the
absence of such provision, as the Board of Directors of such corporation may
determine. Shares standing in the name of a deceased person may be voted by
executor or administrator of such deceased person, either in person or by proxy.
Shares standing in the name of a guardian, conservator or trustee may be voted
by such fiduciary, either in person or by proxy, but no such fiduciary shall be
entitled to vote shares held in such fiduciary capacity without a transfer of
such shares into the name of such fiduciary. Shares standing in the name of a
receiver may be voted by such receiver. A stockholder
Page 4
<PAGE>
whose shares are pledged shall be entitled to vote such shares, unless in the
transfer by the pledger or on the books of the corporation, he has expressly
empowered the pledgee to vote thereon, in which case only the pledgee, or his
proxy, may represent the stock and vote thereon.
SECTION 2.11. TREASURY STOCK. The corporation shall not vote shares of its
------------- ---------------
own stock directly or indirectly; and such shares shall not be counted in
determining the total number of outstanding shares.
SECTION 2.12. ELECTION OF DIRECTORS. When a quorum is present at any
------------ ---------------------
meeting of stockholders, directors shall be elected by a plurality of the votes
of the shares present in person or represented by proxy at such meeting of
stockholders and entitled to vote on the election of directors. (New Section
10/22/92)
ARTICLE III
-----------
Directors
---------
SECTION 3.1. GENERAL POWERS. The property and business of the corporation
------------ ---------------
shall be managed by its Board of Directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders. (Amended 9/28/90)
Without limiting the generality of the foregoing, it shall be the
responsibility of the Board of Directors to establish broad objectives and the
general course of the business, determine basic policies, appraise the adequacy
of overall results, and generally represent and further the interests of the
Company's stockholders and insure the most effective use of the Company's
assets.
Several examples of the responsibilities of the Board are as follows:
1. Establish broad Company objectives and basic policies and maintain
overall control of the business.
2. Make necessary revisions of the by-laws (in accordance with Article X).
3. Determine dividend action (in accordance with Article VIII).
4. Authorize necessary action with respect to issuance of new securities and
listing securities for trading on exchanges.
5. Fix time and place and take other necessary action with respect to
stockholders meetings (in accordance with Article II).
Page 5
<PAGE>
6. Approve issuance of stock certificates to replace those lost or destroyed
(in accordance with Section 7.2).
7. Fill Vacancies in the Board of Directors (in accordance with Section
3.8).
8. Elect the officers of the corporation (in accordance with Section 4.2.)
and appraise their performance.
9. Determine the basic organization structure of the business.
10. Authorize any necessary action with respect to loans and pledging of
assets (in accordance with Section 6.2.).
11. Designate officers authorized to buy or sell corporate investment
securities.
12. Designate persons authorized to execute contracts and other documents
requiring signatures of officers or specific individuals (in accordance
with Section 6.1).
13. Select, or designate those authorized to select, depositaries for
corporate funds and investment securities and designate check signatories
and persons authorized to have access to safe deposit boxes (in
accordance with Sections 6.3 and 6.4).
14. Approve proposals to convey corporate-owned land or buildings or
designate those authorized to take such action.
15. Designate the person or persons authorized to appoint proxies to vote
stock in subsidiary and other concerns in which the corporation has a
significant interest and the person or persons authorized to determine
who shall serve as Directors in representing the parent corporation in
such concerns.
16. Designate stock transfer agents, registrars, and paying agents with
respect to corporate securities and other special purpose agents.
17. Procure special professional services required by and for the Board.
18. Provide for issuance of an annual report to stockholders and such other
reports and notices as the Board deems advisable.
19. Employ, upon recommendation of the Audit Committee (in accordance with
Section 3.13), public accountants to audit the corporation's financial
statements.
Page 6
<PAGE>
20. Review and approve new employee benefit plans and major revisions of
employee stock incentive plans.
21. Review and approve the actions of the Executive Committee as reported in
the minutes of their meetings.
22. Approve the annual operating budget.
23. Review and approve the annual capital budget.
24. Direct the manner of handling matters outside the ordinary course of
business of the corporation.
SECTION 3.2. NUMBER, ELECTION AND TERM. The number of Directors which shall
------------ --------------------------
constitute the whole Board shall be eleven (11) of whom four (4) shall be
Directors of the First Class, three (3) shall be Directors of the Second Class
and four (4) shall be Directors of the Third Class. The term of office of each
class shall be three years, with the term of one class expiring in each year,
and the successors to the class of Directors whose terms shall expire shall be
elected at each annual election or adjournment thereof. Each Director shall
hold office until his successor shall be elected and shall qualify or until his
earlier resignation or removal. Directors need not be residents of Delaware or
stockholders. (Amended 9/29/95, 11/7/96, 3/18/97, 12/1/97, 3/25/99)
SECTION 3.3. MEETINGS. The Board of Directors may hold meetings, both
------------ ---------
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
such place as may from time to time be determined by the Board. Special
meetings of the Board of Directors may be called by or at the request of the
Chief Executive Officer, the Chairman of the Board, a Vice Chairman, President,
or any two directors. (Amended 12/15/88)
SECTION 3.4. NOTICE. Notice of any special meeting of the Board of
------------ -------
Directors stating the place, date and hour of the special meeting shall be given
in writing to each director, either personally, or by mail, telex, telegram or
cable, addressed to the director's residence or usual place of business, not
less than two days before the date of such meeting, or by such other means,
whether or not in writing, and within such lesser period, as circumstances
require in the reasonable judgment of the person calling the meetings. If
mailed, such notice shall be deemed to be given at the time when it is deposited
in the United States mail with first class postage prepaid. Notice by telegram
or cable shall be deemed given when the notice is delivered to the telegraph or
cable company; notice by telex shall be deemed given when the notice is
transmitted by telex. Any director may waive notice of any meeting. The
attendance of a director at any meeting shall constitute a waiver of notice at
such meeting, except where the director attends the meeting for the express
purpose of objecting to the
Page 7
<PAGE>
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting, unless otherwise provided by
statute, the Certificate of Incorporation or these By-Laws. (Amended 6/24/76)
SECTION 3.5. QUORUM. A majority of the Board of Directors shall constitute
------------ -------
a quorum for the transaction of business at any meeting of the Board of
Directors, provided, that if less than a majority of the Directors are present
at said meeting, a majority of the Directors present may adjourn the meeting
from time to time without further notice. (Renumbered 6/24/76)
SECTION 3.6. MANNER OF ACTING. The act of the majority of the Directors
------------ -----------------
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. (Renumbered 6/24/76)
SECTION 3.7. USE OF COMMUNICATIONS EQUIPMENT. Members of the Board of
------------ --------------------------------
Directors, or any committee thereof, may participate in a meeting of the Board
of Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting. (New Section
6/24/76)
SECTION 3.8. VACANCIES AND ADDITIONAL DIRECTORS. Any director may resign at
------------ -----------------------------------
any time upon written notice to the corporation. If any vacancy occurs in the
Board of Directors caused by death, resignation, retirement, disqualification or
removal from office of any Director, or otherwise, or if any new directorship is
created by any increase in the authorized number of Directors, a majority of the
Directors then in office, though less than a quorum may choose a successor or
fill the newly created directorship; and a Director so chosen shall hold office
until the next annual election at which Directors of the class to which he was
chosen are elected and until his successor shall be duly elected and shall
qualify or until his earlier resignation or removal. (Amended 3/26/70)
SECTION 3.9. COMPENSATION. Directors who are not full-time employees of the
------------ -------------
Company shall receive a stated salary and may receive options to purchase shares
of the Company's stock as provided under the Company's stock plans, for their
services, and, in addition thereto, shall receive a fixed fee and expenses, if
any, for attendance at each regular or special meeting of the Board of Directors
from time to time. Directors who are full-time employees of the Company shall
not receive any compensation for their services as such; provided that nothing
herein contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation thereof. (Amended
3/28/91)
Page 8
<PAGE>
SECTION 3.10. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
------------- --------------------
adopted by a majority of the whole Board, may designate not fewer than three nor
more than seven Directors to constitute an Executive Committee. The Chairman of
the Executive Committee shall be the Chief Executive Officer. The Executive
Committee shall have and exercise all of the authority of the Board of Directors
in the management of the corporation, except that such Committee shall not have
the power to take specific actions which have been delegated to other committees
of the Board and shall not be empowered to take action with respect to:
declaring dividends; issuing bonds, debentures, or the borrowing of moneys
except within limits expressly approved by the Board of Directors; amending by-
laws; filling vacancies and newly created directorships in the Board of
Directors; removing Directors of the corporation; mergers or consolidations; the
sale, lease or exchange of all or substantially all of the assets of the
corporation; dissolution; or any other action requiring the approval of
stockholders. The designation of such Committee and the delegation thereto of
authority shall not operate to relieve the Board of Directors or any member
thereof of any responsibility imposed upon it or him by law. (Amended 9/28/90,
10/26/95)
SECTION 3.11. FINANCE COMMITTEE. The Board of Directors, by resolution
------------- ------------------
adopted by a majority of the whole Board, may designate not fewer than three nor
more than seven Directors, a majority of whom shall not be employees of the
Company, to constitute a Finance Committee, which Committee is charged with
reviewing the overall financial policies of the Company and making
recommendations to the Board regarding the Company's financial condition and
requirements for and disposition of funds, including: capital structure,
raising long-term capital, dividend policy, and material changes in the
Company's financial position with respect to cash, investments, debt and
accounts receivable. The Committee shall review the performance and management
of the Company's Retirement Benefit Plan including the investment policy, the
performance of the Investment Trustee on a regular periodic basis, the
reasonableness of the actuarial assumptions in relation to investment
performance, the funding status of the Plan and shall make recommendations with
respect to the selection of one or more investment trustees or other investment
agencies, and undertake such other studies and make such other recommendations
to the Board as it may deem desirable with respect to the Investment Trust of
the Retirement Benefit Plan. (Amended and Renamed 9/28/90, 10/26/95)
SECTION 3.12. HUMAN RESOURCES COMMITTEE. The Board of Directors, by
------------- --------------------------
resolution adopted by a majority of the whole Board, may designate not fewer
than three nor more than seven Directors who are not employees of the Company,
to constitute a Human Resources Committee. The Human Resources Committee shall
determine the annual salary, bonus and other benefits of selected senior
officers and key management employees of the Company and review, as appropriate,
performance standards under compensation programs for key employees. The Human
Resources Committee shall also recommend to the Board candidates for election as
corporate
Page 9
<PAGE>
officers.
The Human Resources Committee shall recommend new employee benefit plans and
changes to stock incentive plans to the Board, approve amendments to the non-
stock employee benefit plans of the Company and oversee the administration of
all of the Company's employee benefit plans. The Human Resources Committee may
delegate to one or more officers of the Company the power to approve any
amendment of any non-stock employee benefit plan of the Company or the Donnelley
Tax Credit Stock Ownership Plan which in the reasonable opinion of such officer
will not materially affect the costs to the Company of, or benefits under, such
plans. (Amended 7/22/93, 10/26/95, 1/25/96)
SECTION 3.13. AUDIT COMMITTEE. The Board of Directors, by resolution
------------- ----------------
adopted by a majority of the whole Board, may designate not fewer than three nor
more than seven Directors who are not employees of the Company to constitute an
Audit Committee, which Committee shall review on behalf of the stockholders of
the Company: the qualifications and services of the independent public
accountants employed by the Company from time to time to audit the books of the
Company, the scope of their audits, the adequacy of their audit reports, and
recommendations made by them. The Committee may also make such reviews of
internal financial audits and controls as the Committee considers desirable.
The Audit Committee will recommend to the Board the selection of the
independent public accountants.
The Audit Committee shall review the Company's financial disclosure
documents, management perquisites, significant developments in accounting
principles and significant proposed changes in financial statements. The Audit
Committee shall also review and monitor the Company's codes of conduct to guard
against significant conflicts of interest and dishonest, unethical or illegal
activities. The Audit Committee shall review periodically the performance of the
Company's accounting and financial personnel, and shall review material
litigation and regulatory proceedings and other issues relating to potentially
significant corporate liability. (Amended 9/28/90, 10/26/95)
SECTION 3.14. CORPORATE RESPONSIBILITY AND GOVERNANCE COMMITTEE. The Board
------------- --------------------------------------------------
of Directors, by resolution adopted by a majority of the whole Board, may
designate not fewer than three nor more than seven Directors to constitute a
Corporate Responsibility and Governance Committee, which Committee shall oversee
the Company's commitment to employee health and safety, equal employment
opportunity and the environment.
The Committee shall also recommend to the Board nominees for election to the
Board of Directors in connection with any meeting of stockholders at which
directors are to be elected and persons for appointment to fill any Board
vacancy which the Board of
<PAGE>
Directors is authorized under the By-Laws to fill, and may also recommend to the
Board policies or guidelines concerning criteria for Board membership, the
structure and composition of Board Committees, the size and composition of the
Board and the selection, tenure and retirement of Directors and matters related
thereto. (Amended 9/28/90, 10/26/95, 1/25/96, 9/25/97)
SECTION 3.15. OTHER COMMITTEES. The Board of Directors, by resolution
------------- -----------------
adopted by a majority of the whole Board, may designate two or more Directors to
constitute committees other than the Executive Committee, Finance Committee,
Human Resources Committee, Audit Committee and Corporate Responsibility and
Governance Committee, which committees shall have and exercise such authority as
may be provided for in the resolution creating such committee. (Amended
9/28/90, 1/25/96, 9/25/97)
SECTION 3.16. HONORARY DIRECTORS. The Board of Directors may select from
------------- -------------------
time to time, and for such periods of time as it may deem appropriate, one or
more past Chairmen of the Board, Presidents or Chief Executive Officers elected
a Director prior to September 28, 1990, to serve as Honorary Directors.
Honorary Directors shall be entitled to receive notice of and to attend all
meetings of the Board of Directors, to receive copies of all reports or other
communications made to the Board of Directors, to give counsel and advice on any
subject, to receive such fees and expense reimbursements as may be provided from
time to time by the Board of Directors. The Board of Directors, Chief Executive
Officer, Chairman of the Board or President may invite an Honorary Director to
attend meetings of any committee of the Board of Directors or to undertake
temporary assignments, but this shall not preclude any other arrangements,
consulting or otherwise, between the corporation and an Honorary Director. The
presence or absence of an Honorary Director shall not be counted for purposes or
determining the existence of a quorum. Honorary Directors shall not have the
right to vote on any matters voted on by the Board of Directors or any of the
rights, duties, privileges, or responsibilities of Directors of the corporation.
(Amended 9/28/90)
SECTION 3.17. NOMINATION OF DIRECTORS. Except as otherwise fixed pursuant
------------- ------------------------
to the certificate of incorporation relating to the rights of the holders of any
one or more classes or series of Preferred Stock issued by the corporation,
acting separately by class or series, to elect, under specified circumstances,
directors at a meeting of stockholders, nominations for the election of
directors may be made by the Board of Directors or a committee appointed by the
Board of Directors pursuant to Section 3.14 or by any stockholder entitled to
vote in the election of directors generally. However, any stockholder entitled
to vote in the election of directors generally may nominate one or more persons
for election as directors at a meeting at which directors are to be elected only
if written notice of such stockholder's intent to make such nomination or
nominations has been delivered personally to, or been mailed to and received by,
the Secretary of the corporation at the principal executive offices of the
Page 11
<PAGE>
corporation in the City of Chicago, State of Illinois, not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that, in the event
that less than 75 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Each such notice shall
set forth: (i) the name and record address of the stockholder who intends to
make the nomination; (ii) the name, age, principal occupation or employment,
business address and residence address of the person or persons to be nominated;
(iii) the class and number of shares of stock held of record, owned beneficially
and represented by proxy by such stockholder and by the person or persons to be
nominated as of the record date for the meeting (if such date shall then have
been made publicly available) and of the date of such notice; (iv) a
representation that the stockholder intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice; (v) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder; (vi) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the Securities Exchange Act of 1934 and the proxy rules of the
Securities and Exchange Commission; and (vii) the consent of each nominee to
serve as a director of the corporation if so elected. The corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the corporation to determine the eligibility of such proposed
nominee to serve as a director of the corporation. The officer of the
corporation presiding at the annual meeting of stockholders shall, if the facts
so warrant, determine that a nomination was not made in accordance with the
provisions of this Section, and if he should so determine, he should so declare
to the meeting and the defective nomination shall be disregarded. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth herein. (Added 3/24/88)
ARTICLE IV
----------
Officers of the Corporation
---------------------------
SECTION 4.1. OFFICERS AND NUMBER. The officers of the corporation shall be
------------ --------------------
a Chief Executive Officer, a Chairman of the Board, one or more Vice Chairmen, a
President, one or more Executive Vice Presidents, one or more Business Unit
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Secretary, a Treasurer, a Controller, a General Counsel, one or more Assistant
Secretaries, one or more Assistant General Counsels, one or more Assistant
Treasurers and one or more Assistant Controllers. Any two or more offices may
be held by the same person except the offices of President and Secretary. The
Board of
Page 12
<PAGE>
Directors may distinguish among officers bearing the same title by the
addition of other designations, such as Chief Financial Officer or the like.
The Chief Executive Officer shall be either the Chairman, a Vice Chairman or the
President, as designated by the Board of Directors. The Board of Directors may
elect an Honorary Director to the office of Honorary Chairman of the Board.
(Amended 1/27/94, 11/20/97)
SECTION 4.2. ELECTION AND TERM OF OFFICE. The officers of the corporation
------------ ----------------------------
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the Board of Directors. Each
officer shall hold office until his successor shall have been duly elected and
shall have qualified or until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. (Adopted 10/21/60)
SECTION 4.3. REMOVAL. Any officer elected by the Board of Directors may be
------------ --------
removed by the Board of Directors whenever in its judgment the best interests of
the corporation would be served thereby. (Amended 12/15/88)
SECTION 4.4. VACANCIES. A vacancy in any office because of death,
------------ ----------
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term. (Adopted 10/21/60)
SECTION 4.5. SALARIES. No officer shall be prevented from receiving a
------------ ---------
salary for his services as an officer by reason of the fact that he is also a
Director of the corporation.
SECTION 4.6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
------------ ------------------------
have overall supervision of, and responsibility for, the business, and shall
direct the affairs and policies of the corporation. (Adopted 12/15/88)
SECTION 4.7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
------------ ----------------------
at all meetings of the stockholders and Board of Directors. The Chairman of the
Board shall perform such other duties and responsibilities as may be assigned to
him by the Board of Directors. (Amended 9/28/90)
SECTION 4.8. VICE CHAIRMEN OF THE BOARD. The Vice Chairmen of the Board
------------ ---------------------------
shall, in the absence of the Chairman of the Board (in the order prescribed by
the Board), preside at all meetings of the stockholders and Board of Directors,
and shall perform such other duties as may be assigned to them by the Board of
Directors. (Amended 12/15/88)
SECTION 4.9. HONORARY CHAIRMAN OF THE BOARD. The Honorary Chairman of
------------ -------------------------------
Page 13
<PAGE>
the Board shall consult with the Chief Executive Officer and other officers of
the corporation, as he or they shall determine, with respect to the general
policies and affairs of the corporation, and shall have such authority and
perform such duties as from time to time may be prescribed by the Board of
Directors or as may be granted by the Chief Executive Officer. (Renumbered
9/28/90)
SECTION 4.10. PRESIDENT. Subject to the supervision and direction of the
------------- ----------
Chief Executive Officer, the President shall have responsibility for such of the
operations and other functions of the corporation as may be assigned to him.
The President shall perform such other duties and responsibilities as may be
assigned to him by the Chief Executive Officer. In the absence of the Chairman
of the Board and Vice Chairmen of the Board, the President shall preside at
meetings of the stockholders and Board of Directors. (Renumbered and Amended
9/28/90)
SECTION 4.11. VICE PRESIDENTS. Each Vice President shall have such
------------- ----------------
corporate powers, if any, as may be assigned to him from time to time by the
Board of Directors, Chief Executive Officer, Chairman of the Board or the
President. (Renumbered 9/28/90)
SECTION 4.12. SENIOR VICE PRESIDENTS. Each Senior Vice President shall have
------------- -----------------------
such corporate powers, if any, as may be assigned to him by the Board of
Directors, Chief Executive Officer, Chairman of the Board or the President.
(Renumbered 9/28/90)
SECTION 4.13. BUSINESS UNIT PRESIDENTS. The Board of Directors may from
------------- -------------------------
time to time designate as Business Unit President one or more of the individuals
who occupies the position of senior officer heading a business unit consisting
of one or more divisions and one or more sales units and who reports to one or
more of the senior officers of the corporation. (Added 1/27/94; Amended and
Renumbered 11/20/97)
SECTION 4.14. EXECUTIVE VICE PRESIDENTS. The Board of Directors may
------------- --------------------------
designate as an Executive Vice President the officer to whom one or more other
senior officers of this corporation reports. (Amended and Renumbered 1/27/94;
Renumbered 11/20/97)
SECTION 4.15. ORDER OF SUCCESSION. Such of the directors of the corporation
------------- --------------------
as shall be designated by resolution of the Board of Directors, and in the order
of such designation, shall in the absence of the Chairman of the Board perform
the duties of the Chairman of the Board and shall have all of the powers and
shall be subject to any restrictions imposed upon the Chairman.
Such of the officers of the corporation as may be designated by resolution of
the Board of Directors, and in the order of such designation, shall in the
absence of the Chief Executive Officer, perform the duties of the Chief
Executive Officer and when
Page 14
<PAGE>
so acting shall have all the powers of and be subject to any restrictions
imposed upon the Chief Executive Officer.
Such of the officers of the corporation as may be designated by resolution of
the Board of Directors, and in the order of such designation, shall in the
absence of the President perform the duties of the President and when so acting
shall have all the powers of and be subject to any restrictions imposed upon the
President. (Renumbered 1/27/94, 11/20/97)
SECTION 4.16. SECRETARY. The Secretary shall keep the minutes of all
------------- ----------
meetings of the stockholders and Board of Directors of the corporation, shall
have charge of the corporate records and the corporate seal, and shall have the
power to attach the seal to all instruments which shall require sealing after
the same shall have been signed as authorized by the Board of Directors.
(Renumbered 1/27/94, 11/20/97)
SECTION 4.17. TREASURER. The Treasurer shall be responsible for the
------------- ----------
receipt, custody and disbursement of all funds of the corporation in the form of
both cash and securities. He may delegate the details of his office to someone
in his stead, but this shall nowise relieve him of the responsibilities and
liability of his office. The Treasurer shall have the power to attach the seal
to all instruments which shall require sealing after the same shall have been
signed as authorized by the Board of Directors. (Renumbered 1/27/94, 11/20/97)
SECTION 4.18. CONTROLLER. The Controller reports to the Chief Executive
------------- -----------
Officer directly or through such other management executives as the Chief
Executive Officer may direct. The Controller, however, may directly submit any
matter to the Board of Directors for their consideration. The Controller shall
maintain adequate records of all assets, liabilities, and transactions of the
corporation, and in conjunction with other officers and department heads, shall
initiate and enforce measures and procedures whereby the business of the
corporation shall be conducted with the maximum of safety, efficiency and
economy. He shall attend that part of the meetings of the Board of Directors
which is concerned with the review of the financial and operating reports of the
business, except when, in the discretion of the Board, he shall be asked not to
attend. (Renumbered 1/27/94, 11/20/97)
SECTION 4.19. GENERAL COUNSEL. The General Counsel shall be the chief legal
------------- ----------------
officer of the corporation and have legal responsibility for all aspects of the
business. The General Counsel shall have the power to attach the seal to all
instruments which shall require sealing after the same shall have been signed as
authorized by the Board of Directors. (Renumbered 1/27/94, 11/20/97)
SECTION 4.20. ASSISTANT TREASURERS. The Assistant Treasurers shall in the
------------- ---------------------
absence of the Treasurer perform all functions and duties of the Treasurer and
in addition shall perform such functions and duties as the Treasurer may
delegate, but this shall in nowise relieve the Treasurer of the responsibilities
and liability of his
Page 15
<PAGE>
office. (Renumbered 1/27/94, 11/20/97)
SECTION 4.21. ASSISTANT SECRETARIES. The Assistant Secretaries shall in the
------------- ----------------------
absence of the Secretary perform all functions and duties of the Secretary and
in addition shall assume such functions and duties as the Secretary may
delegate, but this shall in nowise relieve the Secretary of the responsibilities
and liability of his office. (Renumbered 1/27/94, 11/20/97)
SECTION 4.22. ASSISTANT GENERAL COUNSELS. The Assistant General Counsels
------------- ---------------------------
shall in the absence of the General Counsel perform all functions and duties of
the General Counsel and in addition shall assume such functions and duties as
the General Counsel may delegate, but this shall in nowise relieve the General
Counsel of the responsibilities and liabilities of his office. (Renumbered
1/27/94, 11/20/97)
SECTION 4.23. ASSISTANT CONTROLLERS. The Assistant Controllers shall in the
------------- ----------------------
absence of the Controller perform all functions and duties of the Controller and
in addition shall assume such functions and duties as the Controller may
delegate, but this shall in nowise relieve the Controller of the
responsibilities and liabilities of such office. (Renumbered 1/27/94, 11/20/97)
ARTICLE V
---------
Appointed Officers
------------------
The Chief Executive Officer may appoint officials assigned to either a
business unit and reporting to a Business Unit President or other business unit
officer, or a staff or operations unit and reporting to another official
reporting directly or indirectly to the President of the Company as such
officers of such unit and having such titles as he shall deem appropriate. Any
such officer appointed by the Chief Executive Officer may be removed by the
Chief Executive Officer whenever in his judgment the best interests of the
corporation would be served thereby. The term of office, compensation, powers
and duties and other terms of employment of appointed officers shall be such as
the Chief Executive Officer may from time to time deem proper, and the authority
of such officers shall be limited to acts pertaining to the business of the unit
to which they are assigned. (Amended 1/27/94, 11/20/97)
ARTICLE VI
----------
Contracts, Loans, Checks and Deposits
-------------------------------------
SECTION 6.1. CONTRACTS. The Board of Directors may authorize any officer or
------------ ----------
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be
Page 16
<PAGE>
general or confined to specific instances.
SECTION 6.2. LOANS. No loans shall be contracted on behalf of the
------------ ------
corporation and no evidence of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors (or a resolution of a
committee of Directors pursuant to authority conferred upon that committee).
Such authority may be general or confined to specific instances.
SECTION 6.3. CHECKS, ETC. All checks, demands, drafts or other orders for
------------ ------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the corporation shall be signed by such officer or officers or such
agent or agents of the corporation, and in such manner, as may be designated by
the Board of Directors or by one or more officers of the corporation named by
the Board of Directors for such purpose.
SECTION 6.4. DEPOSITS. All funds of the corporation not otherwise employed
------------ ---------
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies and other depositaries as the Board of Directors may
select.
(Entire Article Renumbered 6/28/84)
ARTICLE VII
-----------
Certificates of Stock and Their Transfer
----------------------------------------
SECTION 7.1. CERTIFICATES OF STOCK. Certificates of stock of the
------------ ----------------------
corporation shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of the
corporation as they are issued. They shall exhibit the holder's name and number
of shares and shall be signed by the Chief Executive Officer, Chairman of the
Board or President or a Vice President and by the Secretary or Assistant
Secretary or the Treasurer or an Assistant Treasurer. If any stock certificate
is signed manually (a) by a transfer agent other than the corporation or its
employee or (b) by a registrar other than the corporation or its employee, any
other signature on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may nevertheless be issued by the corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
All certificates properly surrendered to the corporation for transfer shall be
cancelled and no new certificates shall be issued to evidence transferred shares
until the former certificate for at least a like number of shares shall have
been surrendered and cancelled and the corporation reimbursed for any applicable
taxes on the transfer, except that in the case of a lost, destroyed or
Page 17
<PAGE>
mutilated certificate, a new one may be issued therefor upon such terms, and
with such indemnification (if any) to the corporation, as the Board of Directors
may prescribe specifically or in general terms or by delegation to a transfer
agent for the corporation. Certificates shall not be issued representing
fractional shares of stock. (Amended 12/15/88)
SECTION 7.2. LOST CERTIFICATES. The Board of Directors may direct a new
------------ ------------------
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
SECTION 7.3. TRANSFERS. Upon surrender to the corporation or the transfer
------------ ----------
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Transfers of shares shall be made only on the books
of the corporation by the registered holder thereof or by his attorney thereunto
authorized by power of attorney and filed with the Secretary or transfer agent
of the corporation.
SECTION 7.4. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
------------ ------------------------
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
(Entire Article Renumbered 6/28/84)
ARTICLE VIII
------------
Dividends
---------
SECTION 8.1. DECLARATION. Dividends upon the capital stock of the
------------ ------------
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends
Page 18
<PAGE>
may be paid in cash, in property, or in shares of the capital stock, subject to
the provisions of the certificate of incorporation.
SECTION 8.2. RESERVE. Before payment of any dividend, there may be set
------------ --------
aside out of any funds of the corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
such other purposes as the Directors shall think conducive to the interest of
the corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
(Entire Article Renumbered 6/28/84)
ARTICLE IX
----------
Miscellaneous
-------------
SECTION 9.1. FISCAL YEAR. Unless otherwise fixed by the resolution of the
------------ ------------
Board of Directors, the fiscal year of the corporation shall be the calendar
year.
SECTION 9.2. SEAL. The corporate seal shall have inscribed thereon the name
------------ -----
of the corporation and the words "Corporate Seal, Delaware." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.
SECTION 9.3. BOOKS. The books of the corporation may be kept (subject to
------------ ------
any provision contained in the statutes) outside the State of Delaware at the
offices of the corporation at Chicago, Illinois, or at such other place or
places as may be designated from time to time by the Board of Directors.
(Entire Article Renumbered 6/28/84)
ARTICLE X
---------
Amendment
---------
These by-laws may be altered or repealed at any regular meeting of the Board
of Directors or at any special meeting of the Board of Directors if notice of
such alteration or repeal be contained in the notice of such special meeting,
provided that no amendment of these by-laws shall conflict with the provisions
of the Certificate of Incorporation, whether relating to the number of Directors
which shall constitute the whole Board or the number of Directors of any class
or otherwise. (Renumbered 6/28/84)
Page 19
<PAGE>
EXHIBIT 3(II)(B)
RESOLUTION OF
THE BOARD OF DIRECTORS OF
R. R. DONNELLEY & SONS COMPANY
JANUARY 28, 1999
Re: Amendment of By-Laws
RESOLVED, that the By-Laws of the corporation be and hereby are amended as
follows:
(1) That, effective immediately, the first sentence of Section 2.8 of
ARTICLE II is deleted and the following is substituted therefor:
"At all meetings of stockholders a stockholder may vote by proxy
properly submitted by the stockholder or his duly authorized attorney-in-
fact."
(2) That, effective on March 25, 1999, the first sentence of Section 3.2 of
ARTICLE III is deleted and the following is substituted therefor:
"The number of Directors which shall constitute the whole Board shall
be eleven (11) of whom four (4) shall be Directors of the First Class,
three (3) shall be Directors of the Second Class and four (4) shall be
Directors of the Third Class."
<PAGE>
EXHIBIT 4(D)
EXECUTION COPY
FIVE-YEAR CREDIT AGREEMENT
Dated as of December 11, 1998
Among
R.R. DONNELLEY & SONS COMPANY
as Borrower,
-- --------
THE BANKS NAMED HEREIN
as Banks
-- -----
and
THE FIRST NATIONAL BANK OF CHICAGO
as Administrative Agent
-----------------------
FIRST CHICAGO CAPITAL MARKETS, INC.
as Arranger
-----------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
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<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS........................................ 1
SECTION 1.01. Certain Defined Terms................................................. 1
SECTION 1.02. Computation of Time Periods........................................... 15
SECTION 1.03. Accounting Terms; Modifications due to Implementation of Euro......... 15
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES....................................... 16
SECTION 2.01. The Committed Advances................................................ 16
SECTION 2.02. Making the Committed Advances......................................... 16
SECTION 2.03. The Uncommitted Advances.............................................. 20
SECTION 2.04. Facility Fee and Utilization Fee...................................... 24
SECTION 2.05. Reduction and Termination of the Commitments.......................... 25
SECTION 2.06. Payment; Conversion and Continuation.................................. 25
SECTION 2.07. Interest on Committed Advances........................................ 26
SECTION 2.08. Additional Interest on Eurocurrency Rate Advances..................... 27
SECTION 2.09. Interest Rate Determination........................................... 27
SECTION 2.10. Prepayments........................................................... 27
SECTION 2.11. Funding Indemnification............................................... 28
SECTION 2.12. Increased Costs and Reduced Return.................................... 28
SECTION 2.13. Illegality............................................................ 29
SECTION 2.14. Payments and Computations............................................. 30
SECTION 2.15. Sharing of Payments, Etc.............................................. 31
SECTION 2.16. Currency Equivalents.................................................. 32
SECTION 2.17. Borrowing Subsidiaries................................................ 32
SECTION 2.18. Reserved.............................................................. 33
SECTION 2.19. Taxes................................................................. 33
SECTION 2.20. Defaulting Banks...................................................... 35
SECTION 2.21. Mitigation............................................................ 37
SECTION 2.22. European Economic and Monetary Union.................................. 37
SECTION 2.23. Extension of Termination Date......................................... 37
SECTION 2.24. Increase of Aggregate Commitments..................................... 38
ARTICLE III CONDITIONS PRECEDENT.................................................... 40
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03....... 40
SECTION 3.02. Conditions Precedent to Initial Advance to Each Borrowing Subsidiary.. 41
SECTION 3.03. Conditions Precedent to Each Committed Borrowing...................... 42
SECTION 3.04. Conditions Precedent to Each Uncommitted Borrowing.................... 42
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................... 43
SECTION 4.01. Representations and Warranties of the Company......................... 43
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V COVENANTS OF THE COMPANY................................................ 46
SECTION 5.01. Compliance with Laws, Etc............................................. 46
SECTION 5.02. Interest Coverage Ratio............................................... 46
SECTION 5.03. Reporting Requirements................................................ 46
SECTION 5.04. Use of Proceeds....................................................... 47
SECTION 5.05. Limitation on Liens, Etc.............................................. 48
SECTION 5.06. Merger; Sale of Assets................................................ 49
SECTION 5.07. Books and Records; Inspection......................................... 49
SECTION 5.08. Corporate Existence................................................... 50
SECTION 5.10. Payment of Taxes...................................................... 50
ARTICLE VI EVENTS OF DEFAULT....................................................... 50
SECTION 6.01. Events of Default..................................................... 50
ARTICLE VII GUARANTEE............................................................... 52
SECTION 7.01. Unconditional Guarantee............................................... 52
SECTION 7.02. Validity.............................................................. 53
SECTION 7.03. Waivers............................................................... 53
SECTION 7.04. Subrogation........................................................... 53
SECTION 7.05. Acceleration.......................................................... 53
SECTION 7.06. Reinstatement......................................................... 53
SECTION 7.07. Continuing Guaranty; Assignments...................................... 54
ARTICLE VIII THE ADMINISTRATIVE AGENT................................................ 54
SECTION 8.01. Reserved.............................................................. 54
SECTION 8.02. Authorization and Action.............................................. 54
SECTION 8.03. Administrative Agent's Reliance, Etc.................................. 55
SECTION 8.04. The Administrative Agent and Affiliates............................... 55
SECTION 8.05. Bank Credit Decision; Notice of Default............................... 56
SECTION 8.06. Indemnification....................................................... 56
SECTION 8.07. Successor Administrative Agent........................................ 57
ARTICLE IX MISCELLANEOUS........................................................... 57
SECTION 9.01. Amendments, Etc....................................................... 57
SECTION 9.02. Notices, Etc.......................................................... 58
SECTION 9.03. No Waiver; Remedies................................................... 58
SECTION 9.04. Costs and Expenses.................................................... 59
SECTION 9.05. Right of Set-off...................................................... 59
SECTION 9.06. Binding Effect........................................................ 59
SECTION 9.07. Assignments, Designations and Participations.......................... 59
SECTION 9.08. Governing Law......................................................... 64
SECTION 9.09. Execution in Counterparts............................................. 64
</TABLE>
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<TABLE>
<S> <C>
SECTION 9.10. Confidentiality....................................................... 64
SECTION 9.11. Non-Reliance by the Banks............................................. 64
SECTION 9.12. No Indirect Security.................................................. 64
SECTION 9.13. Indemnification....................................................... 65
SECTION 9.14. Partial Invalidity.................................................... 65
SECTION 9.15. WAIVER OF JURY TRIAL.................................................. 65
SECTION 9.16. Jurisdiction, Etc..................................................... 66
SECTION 9.17. Termination of Existing Credit Agreement.............................. 66
SECTION 9.18. Nonliability of Banks................................................. 66
</TABLE>
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EXHIBITS
EXHIBIT A - Form of Assignment and Acceptance
EXHIBIT B - Form of Assumption Letter
EXHIBIT C - Form of Designation Agreement
EXHIBIT D-1 - Form of Committed Note
EXHIBIT D-2 - Form of Uncommitted Note
EXHIBIT E-1 - Form of Notice of Committed Borrowing
EXHIBIT E-2 - Form of Notice of Uncommitted Borrowing
EXHIBIT F - Form of Notice of Continuation/Conversion
EXHIBIT G - Form of Commitment Increase Consent
EXHIBIT H - Form of Sidley & Austin Opinion
EXHIBIT I - Form of Opinion of Counsel to Borrowing Subsidiary
__________________
/1/ Select one.
/2/ Include if applicable.
/3/ Use if converting Base Rate Advances to Eurocurrency Rate Advances.
/4/ Use if converting only a portion of Eurocurrency Rate Advances and
continuing the balance as Eurocurrency Rate Advances.
/5/ Use if converting Eurocurrency Rate Advances to Base Rate Advances.
/6/ Use if continuing Eurocurrency Rate Advances.
/7/ To be revised if the Borrowing Subsidiary is not a domestic corporation.
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<PAGE>
EXECUTION COPY
FIVE-YEAR CREDIT AGREEMENT
Dated as of December 11, 1998
R.R. DONNELLEY & SONS COMPANY, a Delaware corporation (the "Company"), the
banks listed on the signature pages hereof and THE FIRST NATIONAL BANK OF
CHICAGO, as Administrative Agent (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acceptance Deadline" has the meaning specified in Section
------------------- -------
2.03(a)(iii).
------------
"Administrative Agent" means First Chicago, in its capacity as the
--------------------
contractual representative for all of the Banks for purposes of this
Agreement, as designated and appointed in accordance with Article VIII, and
------------
any successor thereto as provided herein.
"Advance" means a Committed Advance or an Uncommitted Advance.
-------
"Affiliate" means, with respect to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under common
control with such Person.
"Affordable Housing Debt" means Debt of the Company or of any of its
-----------------------
Subsidiaries which is associated with the direct or indirect investment by
the Company or such Subsidiary in affordable housing where the expected tax
benefits of such investment exceed the total amount of the future annual
payments required as part of such investment.
"Agreement" shall mean this Five-Year Credit Agreement, as the same
---------
may be amended, modified, supplemented or restated from time to time.
"Alternative Currency" means Sterling, German Marks, Swiss Francs, Yen
--------------------
and any other currency (other than Dollars) (i) which is readily available,
freely transferable and convertible into Dollars in the international
currency and exchange markets, (ii) in which deposits are customarily
offered to banks
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in the London interbank market and (iii) as to which an equivalent amount
in Dollars may be readily calculated, including the Euro from and after the
Euro Implementation Date.
"Applicable Lending Office" means, with respect to each Bank, such
-------------------------
Bank's Domestic Lending Office in the case of a Base Rate Advance, and such
Bank's Eurocurrency Lending Office in the case of a Eurocurrency Rate
Advance and, in the case of an Uncommitted Advance, the office of such Bank
notified by such Bank to the Administrative Agent as its Applicable Lending
Office with respect to such Uncommitted Advance.
"Applicable Margin" means on any day:
-----------------
(i) 0.155% if Category 1 Status exists on such day,
(ii) 0.17% if Category 2 Status exists on such day,
(iii) 0.20% if Category 3 Status exists on such day,
(iv) 0.25% if Category 4 Status exists on such day, and
(v) 0.40% if Category 5 Status exists on such day.
"Arranger" means First Chicago Capital Markets, Inc.
--------
"Assignment and Acceptance" means an Assignment and Acceptance
-------------------------
executed by a Bank (other than a Designated Bidder) and an Eligible
Assignee and accepted by the Administrative Agent and the Company,
substantially in the form of Exhibit A hereto.
---------
"Assumption Letter" means a letter of a Subsidiary of the Company
-----------------
addressed to the Banks in substantially the form of Exhibit B hereto
---------
pursuant to which such Subsidiary agrees to become a "Borrowing Subsidiary"
and agrees to be bound by the terms and conditions hereof.
"Available Commitment" has the meaning specified in Section 2.01.
-------------------- ------------
"Banks" means the banks listed on Schedule I hereto and each Person
----- ----------
that becomes a party hereto pursuant to Section 9.07(a), (b) and (c), and,
--------------- --- ---
except when used in reference to a Committed Advance, a Committed
Borrowing, a Committed Note, a Commitment or a related term, each
Designated Bidder.
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the corporate base rate of interest announced by First
Chicago from time to time, changing when and as said corporate base
rate changes; and
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<PAGE>
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means a Committed Advance which bears interest at
-----------------
a rate based upon the Base Rate, as provided in Section 2.07(a).
---------------
"Borrower" means the Company or any Borrowing Subsidiary.
--------
"Borrowing" means a Committed Borrowing or an Uncommitted Borrowing.
---------
"Borrowing Subsidiary" means any Subsidiary of the Company duly
--------------------
designated by the Company pursuant to Section 2.17 hereof to make
------------
Borrowings hereunder, which Subsidiary shall have delivered an Assumption
Letter to the Administrative Agent in accordance with Section 2.17.
------------
"Business Day" means a day of the year (other than a Saturday or
------------
Sunday) on which banks are not required or authorized by law to close in
New York City and Chicago and, if the applicable Business Day relates to
any Eurocurrency Rate Advances, on which dealings are carried on in the
London interbank market (and, if such Eurocurrency Rate Advances are
denominated in the Euro, a day upon which such clearing system as is
determined by the Administrative Agent to be suitable for clearing or
settlement of the Euro is open for business).
"Category Status" means Category 1 Status, Category 2 Status, Category
---------------
3 Status, Category 4 Status or Category 5 Status, as appropriate.
"Category 1 Status" exists at any date if at such date the Public Debt
-----------------
Rating announced by S&P is AA- (or the equivalent) or better or the Public
--
Debt Rating announced by Moody's is Aa3 (or the equivalent) or better.
"Category 2 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is A (or the equivalent) or better or the
--
Public Debt Rating announced by Moody's is A2 (or the equivalent) or
better, and (ii) Category 1 Status does not exist.
"Category 3 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is A- (or the equivalent) or better or the
--
Public Debt Rating announced by Moody's is A3 (or the equivalent) or
better, and (ii) neither Category 1 Status nor Category 2 Status exists.
"Category 4 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is BBB (or the equivalent) or better or the
--
Public Debt Rating announced by Moody's is Baa2 (or the equivalent) or
better, and (ii) none of Category 1 Status, Category 2 Status or Category 3
Status exists.
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<PAGE>
"Category 5 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is lower than BBB (or the equivalent) and the
---
Public Debt Rating announced by Moody's is lower than Baa2 (or the
equivalent), or (ii) neither S&P nor Moody's shall have a Public Debt
--
Rating in effect at such date.
"Commission" means the Securities and Exchange Commission or any
----------
federal body succeeding to its functions.
"Commitment" has the meaning specified in Section 2.01.
---------- ------------
"Committed Advance" means an advance by a Bank to a Borrower as part
-----------------
of a Committed Borrowing and refers to a Base Rate Advance or a
Eurocurrency Rate Advance, each of which shall be a "Type" of Committed
----
Advance.
"Committed Borrowing" means a borrowing consisting of simultaneous
-------------------
Committed Advances of the same Type made by each of the Banks to a Borrower
pursuant to Section 2.01.
------------
"Committed Note" means a promissory note, in substantially the form of
--------------
Exhibit D-1 hereto, duly executed by the Company or a Borrowing Subsidiary
-----------
and payable to the order of a Bank in the amount of its Commitment,
including any amendment, modification, renewal or replacement of such
promissory note.
"Consolidated EBIT" means, for any period, on a consolidated basis for
-----------------
the Company and its Consolidated Subsidiaries, the sum of the amounts for
such period of (a) Consolidated Net Income (excluding non-recurring or
extraordinary gains, losses, expenses and charges but including cash
charges and payments during such period related to extraordinary or non-
recurring gains, losses, charges and expenses), plus (b) charges against
----
income for foreign, federal, state and local taxes, plus (c) Consolidated
----
Interest Expense plus (or minus) (d) pre-tax income (or loss) from
---- -----
discontinued operations.
"Consolidated Interest Expense" means, for any period, the sum of
-----------------------------
total interest expense of the Company and its Consolidated Subsidiaries,
whether paid or accrued, as determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
-----------------------
earnings (or loss) after taxes of the Company and its Consolidated
Subsidiaries for such period, determined in accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary the
-----------------------
accounts of which would be consolidated with those of the Company in its
consolidated financial statements at such date in accordance with GAAP;
provided, that for purposes of Sections 5.02 and 5.03, "Consolidated
-------- ------------- ----
Subsidiary" shall mean any subsidiary the accounts of which would be
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<PAGE>
consolidated with those of the Company in its consolidated financial
statements at such date in accordance with GAAP.
"Consolidated Tangible Net Worth" means, as of any date, an amount
-------------------------------
equal to the sum of (i) the par or stated value of the outstanding shares
of all classes of capital stock of the Company, (ii) paid-in capital and
capital surplus of the Company and (iii) retained earnings of the Company,
as each of which would appear on a consolidated balance sheet of the
Company and its Consolidated Subsidiaries prepared as of the last day of
the most recently completed fiscal quarter in accordance with GAAP, less
----
the aggregate net amount of (i) all assets so appearing which in accordance
with GAAP are deemed intangible, such intangible assets to specifically
include, but not be limited to, licenses, copyrights, trademarks,
tradenames, patents and goodwill, and (ii) any write-up in the book value
of assets made after December 31, 1997, other than any such write-up to an
appraised fair market value in accordance with the purchase accounting
requirements of GAAP.
"Continuation Notice" has the meaning specified in Section 2.23.
------------------- ------------
"Continuing Bank" has the meaning specified in Section 2.23.
--------------- ------------
"Debt" means (but without duplication of any item) (i) indebtedness
----
for borrowed money, (ii) obligations evidenced by bonds, debentures, notes
or other similar instruments, (iii) obligations as lessee under leases
which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, and (iv) obligations
under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise
assure a creditor against loss in respect of, indebtedness or obligations
of others of the kinds referred to in clause (i), (ii) or (iii) above.
"Defaulted Advance" means, with respect to any Bank at any time, the
-----------------
amount of any Advance required to be made by such Bank to the Borrower
pursuant to Section 2.01 or Section 2.03(a) at or prior to such time that
------------ ---------------
has not been so made as of such time; provided, however, that any Advance
-------- -------
made by the Administrative Agent for the account of such Bank pursuant to
Section 2.02(e) shall not be considered a Defaulted Advance even if, at
---------------
such time, such Bank shall not have reimbursed the Administrative Agent
therefor as provided in Section 2.02(e). If part of a Defaulted Advance
---------------
shall be deemed made pursuant to Section 2.20(a), the remaining part of
---------------
such Defaulted Advance shall be considered a Defaulted Advance originally
required to be made pursuant to Section 2.01 or Section 2.03(a) on the same
------------ ---------------
date as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Bank at any time, any
----------------
amount required to be paid by such Bank to the Administrative Agent or any
other Bank hereunder at or prior to such time that has not been so paid as
of such time, including, without limitation, any amount required to be paid
by
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<PAGE>
such Bank to (a) the Administrative Agent pursuant to Section 2.02(e) to
---------------
reimburse the Administrative Agent for the amount of any Advance made by
the Administrative Agent for the account of such Bank, (b) any other Bank
pursuant to Section 2.15 to purchase any participation in Advances owing to
------------
such other Bank and (c) the Administrative Agent pursuant to Section 8.06
------------
to reimburse the Administrative Agent for such Bank's ratable share of any
amount required to be paid by the Banks to the Administrative Agent as
provided therein. If part of a Defaulted Amount shall be deemed paid
pursuant to Section 2.20(b), the remaining part of such Defaulted Amount
---------------
shall be considered a Defaulted Amount originally required to be made
hereunder on the same date as the Defaulted Amount so deemed paid in part.
"Defaulting Bank" means, at any time, any Bank that, at such time, (a)
---------------
owes a Defaulted Advance or a Defaulted Amount or (b) shall take or be the
subject of any action or proceeding of a type described in Section 6.01(f).
---------------
"Designated Bidder" means (a) an Eligible Assignee or (b) a special
-----------------
purpose corporation that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and
that issues (or the parent of which issues) commercial paper rated at least
"Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then
equivalent grade) by S&P that, in the case of either clause (a) or clause
(b), (i) is organized under the laws of the United States or any State
thereof, (ii) shall have become a party hereto pursuant to Section 9.07(d),
---------------
(e) and (f), and (iii) is not otherwise a Bank.
--- ---
"Designation Agreement" means a designation agreement entered into by
---------------------
a Bank (other than a Designated Bidder) and a Designated Bidder, and
accepted by the Administrative Agent and the Company, in substantially the
form of Exhibit C hereto.
---------
"Dollar Amount" means, for any date of determination:
-------------
(a) with respect to any amount denominated in Dollars, such amount;
and
(b) with respect to an amount denominated in any Alternative Currency,
the amount of Dollars into which the Administrative Agent could, in
accordance with its practice from time to time in the London interbank
foreign exchange market, convert such amount of Alternative Currency at its
spot rate of exchange applicable to the relevant transaction at or about
11:00 a.m., London time, on the date of such determination, for the
delivery of Dollars two Business Days thereafter. For purposes of this
Agreement, the Dollar Amount of any amount received by a Bank hereunder
shall be determined as of the date of such receipt.
"Dollars" and the sign "$" each means the lawful currency of the
------- -
United States.
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"Domestic Lending Office" means, with respect to any Bank, the office
-----------------------
of such Bank specified as its "Domestic Lending Office" opposite its name
on Schedule I hereto or in the Assignment and Acceptance pursuant to which
----------
it became a Bank, as the case may be, or such other office of such Bank as
such Bank may from time to time specify to the Company and the
Administrative Agent.
"Effective Date" has the meaning specified in Section 3.01.
-------------- ------------
"Eligible Assignee" means (i) a Bank (other than a Designated Bidder);
-----------------
(ii) an Affiliate of a Bank (other than a Designated Bidder); (iii) a
commercial bank organized under the laws of the United States or any State
thereof, and having a combined capital and surplus of at least
$500,000,000; (iv) a commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development, has a combined capital and surplus of at least $500,000,000
and is acting through a branch or agency located in the United States, and
(v) any other Person approved by the Company and the Administrative Agent,
such approvals not to be unreasonably withheld or delayed (it being
understood that the Company may reasonably withhold its approval of any
such other Person if at the time it would become a Bank hereunder payments
to it would not be exempt from United States withholding tax).
"Environmental Action" means any administrative, regulatory or
--------------------
judicial action, suit, demand, demand letter, claim, notice of
noncompliance or violation, notice of liability or potential liability,
investigation, proceeding, consent order or consent agreement relating in
any way to any Environmental Law, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health,
safety or the environment, including, without limitation, (a) by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
-----------------
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial interpretation relating to the environment, health, safety or
Hazardous Materials.
"Environmental Permit" means any permit, approval, indemnification
--------------------
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
-----
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
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"ERISA Affiliate" means any Person that for purposes of Title IV of
---------------
ERISA is a member of the Company's controlled group, or under common
control with the Company, as determined under Section 414 of the Internal
Revenue Code.
"ERISA Event" means (a) the occurrence of a reportable event, within
-----------
the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by the
PBGC; (b) the application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA); (d) the cessation of operations at a facility of
the Company or any of its ERISA Affiliates in the circumstances described
in Section 4062(e) of ERISA; (e) the withdrawal by the Company or any of
its ERISA Affiliates from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (f) the failure by the Company or any of its ERISA Affiliates to
make a payment to a Plan if the conditions for the imposition of a lien
under Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that could constitute grounds for the termination of, or the appointment of
trustee to administer, a Plan.
"Euro" and/or "EUR" means the euro referred to in Council Regulation
---- ---
(EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European
Union, or, if different, the then lawful currency of the member states of
the European Union that participate in the third stage of Economic and
Monetary Union.
"Euro Implementation Date" means the first date (currently expected to
------------------------
be January 1, 1999) on which the Euro becomes the currency of some or all
of the member states of the European Union.
"Eurocurrency Lending Office" means, with respect to any Bank, the
---------------------------
office of such Bank specified as its "Eurocurrency Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
----------
to which it became a Bank (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Bank as such Bank may from
time to time specify to the Company and the Administrative Agent.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
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"Eurocurrency Rate" means, with respect to any Eurocurrency Rate
-----------------
Advance for any specified Interest Period or for the term of any
Uncommitted Advance with respect to which interest is calculated by
reference to the Eurocurrency Rate, either:
(i) the rate of interest per annum equal to the rate for
deposits in Dollars or the applicable Alternative Currency of such
Eurocurrency Rate Advance with a maturity approximately equal to such
Interest Period which appears on Dow Jones Markets (Telerate) Page
3740 or 3750, as applicable, or, if there is more than one such rate,
the average of such rates rounded to the nearest 1/100 of 1% (if such
average is not a multiple of 1/16 of 1%), as of 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest
Period, or
(ii) if no such rate of interest appears on Dow Jones Markets
(Telerate) Page 3740 or 3750, as applicable, for any specified
Interest Period, or if Dow Jones Markets (Telerate) Page 3740 or 3750
is unavailable for any reason, the applicable per annum London
interbank offered rate for deposits in Dollars or the applicable
Alternative Currency appearing on Reuters Screen FRBD as of 11:00 a.m.
(London time) two Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period.
"Eurocurrency Rate Advance" means a Committed Advance which bears
-------------------------
interest at a rate based upon the Eurocurrency Rate, as provided in Section
-------
2.07(c).
-------
"Eurocurrency Rate Reserve Percentage" of any Bank (other than a
------------------------------------
Designated Bidder) for any Interest Period for a Eurocurrency Rate Advance
means the reserve percentage applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for such
Bank with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurocurrency Rate Advances of such currency is determined) having a term
equal to such Interest Period.
"Eurocurrency Rate Uncommitted Borrowing" means an Uncommitted
---------------------------------------
Borrowing comprised of Uncommitted Advances denominated in Dollars, bearing
interest based upon the Eurocurrency Rate.
"Events of Default" has the meaning specified in Section 6.01.
----------------- ------------
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<PAGE>
"Extension Request" has the meaning specified in Section 2.23.
----------------- ------------
"Facility Fee" has the meaning specified in Section 2.04.
------------ ------------
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
immediately preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day for such transactions
received by the Administrative Agent from three federal funds brokers of
recognized standing selected by it.
"First Chicago" means The First National Bank of Chicago, a national
-------------
banking association, in its individual capacity, and its successors.
"Fixed Rate Uncommitted Borrowing" means an Uncommitted Borrowing
--------------------------------
consisting of Uncommitted Advances bearing interest at a fixed percentage
rate per annum (expressed in the form of a decimal to no more than four
decimal places) specified by the respective Banks making such Uncommitted
Advances pursuant to the procedure described in Section 2.03.
------------
"GAAP" has the meaning specified in Section 1.03.
---- ------------
"German Marks" means the lawful currency of the Federal Republic of
------------
Germany.
"Hazardous Materials" means petroleum and petroleum products,
-------------------
byproducts or breakdown products, radioactive materials, asbestos-
containing materials, radon gas and any other chemicals, materials or
substances designated, classified or regulated as being "hazardous" or
"toxic", or words of similar import, under any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial interpretation.
"Insurance Policy Debt" means Debt of the Company or any of its
---------------------
Subsidiaries under policies of life insurance now or hereafter owned by the
Company or any of its Subsidiaries under which policies the sole recourse
for such borrowing is against such policies.
"Interest Coverage Ratio" means the ratio, determined on a
-----------------------
consolidated basis for the Company and its Consolidated Subsidiaries in
accordance with GAAP as of the end of any fiscal quarter, of Consolidated
EBIT to Consolidated Interest Expense, in each case determined as of the
last day of such fiscal quarter for the four-quarter period then ended.
-10-
<PAGE>
"Interest Period" means, for each Eurocurrency Rate Advance comprising
---------------
part of the same Committed Borrowing, the period commencing on the date of
such Eurocurrency Rate Advance or the date of any conversion or
continuation thereof, and ending on the last day of the period selected by
a Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months, in each case as a
Borrower may select, upon notice received by the Administrative Agent
pursuant to Section 2.02 or 2.06; provided, however, that
------------ ---- -------- -------
(i) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same Committed
Borrowing shall be of the same duration;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day
--------
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day;
(iii) whenever the first day of any Interest Period occurs on a
day in an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and
(iv) no Interest Period may terminate later than the Termination
Date.
"Lien" means, with respect to any asset, any security interest,
----
mortgage, pledge, lien, claim, charge or encumbrance of any kind in respect
of such asset.
"Majority Banks" means at any time Banks holding more than 50% of the
--------------
then aggregate unpaid principal amount of the Committed Advances held by
the Banks, or, if no such principal amount is then outstanding, Banks
having more than 50% of the Commitments.
"Margin Stock" has the meaning specified in Regulation U issued by the
------------
Board of Governors of the Federal Reserve System.
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole, (ii) the legality, validity
or
-11-
<PAGE>
enforceability of this Agreement or the Notes or (iii) the ability of
the Company to perform its obligations under this Agreement and the Notes.
"Material Subsidiary" means a Subsidiary of the Company which, at the
-------------------
time of determination, (i) shall own assets comprising in excess of 10% of
all of the assets of the Company and its consolidated Subsidiaries on a
consolidated basis, or (ii) has operating income for the four fiscal
quarters most recently ended in excess of 10% of the operating income of
the Company and its consolidated Subsidiaries on a consolidated basis.
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, to which the Company or any of its ERISA Affiliates is
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and at least one Person other than
the Company and its ERISA Affiliates or (b) was so maintained and in
respect of which the Company or any of its ERISA Affiliates could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"National Currency Unit" means the unit of currency (other than a Euro
----------------------
unit) of each member state of the European Union that participates in the
third stage of Economic and Monetary Union.
"Non-Extending Bank" has the meaning specified in Section 2.23.
------------------ ------------
"Note" means a Committed Note or an Uncommitted Note.
----
"Notice of Committed Borrowing" has the meaning specified in Section
----------------------------- -------
2.02(a).
-------
"Notice of Conversion or Continuation" has the meaning specified in
------------------------------------
Section 2.06(b).
---------------
"Notice of Uncommitted Borrowing" has the meaning specified in Section
------------------------------- -------
2.03(a).
-------
"PBGC" means the Pension Benefit Guaranty Corporation and its
----
successors and assigns.
"Person" means an individual, partnership, corporation (including a
------
business trust), limited liability company, joint stock company, trust,
-12-
<PAGE>
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Pro Rata Share" means, at any time with respect to any Bank, the
--------------
ratio (expressed as a percentage) that such Bank's Commitment bears to the
aggregate Commitments of all Banks at such time or, at any time after the
Commitments have been terminated, the ratio (expressed as a percentage)
that such Bank's outstanding Committed Advances bears to the aggregate
outstanding Committed Advances of all Banks at such time.
"Public Debt Rating" means, on any date, the rating that has been most
------------------
recently announced by S&P or Moody's, as the case may be, for any class of
long-term senior non-credit-enhanced unsecured debt issued by the Company,
changing when and as the applicable rating agency publicly announces a
change in its Public Debt Rating.
"Quote Deadline" has the meaning specified in Section 2.03(a)(ii).
-------------- -------------------
"Register" has the meaning specified in Section 9.07(g).
-------- ---------------
"Replacement Bank" has the meaning specified in Section 2.23(b).
---------------- ---------------
"Request Deadline" has the meaning specified in Section 2.03(a)(i).
---------------- ------------------
"Responsible Officer" means the Executive Vice President and Chief
-------------------
Financial Officer of the Company, the Vice President and Treasurer of the
Company, or any other officer of the Company or any other Borrower
responsible for overseeing or reviewing compliance with this Agreement or
any Note.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-
---
Hill Companies, Inc.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and no Person other than the Company
and its ERISA Affiliates or (b) was so maintained and in respect of which
the Company or any of its ERISA Affiliates could have liability under
Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Sterling" means the lawful currency of the United Kingdom.
--------
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company, association or other business
entity of which securities or other ownership interests having (a) ordinary
voting
-13-
<PAGE>
power to elect a majority of the board of directors or other persons
performing similar functions or (b) having the ability to direct the
management of such corporation, partnership, limited liability company,
association or other business entity, are at the time directly or
indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries; provided however, that Stream International Inc., a Delaware
--------
corporation ("Stream"), shall not be considered a "Subsidiary" of the
------
Company until the earlier of (i) the date of the first regularly scheduled
annual meeting of Stream after such time as the Company has gained ordinary
voting power to elect a majority of the board of directors of Stream and
(ii) the date on which the Company elects the majority of a new board of
directors of Stream.
"Swiss Francs" means the lawful currency of Switzerland.
------------
"Termination Date" means the earlier of (i) December 11, 2003 (or such
----------------
later date as is established pursuant to Section 2.23(d)) or (ii) the date
---------------
the Commitments are terminated in whole pursuant to Section 2.05 or 6.01.
------------ ----
"Uncommitted Advance" means an advance by a Bank to a Borrower as part
-------------------
of an Uncommitted Borrowing resulting from the auction bidding procedure
described in Section 2.03.
------------
"Uncommitted Borrowing" means a borrowing consisting of simultaneous
---------------------
Uncommitted Advances from each of the Banks whose offer to make one or more
Uncommitted Advances as part of such borrowing has been accepted by a
Borrower under the auction bidding procedure described in Section 2.03.
------------
"Uncommitted Borrowing Margin" means, with respect to any Eurocurrency
----------------------------
Rate specified by a Borrower in a Notice of Uncommitted Borrowing and any
offer made by a Bank in response to such Notice of Uncommitted Borrowing,
the margin (expressed as a percentage rate per annum) to be added to or
subtracted from such Eurocurrency Rate in order to determine the interest
rate per annum at which such Bank is willing to, and offers to, make an
Uncommitted Advance to such Borrower as part of a Eurocurrency Rate
Uncommitted Borrowing.
"Uncommitted Note" means a promissory note, in substantially the form
----------------
of Exhibit D-2 hereto, duly executed by the Company or a Borrowing
-----------
Subsidiary and evidencing an Uncommitted Advance made by such Bank,
including any amendment, modification, renewal or replacement of such
promissory note.
"Utilization Fee" has the meaning specified in Section 2.04.
--------------- ------------
"Withdrawal Liability" has the meaning specified in Part 1 of Subtitle
--------------------
E of Title IV of ERISA.
-14-
<PAGE>
"Year 2000 Problem" means anticipated costs, problems and
-----------------
uncertainties associated with the inability of certain computer
applications to effectively handle data including dates on and after
January 1, 2000.
"Yen" means the lawful currency of Japan.
---
"1994 Credit Agreement" means that certain Credit Agreement dated as
---------------------
of December 21, 1994, among the Company, the banks listed on the signature
pages thereto, and Citibank, N.A., as Administrative Agent, as amended,
modified, restated or supplemented from time to time.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
SECTION 1.03. Accounting Terms; Modifications due to Implementation of
--------------------------------------------------------
Euro. (a) All accounting terms not specifically defined herein shall be
- ----
construed in accordance with generally accepted accounting principles consistent
with those applied in the preparation of the financial statements then most
recently delivered by the Company to the Banks in accordance with Section 5.03
------------
("GAAP"); provided, however, that, if any changes in accounting principles from
those used in the preparation of the consolidated financial statements of the
Company and its Subsidiaries for the fiscal year of the Company ended December
31, 1997 (as delivered to the Lenders pursuant to Section 4.01(e)) occur by
---------------
reason of the promulgation of rules, regulations, pronouncements, opinions or
other requirements of the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and such changes would affect (or would result in a
change in the method of calculation of) the covenant set forth in Section 5.02,
------------
or any of the defined terms related thereto contained in Section 1.01, then upon
------------
the request of any party hereto, the Company, the Administrative Agent and the
Banks shall enter into negotiations in good faith, if and to the extent
necessary, to amend such covenant or such terms as would be affected by such
changes in GAAP, in accordance with Section 9.01, in such manner as would
------------
maintain the economic terms of such covenant as in effect under this Agreement,
prior to giving effect to the occurrence of any such changes; and provided
further, however, that until the amendment of the covenant and the defined terms
referred to in the immediately preceding proviso becomes effective, such
covenant and defined terms shall be performed, observed and determined, and any
determination of compliance with such covenant shall be made, as though no such
changes in accounting principles had been made and the Company shall deliver to
the Banks, in addition to the consolidated financial statements otherwise
required to be delivered to the Banks under Sections 5.03(a) or 5.03(b) during
---------------- -------
such period, a statement of reconciliation conforming such consolidated
financial statements to GAAP prior to such changes.
(b) If the Administrative Agent determines that modifications to this
Agreement are necessary as a result of the commencement of the third stage of
European Economic and Monetary Union and the occurrence of the Euro
Implementation Date, then the Company, the Administrative Agent and the Banks
shall enter into negotiations in good faith to amend
-15-
<PAGE>
this Agreement in such manner as to put the parties in the same position as if
the Euro Implementation Date had not occurred. No such modifications shall
become effective until this Agreement has been amended in accordance with
Section 9.01 to incorporate such modifications.
- ------------
ARTICLE II
----------
AMOUNTS AND TERMS OF THE ADVANCES
---------------------------------
SECTION 2.01. The Committed Advances. Each Bank severally agrees, on the
----------------------
terms and conditions hereinafter set forth, to make Committed Advances to the
Borrowers from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an aggregate amount with respect to
all Borrowers not to exceed at any time outstanding an amount (such Bank's
"Available Commitment") equal to (i) the amount set forth opposite such Bank's
name on Schedule I hereto or, if such Bank has entered into any Assignment and
----------
Acceptance, set forth for such Bank in the Register, as such amount may be
reduced pursuant to Section 2.05 (such Bank's "Commitment") minus (ii) such
------------ -----
Bank's Pro Rata Share of the aggregate amount of the Uncommitted Advances then
outstanding. Each Committed Borrowing shall be in an aggregate amount of not
less than $20,000,000 or an integral multiple of $1,000,000 in excess thereof
or, if the requested currency for such Committed Advance is not Dollars, an
equivalent amount (determined in accordance with Section 2.16) and multiple in
------------
the requested Alternative Currency, and, subject to Section 2.02, shall consist
------------
of Committed Advances of the same Type made on the same day to the same Borrower
by the Banks ratably according to their respective Commitments in the currency
so requested. Within the limits of each Bank's Available Commitment, a Borrower
may borrow under this Section 2.01, prepay pursuant to Section 2.10, and
------------ ------------
reborrow under this Section 2.01.
------------
SECTION 2.02. Making the Committed Advances. (a) Each Committed
------------------------------
Borrowing shall be made on notice by the Company (or, if such Borrower is a
Borrowing Subsidiary, by the Company on behalf of such Borrowing Subsidiary) to
the Administrative Agent (which shall give each Bank prompt notice thereof by
telecopy), given not later than 10:00 A.M. (Chicago time) on (i) the date of a
proposed Committed Borrowing comprised of Base Rate Advances, (ii) the third
Business Day prior to the date of a proposed Committed Borrowing comprised of
Eurocurrency Rate Advances to be denominated in Dollars, and (iii) the fourth
Business Day prior to the date of a proposed Committed Borrowing comprised of
Eurocurrency Rate Advances to be denominated in an Alternative Currency. Each
such notice of a Committed Borrowing (a "Notice of Committed Borrowing") shall
be by telecopy confirmed immediately in writing, in substantially the form of
Exhibit E-1 hereto, specifying therein the requested (i) date of such Committed
- -----------
Borrowing, (ii) Type of Committed Advances comprising such Committed Borrowing,
which, in the case of a Committed Borrowing denominated in an Alternative
Currency, shall be Eurocurrency Rate Advances, (iii) currency for such Committed
Borrowing, which shall be in Dollars or an Alternative Currency, (iv) aggregate
amount of such Committed Borrowing, (v) in the case of a Committed Borrowing
consisting of Eurocurrency Advances, the initial Interest Period for each
Committed Advance comprising such Committed Borrowing, and (vi) whether such
Committed Borrowing is to be made by the Company or by a specified Borrowing
-16-
<PAGE>
Subsidiary. The Administrative Agent shall, promptly after such time as the
Company or such Borrower may no longer revoke the Notice of Committed Borrowing
without any liability to the Banks, notify each Bank and the Company or such
Borrower of the applicable interest rate under Section 2.07(a) or (b). Each
--------------- ---
Bank shall, before 12:00 P.M. (Chicago time) on the date of such Committed
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at the Domestic Lending Office of the Bank then acting
as Administrative Agent, in federal or otherwise immediately available funds,
such Bank's Pro Rata Share of such Committed Borrowing. After the
Administrative Agent receives such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Administrative Agent will make such
-----------
funds available to the applicable Borrower at the Administrative Agent's
aforesaid address.
(b) Anything in subsection (a) above to the contrary notwithstanding:
(i) If with respect to a request for a Committed Borrowing of an
Alternative Currency other than Sterling, German Marks, Swiss Francs or
Yen, any Bank shall, prior to 10:00 A.M. (Chicago time) on the second
Business Day before the requested date of such Committed Borrowing, notify
the Administrative Agent that the requested Alternative Currency is not
practically available to such Bank in the amount required to make its
Committed Advance in connection therewith; or
(ii) If any Bank shall, prior to making any requested Committed
Borrowing consisting of Eurocurrency Rate Advances in an Alternative
Currency, notify the Administrative Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or that any central bank or other governmental authority asserts
that it is unlawful, for such Bank or its Eurocurrency Lending Office or
any other Applicable Lending Office to perform its obligations hereunder to
make Eurocurrency Rate Advances in such currency or to fund or maintain
Eurocurrency Rate Advances in such currency hereunder; or
(iii) If the Majority Banks shall, prior to making any requested
Committed Borrowing of an Alternative Currency other than Sterling, German
Marks, Swiss Francs, Yen or the Euro, notify the Administrative Agent or
the Administrative Agent shall reasonably determine that currency control
or other exchange regulations are imposed in the country in which such
currency is issued which result in the introduction of different types of
such currency or that there is a change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls which would make it impracticable for such Advance to be
denominated in the Alternative Currency;
then, upon receipt of such notice, the Administrative Agent shall so notify the
Company and the applicable Borrower (if other than the Company) and the Company
or such Borrower may, without incurring an obligation to indemnify for losses,
costs or expenses under Section 2.02(d), by notice to the Administrative Agent
---------------
(which shall promptly notify each Bank), either
-17-
<PAGE>
(x) withdraw the applicable Notice of Committed Borrowing, in which
case the Committed Borrowing shall not occur;
(y) request that such Committed Borrowing be made by the Banks in
Dollars as a Committed Borrowing comprised of either Eurocurrency Rate
Advances or Base Rate Advances, in which case the original Notice of
Committed Borrowing shall be deemed to be a Notice of Committed Borrowing
which requests a Committed Borrowing in an aggregate principal amount in
Dollars equivalent, on the date the Company or such Borrower so notifies
the Administrative Agent, to the amount of the originally requested
currency for such Type of Committed Advances (determined in accordance with
Section 2.16); provided that such request may not be made by the Company or
------------ --------
such Borrower if the requested Type of Committed Advances is Eurocurrency
Rate Advances and the request by the Company or such Borrower is not given
to the Administrative Agent prior to 2:00 P.M. (London time) on the second
Business Day before the requested date of such Committed Borrowing; or
(z) only in the case of a Bank giving a notice described in Section
-------
2.02(b)(ii) above, request that such Committed Borrowing be made by the
-----------
Banks (other than the notifying Bank) and that no Committed Advance be made
by the notifying Bank in connection with such Committed Borrowing.
In the case of any notice given under clause (y) above, the Company or such
Borrower shall specify in such notice the amount and type of Committed Advance
to be made by each Bank in connection therewith. Any notice under this
subsection (b) shall be given no later than 2:00 P.M. (London time) two Business
Days before the date of the requested Committed Borrowing, may be given by
telephone and, if by telephone, shall be confirmed promptly in writing. If
neither the Company nor the applicable Borrower shall provide a timely notice as
contemplated in clause (x), (y) or (z) above in response to a notice by any Bank
under clause (i) or (ii) above, the applicable Notice of Committed Borrowing
shall be deemed withdrawn.
(c) Anything in subsection (a) above to the contrary notwithstanding, if
the Majority Banks shall, no later than 5:00 P.M. (Chicago time) three Business
Days before the date of any requested Committed Borrowing, continuation or
conversion consisting of Eurocurrency Rate Advances, or any continuation thereof
or conversion thereto, notify the Administrative Agent that the Eurocurrency
Rate for any Interest Period for such Eurocurrency Rate Advances, plus
additional interest, if any, payable under Section 2.08, will not adequately
------------
reflect the cost to such Majority Banks of making, funding, converting to or
continuing their respective Eurocurrency Rate Advances for such Committed
Borrowing for such Interest Period, then the Administrative Agent shall promptly
notify the Company, the applicable Borrower (if other than the Company) and the
Banks of such circumstances and upon receipt of such notice, the Company or such
Borrower may, without incurring an obligation to indemnify for losses, costs or
expenses under Section 2.02(d), by notice to the Administrative Agent (which
---------------
shall promptly notify each Bank), either:
-18-
<PAGE>
(i) withdraw the applicable Notice of Committed Borrowing, in which
case the Committed Borrowing shall not occur;
(ii) withdraw the applicable Notice of Conversion or Continuation,
in which case the conversion or continuation of such Committed Borrowing
shall not occur; or
(iii) request that such Committed Borrowing, continuation or
conversion be made by the Banks in Dollars as a Committed Borrowing,
continuation or conversion, in which case the original Notice of Committed
Borrowing, or Notice of Conversion or Continuation shall be deemed to be a
Notice of Committed Borrowing, or Notice of Conversion or Continuation
which requests a Committed Borrowing, continuation or conversion in an
aggregate principal amount in Dollars equivalent, on the date the Company
or such Borrower so notifies the Administrative Agent, to the amount of the
originally-requested currency for such Committed Advances; provided that
--------
such request may not be made by the Company or such Borrower if the request
by the Company or such Borrower is not given to the Administrative Agent
prior to 2:00 P.M. (London time) on the second Business Day before the
requested date of such Committed Borrowing, continuation or conversion.
In the case of any notice given under clause (iii) above, the Company or such
Borrower shall specify in such notice the amount and Type of Committed Advances
to be made, continued or converted by the Banks in connection therewith. Any
notice under this subsection (c) shall be given no later than 2:00 P.M. (London
time) two Business Days before the date of the requested Committed Borrowing,
may be given by telephone, and, if by telephone, shall be confirmed promptly in
writing. From and after the date the Administrative Agent receives the notice
described in Section 2.02(c), the Banks' obligation to make Eurocurrency
---------------
Advances for any affected Interest Period shall be suspended until the Majority
Banks notify the Administrative Agent that the circumstances giving rise to such
notice no longer exist. If neither the Company nor the applicable Borrower
shall provide a timely notice as contemplated in clauses (i), (ii) or (iii)
above with respect to a Notice of Committed Borrowing, the applicable Notice of
Committed Borrowing shall be deemed withdrawn. If neither the Company nor the
applicable Borrower shall provide timely a notice as contemplated in clauses
(i), (ii) or (iii) above with respect to a Notice of Continuation or Conversion,
the Company or such applicable Borrower shall be deemed to have made the request
described in clause (iii).
(d) Each Notice of Committed Borrowing and Notice of Conversion or
Continuation may be revoked by the Company or, if other than the Company, the
applicable Borrower, by notice to the Administrative Agent without any liability
on the part of the Company or such Borrower at any time prior to (i) 10:00 A.M.
(Chicago time) on the date of a proposed Committed Borrowing, continuation or
conversion comprised of Base Rate Advances, (ii) 11:00 A.M. (London time) on the
second Business Day prior to the date of a proposed Committed Borrowing,
continuation or conversion comprised of Eurocurrency Rate Advances to be
denominated in Dollars, and (iii) 11:00 A.M. (London time) on the third Business
Day prior to the date of a proposed Committed Borrowing, continuation or
conversion comprised of Eurocurrency Rate Advances to be denominated in an
Alternative
-19-
<PAGE>
Currency. In the case of any Committed Borrowing, continuation or conversion
which the related Notice of Committed Borrowing, or Notice of Conversion or
Continuation, specifies is to be comprised of Eurocurrency Rate Advances, unless
the Company or the applicable Borrower revokes such Notice of Committed
Borrowing or Notice of Conversion or Continuation in accordance with the
preceding sentence and except as otherwise provided in Sections 2.02(b) and
----------------
(c), the Company or such Borrower shall indemnify each Bank against any loss,
- ---
cost or expense reasonably incurred by such Bank as a result of any failure to
fulfill on or before the date specified in such Notice of Borrowing or Notice of
Conversion or Continuation for such Committed Borrowing, conversion or
continuation, the applicable conditions set forth in Article III, including,
-----------
without limitation, any loss (excluding loss of anticipated profits), cost or
expense reasonably incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Bank to fund the Committed Advance to
be made by such Bank as part of such Committed Borrowing, conversion or
continuation, when such Committed Advance, as a result of such failure, is not
made, continued or converted on such date.
(e) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Committed Borrowing that such Bank will not make
available to the Administrative Agent such Bank's Pro Rata Share of such
Committed Borrowing, the Administrative Agent may assume that such Bank has made
such Pro Rata Share available to the Administrative Agent on the date of such
Committed Borrowing in accordance with subsection (a) of this Section 2.02 and
------------
the Administrative Agent may, in reliance upon such assumption, make a
corresponding amount available to the applicable Borrower on such date. If and
to the extent that such Bank shall not have so made such Pro Rata Share
available to the Administrative Agent, such Bank and such Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to such Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of such Borrower, the
interest rate applicable at the time to Committed Advances comprising such
Committed Borrowing and (ii) in the case of such Bank, the Federal Funds Rate.
If such Bank shall repay such corresponding amount to the Administrative Agent,
such amount so repaid shall constitute such Bank's Committed Advance as part of
such Committed Borrowing for purposes of this Agreement.
(f) A Bank's failure to make the Committed Advance to be made by it as
part of any Committed Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Committed Advance on the date of such
Committed Borrowing. No Bank shall be responsible for the failure of any other
Bank to make the Committed Advance to be made by such other Bank on the date of
any Committed Borrowing.
SECTION 2.03. The Uncommitted Advances. (a) Each Bank severally agrees
------------------------
that any Borrower may make Uncommitted Borrowings in Dollars from time to time
on any Business Day during the period from the date hereof until 30 days before
the Termination Date in the manner set forth below; provided that, following the
--------
making of each Uncommitted Borrowing, the aggregate amount with respect to all
Borrowers of the Advances then outstanding shall not exceed the aggregate amount
of the Commitments of the Banks.
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<PAGE>
(i) A Borrower may request, and the Company may request for the
benefit of any Borrowing Subsidiary, an Uncommitted Borrowing to be made by
such Borrower under this Section 2.03 by delivering to the Administrative
------------
Agent, by telecopier not later than the applicable Request Deadline a
notice of an Uncommitted Borrowing (a "Notice of Uncommitted Borrowing"),
in substantially the form of Exhibit E-2 hereto, specifying therein (A) the
-----------
requested date of the proposed Uncommitted Borrowing, (B) the aggregate
amount of the proposed Uncommitted Borrowing, (C) that each Bank submitting
an offer shall quote an Uncommitted Borrowing Margin, or that each Bank
submitting an offer shall quote a fixed interest rate per annum without
reference to the Eurocurrency Rate, (D) maturity date for repayment of each
Uncommitted Advance to be made as part of such Uncommitted Borrowing (which
maturity date may not be earlier than seven (7) days, or later than 180
days after the date of the proposed Uncommitted Borrowing or later than the
Termination Date) and whether such Uncommitted Advance may be prepaid, and
if so, whether with or without penalty, (E) interest payment date or dates
relating thereto, (F) Borrower and (G) other material terms to be
applicable to such Uncommitted Borrowing. The Administrative Agent shall
promptly notify each Bank of its receipt of each such Notice of Uncommitted
Borrowing by sending each Bank a copy thereof. "Request Deadline" means
----------------
(x) in the case of a Fixed Rate Uncommitted Borrowing, 4:00 P.M. (Chicago
time) on the Business Day prior to the date of such proposed Uncommitted
Borrowing and (y) in the case of a Eurocurrency Rate Uncommitted Borrowing,
4:00 P.M. (Chicago time) four (4) Business Days prior to the date of such
proposed Uncommitted Borrowing.
(ii) Each Bank shall, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more Uncommitted Advances to such Borrower
as part of such proposed Uncommitted Borrowing at a rate or rates of
interest specified by such Bank, in its sole discretion, by notifying the
Administrative Agent not later than the applicable Quote Deadline of the
minimum amount (if any) and maximum amount of each Uncommitted Advance
which such Bank would be willing to make as part of such proposed
Uncommitted Borrowing (which amounts may, subject to the proviso to the
first sentence of this Section 2.03(a), exceed such Bank's Commitment, if
---------------
any), the Uncommitted Borrowing Margin or Margins to be applied in the
determination of the rate or rates of interest therefor (or, if the Notice
of Uncommitted Borrowing shall have requested that fixed rates per annum be
quoted, the fixed rate or rates per annum therefor) and such Bank's
Applicable Lending Office with respect to such Uncommitted Advance. If any
Bank shall elect not to make such an offer, such Bank shall so notify the
Administrative Agent before the applicable Quote Deadline, and such Bank
shall not be obligated to, and shall not, make any Uncommitted Advance as
part of such Uncommitted Borrowing; provided that the failure by any Bank
--------
to give such notice shall not cause such Bank to be obligated to make any
Uncommitted Advance as part of such proposed Uncommitted Borrowing. The
Administrative Agent shall promptly notify the Company and, if applicable,
the applicable Borrowing Subsidiary of each Bank's response
-21-
<PAGE>
pursuant to this paragraph (ii); provided, that if First Chicago shall
--------
elect to make an offer under this paragraph (ii), such offer shall be
delivered to the Company and, if applicable, the Borrowing Subsidiary not
later than one-half hour prior to the applicable Quote Deadline. Each
Borrower shall be entitled to assume that each quote of an Uncommitted
Borrowing Margin or a fixed rate per annum by a Bank includes, and such
Bank shall not be entitled to claim as additional interest or costs under
Section 2.08 or otherwise, any costs to such Bank in the nature of a
------------
reserve requirement, assessment or other charge in connection with the
Uncommitted Advance to which such quote relates, except that such Bank
shall be entitled to claim increased costs and additional compensation
under Section 2.12(a) and (b) and Section 2.19, but solely with respect
--------------- --- ------------
to the changes described in such provisions that occur after the date such
Uncommitted Advance is made.
"Quote Deadline" means, (x) in the case of a Fixed Rate Uncommitted
---------------
Borrowing, 9:00 A.M. (Chicago time) on the date of such proposed
Uncommitted Borrowing and (y) in the case of a Eurocurrency Rate
Uncommitted Borrowing, 9:00 A.M. (Chicago time) three Business Days prior
to the date of such proposed Uncommitted Borrowing.
(iii) Such Borrower, or the Company on behalf of such Borrower,
shall, in turn, before the applicable Acceptance Deadline, either
(A) cancel, without incurring an obligation on the part of such
Borrower or the Company to indemnify for losses, costs or expenses
under Section 2.02(d), such Uncommitted Borrowing by giving the
---------------
Administrative Agent notice to that effect, in which case such
Uncommitted Borrowing shall not be made, or
(B) accept one or more of the offers made by any Bank or Banks
pursuant to paragraph (ii) above, in its sole discretion but in any
event in ascending order of the fixed rates of interest or Uncommitted
Borrowing Margins (as applicable) offered by all of the Banks
responding to such Notice of Uncommitted Borrowing, by giving notice
to the Administrative Agent of the relevant Banks and the respective
amounts of each Uncommitted Advance (each of which amounts shall be
equal to or greater than the minimum amount, and equal to or less than
the maximum amount, offered to be made by the respective Bank for such
Uncommitted Advance pursuant to Section 2.02(a)(ii) above) and reject
-------------------
any remaining offers made by Banks pursuant to such Section by giving
the Administrative Agent notice to that effect. The Company (either
for itself or on behalf of a Borrowing Subsidiary) may not accept
offers which, in the aggregate, exceed the requested Uncommitted
Borrowing specified in the applicable Notice of Uncommitted Borrowing.
If two or more Banks bid at the same Uncommitted
-22-
<PAGE>
Borrowing Margin or fixed rate of interest, as the case may be, and
the amount of accepted offers is less than the aggregate amount of
such offers, the amount to be borrowed from such Banks as part of such
Uncommitted Borrowing shall be allocated pro rata on the basis of the
--------
maximum amount offered by each such Bank at such fixed rates or
Uncommitted Borrowing Margins in connection with such Uncommitted
Borrowing.
The Administrative Agent shall promptly notify the Banks of each notice it
receives pursuant to this paragraph (iii). "Acceptance Deadline" means, (x)
-------------------
in the case of an Uncommitted Borrowing to be denominated in Dollars, 10:00
A.M. (Chicago time) on the date of such proposed Uncommitted Borrowing and
(y) in the case of an Uncommitted Borrowing to be denominated in an
Alternative Currency, 4:00 P.M. (Chicago time) three Business Days prior to
the date of such proposed Uncommitted Borrowing.
(iv) If such Borrower accepts, or the Company accepts on such
Borrower's behalf, one or more of the offers made by any Bank or Banks
pursuant to Section 2.03(a)(iii)(B) above, the Administrative Agent shall
-----------------------
in turn promptly notify (A) each Bank that has made an offer pursuant to
Section 2.03(a)(ii) of the date and aggregate amount of such Uncommitted
-------------------
Borrowing and whether or not any offer or offers so made by such Bank have
been accepted by such Borrower, (B) each Bank that is to make an
Uncommitted Advance as a part of such Uncommitted Borrowing, of the amount
of each Uncommitted Advance to be made by such Bank as part of such
Uncommitted Borrowing, and (C) each Bank that is to make an Uncommitted
Advance as part of such Uncommitted Borrowing, upon receipt, that the
Administrative Agent has received forms of documents appearing to fulfill
the applicable conditions set forth in Article III. Each Bank that is to
-----------
make an Uncommitted Advance as part of such Uncommitted Borrowing shall,
before 1:00 P.M. (Chicago time) on the date of such Uncommitted Borrowing
specified in the notice received from the Administrative Agent pursuant to
clause (A) of the preceding sentence or any later time when such Bank shall
have received notice from the Administrative Agent pursuant to subclause
(C) of the preceding sentence, make available to the Administrative Agent
at the Administrative Agent's Domestic Lending Office, in federal or
otherwise immediately available funds, such Bank's portion of such
Uncommitted Borrowing. After the Administrative Agent receives such funds
and when the applicable conditions set forth in Article III have been
-----------
fulfilled, the Administrative Agent will make such funds available to the
applicable Borrower at the Administrative Agent's aforesaid address.
Promptly after (x) each Uncommitted Borrowing, the Administrative Agent
will notify each Bank of the amount and date of the Uncommitted Borrowing
and the maturity date thereof and the Available Commitment of each Bank
after giving effect to such Uncommitted Borrowing and (y) the prepayment of
any Uncommitted Borrowing by or on behalf of such Borrower, the
Administrative Agent will notify each Bank of the amount and date of each
-23-
<PAGE>
such prepayment and the Available Commitment of each Bank after giving
effect thereto.
(b) Each Uncommitted Borrowing shall be in an aggregate amount of not less
than $25,000,000 or an integral multiple of $1,000,000 in excess thereof, or if
the requested currency for such Advance is not Dollars, the equivalent of such
amount (determined in accordance with Section 2.16) or multiple in the requested
------------
Alternative Currency.
(c) Within the limits and on the conditions set forth in this Section
-------
2.03, each Borrower may from time to time borrow under this Section 2.03, repay
- ---- ------------
pursuant to subsection (d) below, and reborrow under this Section 2.03; provided
------------ --------
that an Uncommitted Borrowing shall not be made within three Business Days of
any other Uncommitted Borrowing.
(d) Each Borrower shall repay to the Administrative Agent, for the account
of each Bank which has made an Uncommitted Advance to such Borrower, on the
maturity date of each such Uncommitted Advance (such maturity date being that
specified for repayment of such Uncommitted Advance in the related Notice of
Uncommitted Borrowing delivered pursuant to Section 2.03(a)(i) above) the then
------------------
unpaid principal amount of such Uncommitted Advance. A Borrower shall not have
the right to prepay any principal amount of any Uncommitted Advance without the
consent of the Bank making such Advance.
(e) Each Borrower shall pay interest on the unpaid principal amount of
each Uncommitted Advance made to it, from the date of such Uncommitted Advance
to the date the principal amount of such Uncommitted Advance is repaid in full,
at the rate of interest for such Uncommitted Advance specified by the Bank
making such Uncommitted Advance in its notice with respect thereto delivered
pursuant to Section 2.03(a)(ii) above, payable on the interest payment date or
-------------------
dates specified for such Uncommitted Advance in the related Notice of
Uncommitted Borrowing delivered pursuant to Section 2.03(a)(i) above.
------------------
(f) The Borrower of any Uncommitted Advance shall, promptly upon request
by the Bank making such Uncommitted Advance (either in the quote delivered by
such Bank pursuant to Section 2.03(a)(ii) or by notice to the Administrative
-------------------
Agent), execute and deliver to the Administrative Agent an Uncommitted Note
payable to the order of such Bank in a principal amount equal to the principal
amount of such Uncommitted Advance and otherwise on such terms as were agreed to
for such Uncommitted Advance in accordance with Section 2.03.
------------
SECTION 2.04. Facility Fee and Utilization Fee. (a) The Company and each
--------------------------------
Borrowing Subsidiary jointly and severally agree to pay to the Administrative
Agent, for the account of each Bank other than a Designated Bidder, a facility
fee ("Facility Fee") on the average daily Commitment of such Bank from the date
hereof until the Termination Date, payable in arrears on the first Business Day
of each January, April, July and October during the term of such Bank's
Commitment, commencing January 4, 1999, and on the Termination Date, at a rate
per annum equal to the following percentage in effect from time to time:
(i) 0.07% for each day Category 1 Status exists,
-24-
<PAGE>
(ii) 0.08% for each day Category 2 Status exists,
(iii) 0.10% for each day Category 3 Status exists,
(iv) 0.15% for each day Category 4 Status exists, and
(v) 0.25% for each day Category 5 Status exists.
(b) To the extent, and for so long as, (i) the average daily aggregate
outstanding principal amount of Advances at any time exceeds one-half of the
aggregate Commitments at such time, and (ii) Category 3 Status, Category 4
---
Status or Category 5 Status exists, the Company and each Borrowing Subsidiary,
jointly and severally, agree to pay to each Bank other than a Designated Bidder
a utilization fee (the "Utilization Fee") equal to 0.05% per annum of the
aggregate principal amount of such Bank's Advances at such time. The
Utilization Fee shall be payable on each date the Facility Fee is payable.
(c) Notwithstanding the foregoing, (i) any Facility Fee or Utilization Fee
accrued with respect to any Commitment of a Defaulting Bank during the period
prior to the time such Bank became a Defaulting Bank and unpaid at such time
shall not be payable by the Borrowers so long as such Bank shall be a Defaulting
Bank, except to the extent such Facility Fee or Utilization Fee was due and
payable prior to such time, and (ii) no Facility Fee or Utilization Fee shall
accrue on the Commitment of a Defaulting Bank so long as such Bank is a
Defaulting Bank.
SECTION 2.05. Reduction and Termination of the Commitments. (a) The
--------------------------------------------
Company shall have the right, upon at least four (4) days' notice to the
Administrative Agent to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Banks, provided that the aggregate
--------
amount of the Commitments of the Banks shall not be reduced to an amount which
is less than the aggregate principal amount of the Uncommitted Advances then
outstanding and provided, further, that each partial reduction shall be in an
-------- -------
aggregate amount of $10,000,000 or any integral multiple of $1,000,000 in excess
thereof.
(b) Provided that no Event of Default shall have occurred and be
continuing, the Company may at any time replace any Bank, in whole but not in
part, by (i) giving such Bank and the Administrative Agent not less than ten
(10) Business Days' prior notice thereof, which notice shall be irrevocable and
effective only when received by such Bank and the Administrative Agent and shall
specify the effective date of such replacement, and (ii) effecting an assignment
of all of the Bank's Commitment and Advances in accordance with Section 9.07.
------------
SECTION 2.06. Payment; Conversion and Continuation. (a) On the
------------------------------------
Termination Date, the Borrowers shall repay, to the Administrative Agent for the
ratable account of the Banks, the entire unpaid principal amount of the Advances
made by each Bank.
(b) Any Borrower may elect (x) to convert Base Rate Advances or any
portion thereof to Eurocurrency Rate Advances, (y) to convert Eurocurrency Rate
Advances or any portion thereof into Base Rate Advances, or (z) to continue any
Eurocurrency Rate Advance or any portion thereof for an additional Interest
Period; provided, however, that the
-------- -------
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<PAGE>
aggregate amount of Base Rate Advances being converted into Eurocurrency Rate
Advances or of Eurocurrency Rate Advances being continued shall, in the
aggregate, equal $20,000,000 or an integral multiple of $1,000,000 in excess
thereof. The applicable Interest Period for the continuation of any Eurocurrency
Rate Advance shall commence on the day on which the immediately-preceding
Interest Period expires. Each conversion or continuation shall be allocated
among the Committed Advances of each Bank in accordance with its Pro Rata Share
of the amount so converted or continued. Each such election shall be in
substantially the form of Exhibit F (a "Notice of Conversion or Continuation")
---------
and shall be made by giving the Administrative Agent notice by 10:00 a.m.
(Chicago time) on the date of such conversion or continuation, in the case of a
conversion to a Base Rate Advance, giving the Administrative Agent at least
three Business Days' prior written notice thereof in the event of a conversion
to or continuation of a Eurocurrency Advance specifying, in each case (i)
whether a conversion or continuation is to take place, (ii) what Advances are to
be converted or continued, and if converted, the Type of Advance to which it is
to be converted, (iii) the amount of the conversion or continuation, (iv) the
Interest Period therefor and (v) in the case of a conversion, the date of
conversion (which date shall be a Business Day). The Administrative Agent shall
promptly notify each Bank of its receipt of a Notice of Conversion or
Continuation by sending such Bank a copy thereof. If, within the time period
required under the terms of this Section 2.06(b), the Administrative Agent does
---------------
not receive a Notice of Conversion or Continuation from the applicable Borrower
containing an election to continue or convert any Advances for an additional
Interest Period, then, upon the expiration of the Interest Period therefor, such
Advances will be automatically converted to Base Rate Advances.
SECTION 2.07. Interest on Committed Advances. Each Borrower shall pay
-------------------------------
interest on the unpaid principal amount of each Committed Advance made by each
Bank to it from the date of such Committed Advance until such principal amount
shall be paid in full, at the following rates per annum:
(a) Base Rate Advances. During such period as such Committed Advance is a
------------------
Base Rate Advance, a rate per annum equal at all times to the Base Rate in
effect from time to time, payable quarterly in arrears on the first Business Day
of each January, April, July and October, commencing January 4, 1999, and on the
Termination Date. The Administrative Agent shall give notice to the Company and
the applicable Borrower (if other than the Company) and each Bank of any change
in the Base Rate promptly after such change occurs, but the Administrative
Agent's failure to give such notice shall not affect the obligation of the
Company or such Borrower to pay interest at such rate when it becomes due and
payable.
(b) Eurocurrency Rate Advances. During such period as such Committed
--------------------------
Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times
during each Interest Period for such Committed Advance to the sum of the
Eurocurrency Rate for such Interest Period plus the Applicable Margin, payable
on the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day which occurs during such
Interest Period every three months from the first day of such Interest Period
and on the date such Eurocurrency Rate Advance shall be converted or paid in
full.
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<PAGE>
(c) Default Interest. Notwithstanding the foregoing provisions of this
----------------
Section 2.07, any amount of principal and fees and, to the extent permitted by
- ------------
law, interest, that is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on which such
amount is due until such amount is paid in full, payable in arrears on the date
such amount shall be paid in full and on demand, at a rate per annum equal at
all times to 1% per annum above (i) in the case of principal, the rate of
interest otherwise thereto from time to time in accordance with the terms
hereof, and (ii) in the case of interest and fees, the Base Rate in effect from
time to time.
SECTION 2.08. Additional Interest on Eurocurrency Rate Advances. Each
-------------------------------------------------
Borrower shall pay to each Bank other than Designated Bidders, so long as and to
the extent such Bank shall be required under regulations of the Board of
Governors of the Federal Reserve System (or any similar authority outside the
United States, in the case of Committed Advances in Alternative Currencies) to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or any other category of liabilities that
includes deposits by reference to which the interest rate on Eurocurrency Rate
Advances in the applicable Alternative Currency is determined) and such Bank's
performance under this Agreement (and other like agreements) shall have given
rise to additional reserve requirements for such Bank thereunder, additional
interest on the unpaid principal amount of each Committed Advance constituting a
Eurocurrency Rate Advance of such Bank made to such Borrower, from the date of
such Committed Advance until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the Eurocurrency Rate for the applicable Interest Period for
such Committed Advance from (ii) the rate obtained by dividing such Eurocurrency
Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve
Percentage of such Bank for such Interest Period, payable on each date on which
interest is payable on such Committed Advance. Such Bank shall, not later than
the last day of the applicable Interest Period, provide notice to the
Administrative Agent, the Company and, if other than the Company, the applicable
Borrower of any such additional interest arising in connection with such
Committed Advance. Such additional interest so notified on a timely basis by
any Bank shall be payable to the Administrative Agent for the account of such
Bank on the dates specified for payment of interest for such Committed Advance
in Section 2.07.
------------
SECTION 2.09. Interest Rate Determination. (a) Reserved.
---------------------------
(b) The Administrative Agent shall give prompt notice to the Company and
the applicable Borrower (if other than the Company) and each of the Banks (other
than the Designated Bidders) of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.07(a) or (b).
--------------- ---
(c) On the date on which the aggregate unpaid principal amount of
Eurocurrency Rate Advances comprising any Committed Borrowing shall be reduced,
by payment, prepayment or otherwise, to less than $20,000,000, such Advances
shall automatically convert into Base Rate Advances and such conversion shall be
subject to Section 2.11.
------------
SECTION 2.10. Prepayments. A Borrower may prepay, on any Business Day
-----------
following notice by 11:00 a.m. (Chicago time) on such Business Day to the
Administrative Agent (in the case of Base Rate Advances) and on three Business
Days' prior notice to the
-27-
<PAGE>
Administrative Agent (in the case of Eurocurrency Rate Advances), each Committed
Borrowing made to such Borrower, in whole or in part. Such notice shall include
the proposed date and aggregate principal amount of such prepayment, and if such
notice is given, such Borrower shall prepay such principal amount, together with
accrued interest to the date of such prepayment on the principal amount prepaid.
Any amounts payable, if any, pursuant to Section 2.11 hereof in connection with
------------
any prepayment shall be paid on the date of such prepayment; provided, however,
-------- -------
that each partial prepayment shall be in an aggregate principal amount of not
less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
Subject to Sections 2.12 and 2.13, each prepayment of a Committed Borrowing
------------- ----
shall be made to each Bank in accordance with such Bank's Pro Rata Share
thereof. The Company shall, on the first Business Day of each January, April,
July and October, if the aggregate outstanding principal Dollar Amount of all
Advances, calculated by the Administrative Agent on the seventh Business Day
prior to such payment date and reported to the Company by the fifth Business Day
prior to such payment date, exceeds (as the result of fluctuations in applicable
foreign exchange rates or otherwise) 105% of the then aggregate amount of the
Banks' Commitments (calculated as aforesaid), prepay a Committed Borrowing or
Borrowings (in whole or in part, and in any case as selected by the Company) in
an aggregate Dollar Amount (calculated as aforesaid, and rounded upward, if
necessary, to the nearest $1,000,000) equal to the excess of:
(i) the aggregate principal Dollar Amount (calculated as
aforesaid) of Advances outstanding, over
(ii) the then aggregate amount of the Banks' Commitments
(calculated as aforesaid).
Each prepayment of any Committed Borrowing (in whole or in part) made pursuant
to this Section 2.10 shall be without premium or penalty, but shall be subject
------------
to the provisions of Section 2.11. Any mandatory prepayment of a Committed
------------
Borrowing shall be made to the Administrative Agent for the account of each Bank
based on such Bank's Pro Rata Share of such Committed Borrowing and shall
include accrued and unpaid interest on the principal amount prepaid and all
amounts owing under Section 2.11.
------------
SECTION 2.11. Funding Indemnification. If any payment of principal of
-----------------------
any Advance (other than a Base Rate Advance) is made other than on the last day
of an Interest Period for such Advance, as a result of acceleration of the
maturity of the Advances pursuant to Section 6.01 or for any other reason, or if
------------
any Eurocurrency Rate Advance is converted to a Base Rate Advance pursuant to
Section 2.13(b) on any day other than the last day of an Interest Period for
- ---------------
such Eurocurrency Rate Advance, the applicable Borrower shall, upon demand by
any Bank (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank any amounts required to
compensate such Bank for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment or conversion, including without
limitation any loss (excluding loss of anticipated profits), cost or expense
reasonably incurred as a result of the liquidation or re-employment of deposits
or other funds acquired by such Bank to fund or maintain such Advance.
-28-
<PAGE>
SECTION 2.12. Increased Costs and Reduced Return. (a) Subject to the
----------------------------------
limitation in Section 2.03(a)(ii), if, due to either (i) the introduction of or
-------------------
any change (other than any change by way of imposition or increase of reserve
requirements, in the case of Eurocurrency Rate Advances, included in the
Eurocurrency Rate Reserve Percentage), after the date hereof, in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) issued after the date hereof, there
shall be any increase in the cost to any Bank of agreeing to make, making,
funding or maintaining Eurocurrency Rate Advances, by an amount reasonably
deemed by such Bank to be material, then from time to time, within ten days
after demand by such Bank (with a copy of such demand to the Administrative
Agent), such Borrower shall pay to the Administrative Agent for the account of
such Bank additional amounts sufficient to compensate such Bank for such
increased cost; provided that no Borrower shall be obligated to pay any such
--------
amount to the extent such amount results from a change, guideline or request
which took effect more than 90 days prior to the date of such demand.
(b) Subject to the limitation in Section 2.03(a)(ii), if any Bank shall
-------------------
have determined that the adoption, after the date hereof, of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive issued after the date hereof regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance by an amount reasonably deemed by such Bank to be
material, then from time to time, within ten days after demand by such Bank
(with a copy of such demand to the Administrative Agent), the Company shall pay
to the Administrative Agent for the account of such Bank such additional amount
or amounts as will compensate such Bank, in light of such circumstances, to the
extent such Bank reasonably determines such reduction to be allocable to the
existence of such Bank's Commitment; provided that no Borrower shall be
--------
obligated to pay any such amount to the extent such amount results from an
adoption, change, request or directive which took effect or was issued more than
90 days prior to the date of such demand.
(c) Each Bank will promptly notify the Administrative Agent and the
Company of any event of which it has knowledge, occurring after the date hereof,
which would entitle such Bank to compensation pursuant to this Section 2.12. A
------------
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall create a
rebuttable presumption as to the correctness of such additional amount or
amounts. Each Bank agrees not to request any payment under this Section 2.12
------------
unless similar requests are then generally being made by such Bank of other
borrowers similarly situated, and to use a reasonable basis for calculating
amounts allocable to its Commitment hereunder.
SECTION 2.13. Illegality. (a) If any Bank shall determine (which
----------
determination shall be rebuttably presumed correct as to all parties) at any
time that the making or
-29-
<PAGE>
continuance of its Eurocurrency Rate Advances has become unlawful because of the
introduction of or any change in or in the interpretation of any law or
regulation or because of the assertion of unlawfulness by any central bank or
other governmental authority, then, in any such event, such Bank shall give
prompt notice (by telephone confirmed in writing) to the Administrative Agent of
such determination (which notice the Administrative Agent shall promptly
transmit to each Borrower and the other Banks).
(b) Upon the giving of the notice to the Company referred to in subsection
(a) above, if the affected Advances are then outstanding, each Borrower shall,
upon at least one Business Day's written notice to the Administrative Agent and
the affected Bank, or if permitted by applicable law no later than the date
permitted thereby, in such Borrower's sole discretion, either (i) prepay the
principal amount of all outstanding Advances of such Bank to which such notice
relates, together with accrued interest thereon to the date of payment, or (ii)
convert each such Advance into a Base Rate Advance denominated in Dollars and,
in each case, be obligated to reimburse the Banks in respect thereof pursuant to
Section 2.11 hereof. If more than one Bank gives notice pursuant to Section
- ------------ -------
2.13(a) at any time, then all outstanding Advances of the affected Type or
- -------
currency of such Banks must be treated in the same manner by the Borrowers
pursuant to this subsection 2.13(b) and the Banks' obligations to make, convert
------------------
or continue Eurocurrency Rate Advances shall be suspended until the
Administrative Agent notifies the Borrowers that the circumstances causing such
suspension no longer exist.
SECTION 2.14. Payments and Computations. (a) The Company and each
---------------------------
Borrowing Subsidiary shall make each payment hereunder and under the Notes
without set-off, counterclaim or other deduction by causing a wire transfer of
immediately-available funds to be initiated to the Administrative Agent in an
amount equal to such payment not later than 12:00 noon (Chicago time) on the day
when due from the Company or such Borrowing Subsidiary. The Administrative
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or fees ratably (other than amounts payable
pursuant to Sections 2.03, 2.05(b), 2.08, 2.11, 2.12, 2.15, 2.19 or 2.20) to the
------------- ------- ---- ---- ---- ---- ---- ----
Banks for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to any Bank to such
Bank for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. All such payments shall
be made in Dollars, except that payments of principal of and interest on
Borrowings in an Alternative Currency shall be made in such Alternative Currency
or, where such Alternative Currency has converted to the Euro, in the Euro;
provided that if the applicable Borrower fails to make any payment of principal
or interest with respect to any Borrowing in an Alternative Currency (including
the Euro) on the due date thereof because such Alternative Currency has ceased
to be freely transferable and convertible into Dollars in the international
currency and exchange markets, such failure shall not constitute an Event of
Default or an event which would constitute an Event of Default but for the
requirement that notice be given or time elapse or both, if such Borrower pays
the equivalent in Dollars of such payment on the due date thereof. In addition
to any such Dollar payment, such Borrower agrees to pay to each affected Bank an
indemnity payment within five Business Days after such Borrower shall have
received a certificate from such Bank setting forth in reasonable detail the
amount of any loss, cost, damage or expense suffered by such Bank as a
consequence of such inability to make any such payment
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<PAGE>
in such Alternative Currency on the due date thereof. Each Bank agrees to use
reasonable efforts to avoid or minimize all such loss, cost, damage or expense.
(b) All computations of interest based on the Base Rate, or the
Eurocurrency Rate applicable to Borrowings denominated in Sterling, shall be
made by the Administrative Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurocurrency Rate
(as to all other currencies) or the Federal Funds Rate, all computations of
interest pursuant to Section 2.08 and all computations of the Facility Fee and
------------
the Utilization Fee shall be made by the Administrative Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Administrative Agent
(or, in the case of Section 2.08, by a Bank) of an interest rate or fee owing
------------
hereunder shall create a rebuttable presumption as to the correctness of such
determination.
(c) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be;
provided, however, if such extension would cause payment of interest on or
- -------- -------
principal of Eurocurrency Rate Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the
applicable Borrower prior to the date on which any payment is due to the Banks
hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
such Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.15. Sharing of Payments, Etc. If any Bank shall obtain any
------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Committed Advances made by it (other
than pursuant to Sections 2.08, 2.11, 2.12, 2.13(b), 2.19 or 2.20) in excess of
------------- ---- ---- ------- ---- ----
its ratable share of payments on account of the Committed Advances obtained by
all the Banks, such Bank shall forthwith purchase from the other Banks such
participations in the Committed Advances made by them as shall be necessary to
cause such purchasing Bank to share the excess payment ratably with each of
them, provided, however, that if all or any portion of such excess payment is
-------- -------
thereafter recovered from such purchasing Bank, such purchase from each Bank
shall be rescinded and such Bank shall repay to the purchasing Bank the purchase
price to the extent of such recovery together with an amount equal to such
Bank's ratable share (according to the proportion of (i) the amount of such
Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
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<PAGE>
purchasing Bank in respect of the total amount so recovered. Each Borrower
agrees that any Bank so purchasing a participation from another Bank with
respect to Advances made to such Borrower pursuant to this Section 2.15 may, to
------------
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Bank were the direct creditor of such Borrower in the amount of such
participation.
SECTION 2.16. Currency Equivalents. (a) For purposes of this Article
--------------------- -------
II, (i) the equivalent in Dollars of any Alternative Currency shall be
- --
determined by using the arithmetical mean of the buy and sell spot rates at
which First Chicago's principal office in London exchanges Dollars for such
Alternative Currency in the interbank market in London at 11:00 A.M. (London
time) two Business Days prior to the date on which such equivalent is to be
determined, (ii) the equivalent in any Alternative Currency of any other
Alternative Currency shall be determined by using the arithmetical mean of the
buy and sell spot rates at which First Chicago's principal office in London
exchanges such Alternative Currency for the equivalent in such other Alternative
Currency in London at 11:00 A.M. (London time) two Business Days prior to the
date on which such equivalent is to be determined, and (iii) the equivalent in
any Alternative Currency of Dollars shall be determined by using the
arithmetical mean of the buy and sell spot rates at which First Chicago's
principal office in London exchanges such Alternative Currency for Dollars in
London at 11:00 A.M. (London time) two Business Days prior to the date on which
such equivalent is to be determined. The equivalent in Dollars of each
Eurocurrency Rate Advance made in an Alternative Currency shall be recalculated
hereunder on each day that it is necessary to determine the unused portion of
each Bank's Commitment, or any or all of the Advances on such date.
(b) If for the purpose of obtaining a judgment in any court with respect
to any obligation of a Borrower hereunder, it shall become necessary for the
Administrative Agent or any Bank entitled to receive payments hereunder to
convert any amount into a currency other than the currency denominated hereunder
for such obligation, then such conversion shall be made on the basis of rates
(the "Exchange Rates") determined in the manner described in subsection (a)
above (or, if the applicable currency to be converted is not at the time of
conversion available in the interbank market in London, then in such other
interbank market as the Administrative Agent shall determine to have adequate
availability of such currency) and the date with respect to which such an
equivalent is to be determined shall be the first Business Day preceding the
date on which final judgment is entered. If pursuant to any such judgment
conversion is to be made with respect to a date other than the date referred to
above, and there shall occur a change between the Exchange Rates in effect on
such date and the Exchange Rates in effect on the date of payment, (i) the
applicable Borrower agrees to pay such additional amounts (if any) as may be
necessary to ensure that the amount paid is the amount in such other currency
which, when converted at the Exchange Rates as in effect on the date of payment
or distribution, is the amount then due hereunder in the relevant currency and
(ii) such Borrower shall not be required to pay any amount in excess of the
amount determined to be payable in connection with such obligation, calculated
on the basis of the Exchange Rates in effect on the first Business Day preceding
the date on which final judgment is entered. Any amount due from a Borrower
under this subsection (b) shall be due as a separate debt and is not to be
affected by or merged into any judgment being obtained for any other sums due
hereunder.
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<PAGE>
SECTION 2.17. Borrowing Subsidiaries. The Company may at any time or
----------------------
from time to time add as a party to this Agreement any Subsidiary of the Company
to be a "Borrowing Subsidiary" hereunder by causing such Subsidiary to execute
and deliver a duly completed Assumption Letter to the Administrative Agent, with
the written consent of the Company at the foot thereof. Upon such execution,
delivery and consent such Subsidiary shall for all purposes be a party hereto as
a Borrowing Subsidiary as fully as if it had executed and delivered this
Agreement. So long as the principal of and interest on all Advances made to any
Borrowing Subsidiary under this Agreement shall have been paid in full and all
other obligations of such Borrowing Subsidiary shall have been fully performed,
such Borrowing Subsidiary may, by not less than five Business Days' prior notice
to the Administrative Agent (which shall promptly notify the Banks thereof),
terminate its status as a "Borrowing Subsidiary."
SECTION 2.18. Reserved.
--------
SECTION 2.19. Taxes. (a) Any and all payments by a Borrower hereunder or
-----
under the Notes shall be made in accordance with Section 2.14, free and clear of
------------
and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Administrative Agent, taxes imposed
- ---------
on its income, and franchise taxes imposed on it, by the jurisdiction under the
laws of which such Bank or the Administrative Agent is organized or any
political subdivision thereof and taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Bank or the Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
-------
2.19) such Bank or the Administrative Agent (as the case may be) receives an
- ----
amount equal to the sum it would have received had no deductions been made, (ii)
such Borrower shall make such deductions and (iii) such Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, each Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Taxes").
(c) Each Borrower will indemnify each Bank and the Administrative Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.19) paid by such Bank or the Administrative Agent and any liability
- ------------
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted; provided, that the Borrowers shall have no obligation under this
--------
subsection (c) to indemnify any Bank or the Administrative Agent if a Borrower
shall have performed its obligations under subsection (a) and (b), thereby
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<PAGE>
providing such Bank or the Administrative Agent (as the case may be) the
wherewithal to make payment, or demonstrate that payment has been made, of any
such Taxes or Other Taxes, and such Bank or the Administrative Agent (as the
case may be) shall not have effected such payment or made such demonstration of
payment on a timely basis to the relevant taxing authorities. This
indemnification shall be made to the Administrative Agent for the account of
such Bank or the Administrative Agent (as the case may be) within 30 days from
the date such Bank or the Administrative Agent makes written demand therefor
(with a copy, in the case of a demand by a Bank, of such demand to the
Administrative Agent).
(d) Notwithstanding the foregoing, unless, prior to the date of the
initial Committed Borrowing (in the case of a Bank listed on Schedule I hereto),
----------
and prior to the effective date of the Assignment and Acceptance by which it
became a Bank (in the case of bank that became a Bank pursuant to such
Assignment and Acceptance), and in each case from time to time thereafter, if
requested by any Borrower,
(i) each Bank organized under the laws of a jurisdiction outside the
United States shall have provided the Company with the forms prescribed by
the Internal Revenue Service of the United States certifying as to such
Bank's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Bank
hereunder or other documents satisfactory to the Company which shall
indicate that all payments to be made to such Bank hereunder are not
subject to United States withholding tax or are subject to such taxes at a
rate reduced to zero by an applicable tax treaty, neither the Company nor
any other Borrower shall have any obligation under the last sentence of
Section 2.19(a) to make any payments to or for the benefit of such Bank in
---------------
excess of the amounts otherwise payable under this Agreement, and
(ii) each Bank organized under the laws of a jurisdiction outside the
jurisdiction where any Borrowing Subsidiary is incorporated shall have
taken all steps prescribed by the applicable governmental authority in the
jurisdiction where such Borrowing Subsidiary is located so that such Bank
is exempt from applicable withholding taxes with respect to all payments to
be made to such Bank hereunder or so that all payments to be made to such
Bank hereunder are not subject to applicable withholding taxes or are
subject to such taxes at a rate reduced to zero by an applicable tax
treaty, neither the Company nor any other Borrower shall have any
obligation under the last sentence of Section 2.19(a) to make any payments
---------------
to or for the benefit of such Bank in excess of the amounts otherwise
payable under this Agreement; provided, however, that the applicable
-------- -------
Borrower shall make the payments required by the last sentence of Section
-------
2.19(a) if the obligation to withhold arises from a change in applicable
-------
law after the date hereof (or, with respect to payments to a new Applicable
Lending Office designated pursuant to Section 2.21, after the date such
------------
Bank designates such new Applicable Lending Office).
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<PAGE>
Unless the applicable Borrower has received forms or other documents, including
Form 1001, Form 4224 or any other applicable tax forms from the United States or
any other applicable jurisdiction, such forms to be satisfactory to the Company,
indicating that payments hereunder are not subject to any withholding tax or are
subject to such tax at a rate reduced to zero by an applicable tax treaty, the
applicable Borrower shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Bank organized under the
laws of a jurisdiction outside the United States (or in the case of a Borrowing
Subsidiary incorporated outside the United States, any Bank organized under the
laws outside of the jurisdiction where such Borrowing Subsidiary is
incorporated). Should a Bank become subject to Taxes because of its failure or
inability to deliver a form required hereunder, the Company shall take such
steps not requiring the expenditure of money as the Bank shall reasonably
request to assist the Bank to recover such Taxes.
SECTION 2.20. Defaulting Banks. (a) If at any time (i) any Bank shall be
----------------
a Defaulting Bank, (ii) such Defaulting Bank shall owe a Defaulted Advance to
the Borrower and (iii) the Borrower shall be required to make any payment
hereunder or under any Note to or for the account of such Defaulting Bank, then
the Borrower may, so long as no Event of Default shall have occurred and be
continuing at such time and to the fullest extent permitted by applicable law,
set off and otherwise apply the amount owed by the Borrower to or for the
account of such Defaulting Bank against the obligation of such Defaulting Bank
to make such Defaulted Advance. If the Borrower shall so set off and otherwise
apply the amount owed by the Borrower to or for the account of such Defaulting
Bank against the obligation of such Defaulting Bank to make any such Defaulted
Advance on any date, the amount so set off and otherwise applied by the Borrower
shall constitute for all purposes of this Agreement and the Notes an Advance by
such Defaulting Bank made on the date of such setoff. Such Advance shall be a
Base Rate Advance and shall be considered, for all purposes of this Agreement,
to comprise part of the Borrowing in connection with which such Defaulted
Advance was originally required to have been made pursuant to Section 2.01 or
------------
Section 2.03(a), as the case may be, even if the other Advances comprising such
- ---------------
Borrowing shall be Eurocurrency Rate Advances on the date such Advance is deemed
to be made pursuant to this Section 2.20(a). The Borrower shall notify the
---------------
Administrative Agent at any time the Borrower makes a setoff under this Section
-------
2.20(a) and shall specify in such notice (A) the name of the Defaulting Bank and
- -------
the Defaulted Advance required to be made by such Defaulting Bank and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this Section 2.20(a). Any part of such payment otherwise required
---------------
to be made by the Borrower to or for the account of such Defaulting Bank that is
paid by the Borrower, after giving effect to the amount set off and otherwise
applied by the Borrower pursuant to this Section 2.20(a), shall be applied by
---------------
the Administrative Agent as specified in Section 2.20(b) or 2.20(c).
--------------- -------
(b) If at any time (i) any Bank shall be a Defaulting Bank, (ii) such
Defaulting Bank shall owe a Defaulted Amount to the Administrative Agent or any
of the other Banks and (iii) the Borrower shall make any payment hereunder or
under any Note to the Administrative Agent for the account of such Defaulting
Bank, then the Administrative Agent may, on its behalf or on behalf of such
other Banks and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Bank to the payment of each such Defaulted Amount to the extent required to pay
such Defaulted Amount. If the Administrative Agent shall so apply
-35-
<PAGE>
any such amount to the payment of any such Defaulted Amount on any date, the
amount so applied by the Administrative Agent shall constitute for all purposes
of this Agreement and the Notes payment to such extent of such Defaulted Amount
on such date. Any such amount so applied by the Administrative Agent shall be
retained by the Administrative Agent or distributed by the Administrative Agent
to such other Banks, ratably in accordance with their respective portions of
such Defaulted Amounts payable at such time to the Administrative Agent and such
other Banks and, if the amount of such payment made by the Borrower shall at any
time be insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent and the other Banks, in the following order of priority:
(A) first, to the Administrative Agent for any Defaulted Amounts
-----
owing to the Administrative Agent (solely in its capacity as Administrative
Agent) at such time; and
(B) second, to the other Banks for any Defaulted Amounts owing to the
------
other Banks (solely in their capacity as Banks) at such time, ratably in
accordance with such respective Defaulted Amounts owing to each other Bank
(solely in its capacity as a Bank) at such time.
Any part of such payment made by the Borrower for the account of such Defaulting
Bank remaining, after giving effect to the amount applied by the Administrative
Agent pursuant to this Section 2.20(b), shall be applied by the Administrative
---------------
Agent as specified in Section 2.20(c).
---------------
(c) If at any time, (i) any Bank shall be a Defaulting Bank, (ii) such
Defaulting Bank shall not owe a Defaulted Advance or a Defaulted Amount and
(iii) the Borrower, the Administrative Agent or any other Bank shall be required
to pay or to distribute any amount hereunder or under any Note to or for the
account of such Defaulting Bank, then the Borrower or such other Bank shall pay
such amount to the Administrative Agent to be held by the Administrative Agent,
to the fullest extent permitted by applicable law, in escrow or the
Administrative Agent shall, to the fullest extent permitted by applicable law,
hold in escrow such amount otherwise held by it. Any funds held by the
Administrative Agent in escrow under this Section 2.20(c) shall be deposited by
---------------
the Administrative Agent in an account with First Chicago, in the name and under
the control of the Administrative Agent, but subject to the provisions of this
Section 2.20(c). The terms applicable to such account, including the rate of
- ---------------
interest payable with respect to the credit balance of such account from time to
time, shall be First Chicago's standard terms applicable to escrow accounts
maintained with it. Any interest credited to such account from time to time
shall be held by the Administrative Agent in escrow under, and applied by the
Administrative Agent from time to time in accordance with the provisions of,
this Section 2.20(c). The Administrative Agent shall, to the fullest extent
---------------
permitted by applicable law, apply all funds so held in escrow from time to time
to the extent necessary to make any Advances required to be made by such
Defaulting Bank and to pay any amount payable by such Defaulting Bank hereunder
to the Administrative Agent or any other Bank, as and when such Advances or such
amounts are required to be made or paid and, if the amount so held in escrow
shall any time be insufficient to make and pay all such Advances and all such
amounts required to be made or paid at such time, in the following order of
priority:
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<PAGE>
(A) first, to the Administrative Agent for any amounts due and
-----
payable by such Defaulting Bank to the Administrative Agent hereunder
(solely in its capacity as Administrative Agent) at such time;
(B) second, to the other Banks for any amounts due and payable by
------
such Defaulting Bank to the other Banks hereunder (solely in their capacity
as Banks) at such time, ratably in accordance with such respective amounts
due and payable to each other Bank (solely in its capacity as Bank) at such
time; and
(C) third, to the Borrower for any Advances required to be made by
-----
such Defaulting Bank pursuant to the Commitment of such Defaulting Bank at
such time.
If such Defaulting Bank shall, at any time, cease to be a Defaulting Bank,
any funds held by the Administrative Agent in escrow at such time with respect
to such Defaulting Bank shall be distributed by the Administrative Agent to such
Defaulting Bank and applied by such Defaulting Bank to the amounts owing to such
Defaulting Bank at such time under this Agreement in accordance with the terms
of this Agreement.
(d) The rights and remedies against a Defaulting Bank under this Section
-------
2.20 are in addition to other rights and remedies that the Borrower may have
- ----
against such Defaulting Bank with respect to any Defaulted Advance and that the
Administrative Agent or any other Bank may have against such Defaulting Bank
with respect to any Defaulted Amount.
SECTION 2.21. Mitigation. Any Bank claiming any additional amounts
----------
payable pursuant to Sections 2.12 or 2.19 or subject to Section 2.13 shall use
------------- ---- ------------
its reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its Applicable Lending
Office if the making of such a change would avoid the need for, or reduce the
amount of, any such additional amounts which may thereafter accrue under
Sections 2.12 or 2.19 or would avoid the unavailability of Eurocurrency Rate
- ------------- ----
Advances under Section 2.13 and would not, in any such case, in the judgment of
------------
such Bank, be otherwise disadvantageous to such Bank.
SECTION 2.22. European Economic and Monetary Union. (a) Advances After
------------------------------------ --------------
the Euro Implementation Date. If any Advance made (or to be made) on or after
- ----------------------------
the Euro Implementation Date is capable of being made in either the Euro or in a
National Currency Unit, then the Company shall, by notice to the Administrative
Agent, select whether such Advance shall be made in the Euro or in such National
Currency Unit.
(b) Rounding and Other Consequential Changes. With effect from and after
----------------------------------------
the Euro Implementation Date, without prejudice to any method of conversion or
rounding prescribed by any legislative measures of the Council of the European
Union, each reference in this Agreement to a fixed amount or to fixed amounts in
a National Currency Unit to be paid to or by the Administrative Agent shall,
notwithstanding any other provision of this Agreement and to the extent the Euro
has replaced such National Currency Unit, be replaced by a reference to such
comparable and convenient fixed amount or fixed amounts of the Euro as the
Administrative Agent may from time to time reasonably specify.
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<PAGE>
SECTION 2.23. Extension of Termination Date. (a) The Company may, by
-----------------------------
written notice to the Administrative Agent (each such notice being an "Extension
Request") given no more than 59 days nor less than 30 days prior to each
anniversary date of this Agreement, extend the then applicable Termination Date
to a date one year after the then- applicable Termination Date; provided,
however, that such extension shall be effective only with respect to a Bank
which, by a written notice (a "Continuation Notice") to the Company and the
Administrative Agent given no more than 30 days and no less than 15 days before
such anniversary date, consents to such extension (each Bank giving a
Continuation Notice thereafter being referred to as a "Continuing Bank" and each
Bank other than a Continuing Bank being a "Non-Extending Bank"); provided
further, however, that such extension shall be effective only if the aggregate
Commitments of the Continuing Banks are not less than 51% of the aggregate
Commitments in effect at the date the Company gives the applicable Extension
Request. Within five Business Days after the Administrative Agent receives an
Extension Request it shall notify each Bank thereof. If any Bank fails to notify
the Administrative Agent in writing of its consent to, or refusal of, any such
Extension Request at least 15 days prior to such anniversary date, such Bank
shall be deemed to be a Non-Extending Bank with respect to such Extension
Request. The Commitment of each Non-Extending Bank shall terminate on the
Termination Date in effect for such Non-Extending Bank immediately prior to such
Extension Request, and on such Termination Date the Company shall pay the
Administrative Agent, for the account of such Non-Extending Banks, an amount
equal to such Non-Extending Banks' Advances plus accrued but unpaid interest and
fees thereon; provided that the Company has not replaced such Non-Extending
--------
Banks pursuant to Section 2.23(b) below.
---------------
(b) A Non-Extending Bank shall be obligated, at the request of the Company
and subject to the Non-Extending Bank receiving payment in full of (i) the
principal amount of all Advances owing to such Non-Extending Bank, and (ii) all
accrued interest and fees owing to such Non-Extending Bank and all other amounts
owing to such Non-Extending Bank hereunder, to assign without recourse,
representation, warranty (other than good title to its Advances) or expense to
such Non-Extending Bank, at any time prior to the Termination Date applicable to
such Non-Extending Bank, all of its rights (other than rights that would survive
the termination of this Agreement pursuant to Section 9.13) and obligations
------------
hereunder to one or more Eligible Assignees (the "Replacement Banks") nominated
by the Company and willing to take the place of such Non-Extending Bank;
provided that each such Replacement Bank satisfies all the requirements of this
- --------
Agreement and the Administrative Agent shall have consented to such assignment,
which consent shall not be unreasonably withheld. Each such Replacement Bank
shall become a Continuing Bank hereunder in replacement for the Non-Extending
Bank.
(c) If the Termination Date shall have been extended in respect of
Continuing Banks in accordance with Section 2.23(a), any notice of borrowing
---------------
specifying a date for the borrowing of an Advance occurring after the
Termination Date applicable to a Non-Extending Bank or requesting an Interest
Period extending beyond such date shall (a) have no effect in respect of such
Non-Extending Bank and (b) not specify a requested aggregate principal amount
exceeding the Aggregate Commitment excluding the Commitments of all such Non-
Extending Banks.
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<PAGE>
(d) If the Termination Date shall have been extended in respect of
Continuing Banks in accordance with this Section 2.23, all references herein to
------------
the "Termination Date" shall, with respect to all parties hereto other than Non-
Extending Banks, refer to the Termination Date as so extended.
SECTION 2.24. Increase of Aggregate Commitments. (a) The Company may from
---------------------------------
time to time, on the terms set forth below, request that the aggregate amount of
the Commitments be increased to an amount which does not exceed $400,000,000;
provided, however, that an increase in the Commitments hereunder may only be
- -------- -------
made at a time when (i) no Event of Default or event which, with notice or the
passage of time or both, would constitute an Event of Default shall have
occurred and be continuing or would result therefrom and (ii) the Public Debt
Rating from S&P is at least BBB- and the Public Debt Rating from Moody's is at
least Baa3.
(b) If the Company requests an increase in the aggregate Commitments:
(i) each of the Banks shall be given the opportunity to participate
in the increased aggregate Commitments (x) initially, ratably in accordance
with its Pro Rata Share, and (y) next, to the extent that the requested
increase in the aggregate Commitments is not fulfilled pursuant to the
preceding clause (x) and subject to Section 2.24(d) below, in such
---------------
additional amounts as any Bank and the Company agree, and
(ii) if, after each Bank has been afforded an opportunity to increase
its Commitment to satisfy the Company's requested increase, the aggregate
increase in the Commitments offered by the Banks is less than the Company's
requested increase, then the Company shall consult with the Administrative
Agent as to the number, identity and requested Commitments of additional
financial institutions which the Company may, with the written consent of
the Administrative Agent (which consent shall not be unreasonably withheld)
invite to participate in the aggregate Commitments.
(c) No Bank shall have any obligation to increase its Commitment pursuant
to a request by the Company hereunder. No Bank shall be deemed to have approved
an increase in its Commitment unless such approval is in writing. Failure on
the part of any Bank to respond to a request by the Company within 30 days of
such Bank's receipt of notice of such request hereunder shall be deemed a
rejection of such request.
(d) In no event shall any Bank's Commitment, after giving effect to an
increase in its Commitment hereunder, exceed 25% of the aggregate Commitments
under this Agreement.
(e) If the Company and one or more of the Banks (or other financial
institutions) shall agree upon such an increase in the aggregate Commitments
hereunder (i) the Company, the Administrative Agent and each Bank or other
financial institution increasing its Commitment or extending a new Commitment
shall enter into a consent in substantially the form of Exhibit G hereto and
---------
(ii) the Company shall furnish new Notes to each financial institution that is
extending a new Commitment and to each Bank which is increasing its Commitment.
Notwithstanding anything else to the contrary contained in Section 2.06(b), if
---------------
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<PAGE>
an increase in the aggregate Commitments pursuant to this Section 2.24 occurs
------------
during an Interest Period for an outstanding Committed Borrowing, (a) such
Committed Borrowing may not be continued or converted pursuant to Section
-------
2.06(b) and (b) such Committed Borrowing shall be due and payable at the end of
- -------
the current Interest Period applicable thereto, without prejudice to the
Company's right, subject to the terms and conditions of this Agreement, to
reborrow all or any portion of the amount of such Committed Borrowing.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and
----------------------------------------------------------
2.03. Sections 2.01 and 2.03 shall become effective on the first day (the
------------- ----
"Effective Date") on which all of the following conditions precedent have been
satisfied:
(a) The Administrative Agent shall have received the following, in
form and substance reasonably satisfactory to the Administrative Agent and
(except for the Committed Notes) in sufficient copies for the Banks:
(i) This Agreement, executed by the Company, the Administrative
Agent and each of the Banks;
(ii) A Committed Note executed by the Company, payable to each
Bank;
(iii) A certificate of the Secretary of the Company certifying
(A) copies attached thereto of the resolutions of the Board of
Directors of the Company authorizing and empowering certain officers
of the Company to effect such borrowings as such officers may deem
necessary or desirable for proper corporate purposes, subject to the
limitations set forth in such resolutions, (B) copies attached thereto
of the Certificate of Incorporation and by-laws of the Company, and
(C) the names and true signatures of the officers of the Company
authorized to sign this Agreement and the Notes and other documents to
be executed and delivered by the Company hereunder;
(iv) A certificate of a duly authorized officer of the Company,
dated the Effective Date, certifying that as of such date, (A) the
representations and warranties contained in Section 4.01 are correct
------------
on and as of the Effective Date and (B) no event shall have occurred
and be continuing that constitutes an Event of Default or which would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both;
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<PAGE>
(v) A favorable opinion of Sidley & Austin, counsel for the
Company, substantially in the form of Exhibit H hereto; and
---------
(vi) Evidence that all amounts owing under the 1994 Credit
Agreement are being paid in full, and that the 1994 Credit Agreement
is being terminated, no later than the Effective Date;
(b) The Company shall have paid all accrued fees and expenses of the
Arranger, the Administrative Agent and the Banks which are due and payable
on the Effective Date (including, without limitation, the reasonable fees
and expenses of counsel for the Arranger and the Administrative Agent);
(c) There shall have occurred no material adverse change in the
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole, since December 31, 1997;
(d) There shall exist no action, suit or proceeding (investigative,
judicial or otherwise) against the Company or any of its Subsidiaries
pending before any court or arbitrator or any governmental body, agency or
official, or to the knowledge of any Responsible Officer of the Company,
threatened, that could reasonably be expected (i) to have a Material
Adverse Effect or (ii) to materially and adversely affect the legality,
validity or enforceability of this Agreement or any Note;
(e) The representations and warranties contained in Section 4.01
------------
shall be correct on and as of the Effective Date, as though made on and as
of such date; and
(f) No event shall have occurred and be continuing which constitutes
an Event of Default or which would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
For purposes of determining compliance with the conditions specified above,
each Bank shall be deemed to have consented to, approved and accepted, and to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Banks unless
the officer of the Administrative Agent responsible for the transactions
contemplated by this Agreement shall have received notice from such Bank prior
to the proposed Effective Date, as notified by the Administrative Agent to the
Banks, specifying its objection thereto. The Administrative Agent shall
promptly notify the Banks of the occurrence of the Effective Date.
SECTION 3.02. Conditions Precedent to Initial Advance to Each Borrowing
---------------------------------------------------------
Subsidiary. The obligation of each Bank to make its initial Advance hereunder
- ----------
to any Borrowing Subsidiary is subject to the conditions precedent that the
Effective Date shall have occurred and the Administrative Agent shall have
received on or before the day of the
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<PAGE>
initial Borrowing by such Borrowing Subsidiary the following, each in form and
substance reasonably satisfactory to the Administrative Agent and in sufficient
copies for the Banks:
(a) The Assumption Letter executed and delivered by such Borrowing
Subsidiary and containing the written consent of the Company at the foot
thereof, as contemplated by Section 2.17 hereof;
------------
(b) A Committed Note executed by such Borrowing Subsidiary, payable
to each Bank;
(c) Certified copies of the resolutions of the Board of Directors of
such Borrowing Subsidiary approving the Assumption Letter and all other
documents evidencing corporate action and governmental approvals, if any,
required with respect to the Assumption Letter;
(d) A certificate of the Secretary or an Assistant Secretary of such
Borrowing Subsidiary certifying the names and true signatures of the
officers of such Borrowing Subsidiary authorized to sign the Assumption
Letter and the other documents to be executed and delivered by such
Borrowing Subsidiary hereunder; and
(d) An opinion of counsel to such Borrowing Subsidiary, substantially
in the form of Exhibit I hereto and as to such other matters as the
---------
Administrative Agent shall reasonably request.
SECTION 3.03. Conditions Precedent to Each Committed Borrowing. The
------------------------------------------------
obligation of each Bank to make a Committed Advance on the occasion of each
Committed Borrowing (including the initial Committed Borrowing) shall be subject
to the further conditions precedent that the Effective Date shall have occurred
and on the date of such Committed Borrowing the following statements shall be
true (and each of the giving of the applicable Notice of Committed Borrowing and
the acceptance by the applicable Borrower of the proceeds of such Committed
Borrowing shall constitute a representation and warranty by such Borrower that
on the date of such Committed Borrowing such statements are true):
(i) The representations and warranties contained in subsections (a),
(b), (c), (d), (f)(ii) and (h) through (q) of Section 4.01 are correct on
------------
and as of the date of such Committed Borrowing, before and after giving
effect to such Committed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;
(ii) No event has occurred and is continuing, or would result from
such Committed Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or which would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both; and
(iii) The aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
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<PAGE>
amount) of indebtedness for borrowed money (after giving effect to such
Committed Borrowing and the application of the proceeds thereof) of the
Company and its Subsidiaries does not exceed the maximum amount then
authorized by the Company's Board of Directors.
SECTION 3.04. Conditions Precedent to Each Uncommitted Borrowing. Each
--------------------------------------------------
bidding Bank's obligation to make an Uncommitted Advance as part of an
Uncommitted Borrowing (including the initial Uncommitted Borrowing) is subject
to the conditions precedent that on the date of such Uncommitted Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Uncommitted Borrowing and the acceptance by such Borrower of the
proceeds of such Uncommitted Borrowing shall constitute a representation and
warranty by such Borrower that on the date of such Uncommitted Borrowing such
statements are true):
(a) The representations and warranties contained in subsections (a),
(b), (c), (d), f(ii) and (h) through (q) of Section 4.01 are correct on and
------------
as of the date of such Uncommitted Borrowing, before and after giving
effect to such Uncommitted Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date,
(b) No event has occurred and is continuing, or would result from
such Uncommitted Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or which would constitute
an Event of Default but for the requirement that notice be given or time
elapse or both, and
(c) The aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to the
application of the proceeds of such Uncommitted Borrowing) of the Company
and its Subsidiaries does not exceed the maximum amount thereof then
authorized by the Company's Board of Directors.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to the Banks as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Agreement.
(b) The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene
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<PAGE>
(i) the Company's certificate of incorporation, as amended, or by-laws or
(ii) law or any contractual restriction binding on or affecting the
Company.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of this
Agreement.
(d) This Agreement has been, and each of the Notes when delivered
hereunder will have been, duly executed and delivered by the applicable
Borrower. This Agreement is, and each of the Notes when delivered
hereunder will be, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with their respective terms,
subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to
general principles of equity.
(e) The consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of December 31, 1997, and the related
consolidated statements of income, cash flow and shareholders' equity of
the Company and its Consolidated Subsidiaries for the fiscal year then
ended, copies of which have been furnished to each Bank, fairly present the
financial condition of the Company and its Consolidated Subsidiaries as at
such date and the consolidated results of the operations of the Company and
its Consolidated Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles, and since
December 31, 1997, there has been no material adverse change in the
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole.
(f) There are no actions, suits or proceedings (investigative,
judicial or otherwise) against the Company or any of its Subsidiaries
pending before any court or arbitrator or any governmental body, agency or
official, or, to the knowledge of any Responsible Officer of the Company,
threatened, that could reasonably be expected (i) to have a Material
Adverse Effect or (ii) to materially and adversely affect the legality,
validity or enforceability of this Agreement or any Note.
(g) Reserved.
(h) Following application of the proceeds of each Advance to the
Company, not more than 25% of the value of the assets (either of the
Company only or of the Company and its Consolidated Subsidiaries) will be
Margin Stock subject to any restriction contained in any agreement or
instrument between the Company and any Bank or any affiliate of any Bank
relating to Debt within the scope of Section 6.01(e).
---------------
(i) The Company is not principally engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
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<PAGE>
(j) The Advances to each Borrower, and all related obligations of
such Borrower under this Agreement, rank pari passu with all other
---- -----
unsecured indebtedness for money borrowed or raised by such Borrower that
is not, by its terms, expressly subordinated to other such indebtedness of
such Borrower.
(k) No Borrower is an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company
Act of 1940, as amended.
(l) (i) All necessary Environmental Permits have been obtained and
are in effect for the operations and properties of the Company and its
Subsidiaries, and the Company and its Subsidiaries are in compliance with
all such Environmental Permits, except to the extent that the failure to so
obtain or comply could not reasonably be expected to have a Material
Adverse Effect; and (ii) no circumstances exist that could reasonably be
expected to (A) form the basis of an Environmental Action against the
Company or any of its Subsidiaries or any of their properties that could
reasonably be expected to have a Material Adverse Effect or (B) cause any
such property to be subject to any restrictions on ownership, occupancy,
use or transferability under any Environmental Law that could reasonably be
expected to have a Material Adverse Effect.
(m) None of the properties owned or leased by the Company or any of
its Subsidiaries is the subject of any investigation or cleanup, whether
voluntary or required pursuant to any Environmental Law or ordered by any
governmental authority, that could reasonably be expected to have a
Material Adverse Effect.
(n) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.
(o) Neither the Company nor any of its ERISA Affiliates (i) has
incurred or is reasonably expected to incur any Withdrawal Liability with
respect to any Multiemployer Plan or (ii) has been notified by the sponsor
of a Multiemployer Plan that such Multiemployer Plan is in reorganization
or has been terminated, within the meaning of Title IV of ERISA, and no
such Multiemployer Plan is reasonably expected to be in reorganization or
to be terminated, within the meaning of Title IV of ERISA.
(p) As of the last annual actuarial valuation date, the aggregate
current liability (as defined in Section 412 of the Internal Revenue Code)
under the Plans does not exceed the aggregate fair market value of the
assets of such Plans by more than $50,000,000.
(q) The Company's effort to address the problems which may arise in
connection with the Year 2000 Problem in its core business includes (i)
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<PAGE>
evaluating internal computing infrastructure, business applications and
shop-floor systems for issues related to the Year 2000 Problem, (ii)
replacing or renovating systems and applications as necessary to resolve
such issues, and (iii) testing the replaced or renovated systems and
applications. As of the date of this Agreement, the Company expects that
all phases of such efforts will be completed before December 31, 1999. In
addition to its internal remediation activities, the Company is continuing
to evaluate the Year 2000 Problem with respect to key suppliers and vendors
and other external companies, including customers whose systems interact
with those of the Company. As of the date of this Agreement, the Company
expects to complete this evaluation before December 31, 1999.
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
So long as any Advance shall remain unpaid or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:
SECTION 5.01. Compliance with Laws, Etc. The Company will comply, and
--------------------------
cause each of its Subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders, except for laws, rules,
regulations and orders the violation of which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.02. Interest Coverage Ratio. The Company will, as of the end of
-----------------------
each fiscal quarter after the Effective Date, maintain an Interest Coverage
Ratio of not less than 2.0 to 1.
SECTION 5.03. Reporting Requirements. The Company will furnish to the
-----------------------
Banks:
(a) within 60 days after the end of each of the first three quarters
of each fiscal year of the Company, but in no case earlier than when such
report shall be required to be filed with the Commission, a copy of the
Company's Form 10-Q filed with the Commission for such quarter, or any
similar quarterly report required to be filed by the Company with the
Commission; provided that if the Company shall no longer be required to so
--------
file with the Commission, the Company will nonetheless thereafter continue
to furnish to the Banks such financial statements and related materials as
would have comprised such filings, at such times as the Company would have
otherwise delivered the same to the Commission;
(b) within 120 days after the end of each fiscal year of the Company,
but in no case earlier than when such report shall be required to be filed
with the Commission, a copy of the Company's Form 10-K filed with the
Commission for such year, or any similar annual report required to be filed
by the Company with the Commission; provided that if the Company shall no
--------
longer be required to so file with the Commission, the Company will
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<PAGE>
nonetheless thereafter continue to furnish to the Banks such financial
statements and related materials as would have comprised such filings, at
such times as the Company would have otherwise delivered the same to the
Commission;
(c) simultaneously with the delivery of the reports referred to in
clauses (a) and (b) above, a certificate of a designated financial officer
of the Company (i) setting forth in reasonable detail the calculations
required to establish whether the Company was in compliance with the
requirements of Section 5.02 on the date of such financial statements and
------------
(ii) stating whether there exists on the date of such certificate any Event
of Default or condition or event which with notice or lapse of time or both
would become an Event of Default and, if any Event of Default or any such
condition or event then exists, setting forth the details thereof and the
action which the Company is taking with respect thereto;
(d) promptly after the sending or filing thereof, copies of all
reports which the Company sends to any of its security holders, and copies
of all reports and registration statements (other than Form S-8 or any
similar form) which the Company or any Borrowing Subsidiary files with the
Commission or any national securities exchange;
(e) promptly following any Responsible Officer's knowledge thereof,
notice in writing of (i) the occurrence of any Event of Default or
condition or event which with notice or lapse of time or both would become
an Event of Default and, if any Event of Default or any such condition or
event then exists, setting forth the details thereof and the action which
the Company is taking with respect thereto, or (ii) the institution of, or
any adverse final judgment in, any litigation, arbitration proceeding or
governmental proceeding which, in the Company's judgment, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
and
(f) such other pertinent information (including information relating
to the Company's plan to address the Year 2000 Problem) as any Bank may
reasonably request.
SECTION 5.04. Use of Proceeds. The Borrowers will use the proceeds of
---------------
the Advances made under this Agreement only for general corporate purposes
otherwise permitted under this Agreement, including, without limitation, mergers
and acquisitions, the purchase of stock of other Persons, the repurchase of
shares of capital stock of the Company, the repayment of indebtedness, the
funding of employee benefit plans of the Company or its Subsidiaries and for
other lawful purposes; provided that, no Borrower shall use the proceeds of any
--------
Advances made hereunder to acquire 20% or more of the outstanding shares of the
capital stock of any Person unless (a) at the time of such acquisition, such
Person shall have consented to such acquisition either by having entered into an
agreement with the Company or a subsidiary of the Company contemplating a merger
of such Person with or into the Company or such subsidiary or by its Board of
Directors having authorized, approved or consented to such acquisition, or (b)
such Borrower shall have obtained the
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<PAGE>
prior written consent with respect thereto of (i) in the case of any Committed
Borrowing the proceeds of which shall be used to facilitate such acquisition,
the Banks and (ii) in the case of any Uncommitted Borrowing the proceeds of
which shall be used to facilitate such acquisition, the Banks extending
Uncommitted Advances in connection therewith; provided further that if the
-------- -------
applicable Borrower shall have specified the intended use of proceeds of an
Uncommitted Borrowing in the Notice of Uncommitted Borrowing with respect
thereto, each Bank electing to offer to make one or more Uncommitted Advances in
response thereto shall be deemed to have provided the written consent required
under this Section 5.04 for such use of the proceeds of such Uncommitted
------------
Advances.
SECTION 5.05. Limitation on Liens, Etc. The Company will not create or
-------------------------
suffer to exist, or permit any of its Consolidated Subsidiaries to create or
suffer to exist, any Lien, upon or with respect to any of its properties (other
than Margin Stock), whether now owned or hereafter acquired, or assign, or
permit any of its Consolidated Subsidiaries to assign, any right to receive
income, in each case to secure any Debt of any Person or entity, other than:
(a) Liens arising in connection with the obligations of the Company
or any Subsidiary under industrial revenue bonds;
(b) Liens on assets of a Subsidiary of a Borrower to secure Debt of
such Subsidiary to any Borrower;
(c) Purchase money Liens claimed by sellers of goods on ordinary
trade terms provided that no financing statement has been filed to perfect
such Liens, and provided that no such Lien shall extend to assets of any
character other than the goods being acquired;
(d) Liens securing Debt existing as of December 31, 1997;
(e) Liens securing Debt on property of a corporation or firm (or
division thereof) that becomes a Subsidiary of the Company or of any of its
Subsidiaries after the date hereof in accordance with Section 5.06 and
------------
existing at the time such corporation is merged or consolidated with the
Company or any Subsidiary, at the time such corporation or firm (or
division thereof) becomes a Subsidiary of the Company or any of its
Subsidiaries, or at the time of a sale, lease or other disposition of the
properties of a corporation or a firm (or division thereof) as an entirety
or substantially as an entirety to the Company or a Subsidiary, provided
that such Liens were not created in contemplation of such merger,
consolidation, acquisition, sale, lease or disposition and do not extend to
assets other than those of the Person merged into or consolidated with the
Company or such Subsidiary or acquired by the Company or such Subsidiary;
(f) Liens on life insurance policies owned by the Company or any
Subsidiary, securing Insurance Policy Debt;
(g) Purchase money Liens constituting the interest of a lessor under
a lease that would be capitalized on the lessee's balance sheet in
accordance
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<PAGE>
with GAAP, or under a sale-leaseback transaction, in each case relating to
equipment, provided that after giving effect thereto, no Event of Default
under Section 5.02 shall exist;
------------
(h) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Liens referred to in
the foregoing subsections (a) through (g); provided that, in the case of
--------
Liens referred to in the foregoing subsections (c), (d), (e), (f) and (g),
the principal amount of Debt secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement Lien shall be
limited to all or a part of the property which is subject to the Lien so
extended, renewed or replaced (plus improvements on such property); and
(i) Additional Liens securing Debt other than as may be included in
the foregoing subsections (a) through (h), provided, that the aggregate
--------
outstanding principal amount of such Debt shall not at any time exceed 10%
of Consolidated Tangible Net Worth at such time.
SECTION 5.06. Merger; Sale of Assets. The Company will not, and will not
----------------------
permit its Material Subsidiaries to, merge or consolidate with or into any other
Person, or sell, transfer, lease or otherwise dispose of all or substantially
all of its assets (whether now owned or hereafter required), except that:
(i) the Company or a Material Subsidiary may acquire another
corporation by merger, provided that, if the Company is a party to such
merger, the Company is the surviving corporation, and provided further that
after giving effect to such merger, no Event of Default (or event which,
with the giving of notice or the passing of time or both would constitute
an Event of Default) shall exist; and
(ii) any Material Subsidiary may merge or consolidate with or into, or
sell or otherwise dispose of any or all of its assets to, the Company or
another Subsidiary, and any Material Subsidiary that is not a Borrowing
Subsidiary may sell all or substantially all of its assets; provided that
(a) after giving effect to such merger, consolidation, sale or other
disposition, no Event of Default (or any event which, with the giving of
notice or the passing of time or both would constitute an Event of Default)
shall exist, and (b) in the case of an asset sale by such a Material
Subsidiary, the assets to be sold do not constitute all or substantially
all of the assets of the Company and its Subsidiaries, taken as a whole.
SECTION 5.07. Books and Records; Inspection. The Company will, and will
-----------------------------
cause each of its Subsidiaries to, (a) maintain complete and accurate books and
records, in which full and correct entries shall be made of all financial
transactions of the Company and each such Subsidiary in accordance with
generally accepted accounting principles, and (b) permit any Bank, the
Administrative Agent and their respective employees and agents, at such
reasonable times during normal business hours and as often as may be reasonably
requested, to inspect any of the properties of the Company or any of its
Subsidiaries and to inspect and make copies of the material books and records of
the Company and its Subsidiaries and to discuss the affairs and finances of the
Company and its Subsidiaries with their officers; provided that such Bank or the
--------
Administrative Agent shall have delivered a written request for such inspection
to the Company prior to the date of any such inspection.
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<PAGE>
to inspect any of the properties of the Company or any of its Subsidiaries and
to inspect and make copies of the material books and records of the Company and
its Subsidiaries and to discuss the affairs and finances of the Company and its
Subsidiaries with their officers; provided that such Bank or the Administrative
--------
Agent shall have delivered a written request for such inspection to the Company
prior to the date of any such inspection.
SECTION 5.08. Corporate Existence. Subject to the Company's rights under
-------------------
Section 5.06, the Company will, and will cause each of its Material Subsidiaries
- ------------
to, at all times maintain its corporate existence and preserve and keep, or
cause to be preserved and kept, in full force and effect its rights and
franchises material to its businesses.
SECTION 5.09. Conduct of Business. The Company shall not, and shall not
-------------------
permit any Material Subsidiary to, engage in any line of business other than (A)
the businesses engaged in by the Company and its Subsidiaries on the date hereof
and (B) any business or activities substantially similar or related thereto
(which shall include, without limitation, other businesses related to the
handling and/or distribution of data used or processed in the businesses engaged
in by the Company and its Subsidiaries on the date hereof).
SECTION 5.10. Payment of Taxes. The Company will pay and discharge, and
----------------
cause each of its Material Subsidiaries to pay and discharge, before the same
shall become delinquent, all material taxes, assessments and governmental
charges or levies imposed upon it or its property; provided, however, that
-------- -------
neither the Company nor any of its Material Subsidiaries shall be required to
pay or discharge any such tax, assessment, charge or levy that is being
contested in good faith and by proper proceedings and as to which appropriate
reserves are being maintained in accordance with GAAP, as long as no action has
been commenced to enforce any Lien securing any such tax, assessment, charge or
levy.
ARTICLE VI
EVENTS OF DEFAULT
-----------------
SECTION 6.01. Events of Default. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing:
(a) A Borrower shall fail to pay when due any installment of
principal of any Advance; or
(b) A Borrower shall fail to pay any fee under this Agreement, or any
installment of interest on any Advance, within ten (10) days after the due
date thereof; or
(c) Any written representation or warranty made by a Borrower herein
or in connection with this Agreement shall prove to have been incorrect in
any material respect when made; or
(d) The Company shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 5.02, 5.03(a), (b) or (e), 5.04,
---- ------- --- --- ----
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<PAGE>
5.05, 5.06, 5.07, 5.08, 5.09 or 5.10, or (ii) any other term, covenant or
---- ---- ---- ---- ---- ----
agreement contained in this Agreement, other than in (a) or (b) above, on
its part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been given
to the Company by the Majority Banks through the Administrative Agent; or
(e) The Company or any Material Subsidiary shall fail to pay any
principal of or premium or interest on any Debt, or any obligations in
respect of acceptances, letters of credit or other similar instruments, of
the Company or such Material Subsidiary which is outstanding in a principal
amount of at least $50,000,000 in the aggregate (but excluding Debt arising
under this Agreement), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt or other obligation; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt or other
obligation and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of
such Debt or other obligation; or any Debt or other such obligation in
which the outstanding principal exceeds $50,000,000 shall be otherwise
declared to be due and payable (by acceleration or otherwise) or required
to be prepaid, redeemed, defeased or otherwise repurchased by the Company
or any Material Subsidiary (other than by a regularly-scheduled required
prepayment), or any offer to prepay, redeem, defease or purchase such Debt
shall be required to be made, prior to the stated maturity thereof; or
(f) The Company or any Material Subsidiary shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against
the Company or any Material Subsidiary seeking to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or for
any substantial part of its property, and in the event of any such
proceeding instituted against the Company or any Material Subsidiary (but
not instituted by it), such proceeding shall remain undismissed or unstayed
for a period of 60 days or shall result in the entry of an order for
relief, the appointment of a trustee or receiver, or other action in such
proceeding or result adverse to the Company or such Material Subsidiary, as
applicable, or the Company or any Material Subsidiary shall take any
corporate action to authorize any of the actions set forth above in this
subsection (f); or
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<PAGE>
(g) Any Person, or a group of Persons acting in concert, shall at any
time acquire, directly or indirectly, in excess of 51% of the securities
having ordinary voting power to elect members of the board of directors of
the Company; or
(h) The Company shall incur liability in excess of $50,000,000 in the
aggregate as a result of one or more of the following: (i) the occurrence
of any ERISA Event; (ii) the partial or complete withdrawal of the Company
or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the
reorganization or termination of a Multiemployer Plan; or
(i) One or more final judgments or orders for the payment of money,
in an aggregate amount exceeding $50,000,000 at any one time outstanding
(exclusive of judgment amounts fully covered by insurance, to the extent
the insurer has admitted liability in respect thereof), shall be rendered
against the Company or any Material Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order, or (ii) such judgments or orders shall not be discharged (or
provision shall not have been made for such discharge), a stay of execution
thereof shall not be obtained, or such judgments or orders shall not be
paid or bonded, within 60 days from the date of entry thereof, and the
Company or such Material Subsidiary, as the case may be, shall not, within
such 60-day period, appeal therefrom and cause the execution thereof to be
stayed pending such appeal;
then, and in any such event, the Administrative Agent shall at the request, or
may with the consent, of the Majority Banks, by notice to the Company, (i)
declare the obligation of each Bank to make Advances to any Borrower to be
terminated, whereupon the same shall forthwith terminate, and (ii) declare the
Notes, all interest thereon and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Company; provided, however, that in the event of an actual or
-------- -------
deemed entry of an order for relief with respect to the Company under the
Federal Bankruptcy Code, (A) the obligation of each Bank to make Advances to any
Borrower shall automatically be terminated and (B) the Notes, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company.
ARTICLE VII
GUARANTEE
---------
SECTION 7.01. Unconditional Guarantee. For valuable consideration,
-----------------------
receipt whereof is hereby acknowledged, and to induce the Banks to make Advances
to each Borrowing Subsidiary, the Company unconditionally guarantees to the
Banks and the Administrative Agent that the principal of and interest on each
Advance and all other amounts payable by each Borrowing Subsidiary hereunder
shall be promptly paid in full
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when due (whether at stated maturity, by acceleration or otherwise) in
accordance with the terms hereof and thereof, and, in the case of any extension
of time of payment, in whole or in part, that all such amounts shall be promptly
paid when due (whether at stated maturity, by acceleration or otherwise) in
accordance with the terms of such extension. In addition, the Company
unconditionally agrees that upon default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of any of such principal,
interest or other amounts, the Company shall forthwith pay the same. Without
limiting the generality of the foregoing, the Company's liability shall extend
to all amounts that constitute part of the obligations of any Borrowing
Subsidiary guaranteed by the Company under this Article VII and would be owed by
-----------
any such Borrowing Subsidiary to any Bank or the Administrative Agent under this
Agreement or the Notes but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such Borrowing Subsidiary.
SECTION 7.02. Validity. The obligations of the Company under this Article
-------- -------
VII are independent of the obligations of the Borrowing Subsidiaries guaranteed
- ---
hereunder, and a separate action or actions may be brought and prosecuted
against the Company to enforce its obligations under this Article VII,
-----------
irrespective of whether any action is brought against any Borrowing Subsidiary
or whether any Borrowing Subsidiary is joined in any such action or actions.
The obligations of the Company under this Article VII shall be unconditional
-----------
irrespective of (i) the genuineness, validity, regularity or enforceability of
the obligations of the Borrowing Subsidiaries under this Agreement, any Note or
any Assumption Letter, (ii) any law, regulation or order of any jurisdiction
affecting any term of any obligation of any Borrowing Subsidiary under this
Agreement or the rights of any Bank or the Administrative Agent with respect
thereto, (iii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of any Borrowing Subsidiary
guaranteed by the Company under this Article VII, or any other amendment or
-----------
waiver of or any consent to departure from this Agreement or the Notes, (iv) any
change, restructuring or termination of the corporate structure or existence of
any Borrowing Subsidiary or any of its Subsidiaries, or (v) to the fullest
extent permitted by applicable law, any other circumstance which might otherwise
constitute a legal or equitable discharge of a surety or guarantor.
SECTION 7.03. Waivers. The Company expressly waives promptness,
-------
diligence, presentment, protest and any other notice with respect to the
obligations of the Company under this Article VII and any requirement that any
-----------
right or power be exhausted or any action be taken against any Borrowing
Subsidiary and all notices and demands whatsoever.
SECTION 7.04. Subrogation. The Company shall be subrogated to the rights
-----------
of the Banks or the Administrative Agent against any Borrowing Subsidiary
hereunder only after the Banks and the Administrative Agent shall have been paid
in full all such amounts, with interest thereon, for which such Borrowing
Subsidiary shall have become indebted hereunder.
SECTION 7.05. Acceleration. The Company agrees that, as between the
------------
Company on the one hand, and the Banks and the Administrative Agent, on the
other hand, the obligations of each Borrowing Subsidiary guaranteed under this
Article VII may be declared to be forthwith due and payable, or may be deemed
- -----------
automatically to have been accelerated,
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<PAGE>
as provided in Section 6.01 hereof for purposes of this Article VII,
------------ -----------
notwithstanding any stay, injunction or other prohibition (whether in a
bankruptcy proceeding affecting such Borrowing Subsidiary or otherwise)
preventing such declaration as against such Borrowing Subsidiary and that, in
the event of such declaration or automatic acceleration, such obligations
(whether or not due and payable by such Borrowing Subsidiary) shall forthwith
become due and payable by the Company for purposes of this Article VII.
-----------
SECTION 7.06. Reinstatement. The Company's obligations under this Article
------------- -------
VII shall be reinstated if at any time any payment received by any Bank or the
- ---
Administrative Agent from any Borrowing Subsidiary hereunder is required to be
repaid or returned by such Bank or the Administrative Agent, all as though such
payment had not been made.
SECTION 7.07. Continuing Guaranty; Assignments. This guarantee of the
--------------------------------
Company shall (a) remain in full force and effect until the later of (i) the
cash payment in full of the obligation of any Borrowing Subsidiary guaranteed by
the Company under this Article VII and (ii) the Termination Date, (b) be binding
-----------
upon the Company, its successors and assigns and (c) inure to the benefit of,
and be enforceable by, the Banks and the Administrative Agent and their
successors, transferees and assigns (provided that the applicable transfers and
assignments are made in accordance with the terms of this Agreement).
ARTICLE VIII
THE ADMINISTRATIVE AGENT
------------------------
SECTION 8.01. Reserved.
SECTION 8.02. Authorization and Action. Each Bank appoints and
------------------------
authorizes First Chicago to act as the Administrative Agent hereunder, and each
Bank irrevocably authorizes the Administrative Agent (for so long as the
Administrative Agent remains in such capacity under this Agreement) to act as
the contractual representative of such Bank with only the rights and duties
expressly set forth herein. The Administrative Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
VIII. Notwithstanding the use of the defined term "Administrative Agent," it is
expressly understood and agreed that the Administrative Agent shall not have any
fiduciary responsibilities to any Bank by reason of this Agreement and that the
Administrative Agent is merely acting as the representative of the Banks with
only those duties as are expressly set forth in this Agreement. In its capacity
as the Banks= contractual representative, the Administrative Agent (i) does not
assume any fiduciary duties to any of the Banks, (ii) is a "representative" of
the Lenders within the meaning of Section 9-105 of the Uniform Commercial Code
and (iii) is acting as an independent contractor, the rights and duties of which
are limited to those expressly set forth in this Agreement. Each Bank agrees to
assert no claim against the Administrative Agent on any agency theory or any
other theory of liability for breach of fiduciary duty, all of which claims each
Bank waives. The Administrative Agent shall have and may exercise such powers
under this Agreement as are specifically delegated to the Administrative Agent
by the terms hereof, together with such powers as are reasonably incidental
hereto. The Administrative Agent shall have no implied
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<PAGE>
duties to the Banks, or any obligation to the Banks to take any action
hereunder, except any action specifically provided by this Agreement to be taken
by the Administrative Agent. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Majority Banks, and such instructions shall be
binding upon all Banks and all holders of the Notes; provided, however, that the
-------- -------
Administrative Agent shall not be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement or applicable law. The Administrative Agent agrees to give to each
Bank prompt notice of each notice given to it by any Borrower pursuant to the
terms of this Agreement. The Administrative Agent may execute any of its duties
as Administrative Agent hereunder and under any other instrument, document or
agreement executed in connection herewith by or through employees, agents, and
attorney-in-fact and shall not be answerable to the Banks, except as to money or
securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Without limiting the foregoing, the Administrative Agent may
appoint any Affiliate as its agent for all matters relating to Advances made in
Alternative Currencies. Each such agent shall be entitled to all of the rights
and benefits granted to the Administrative Agent hereunder, and each Bank shall
treat any notice given by any such agent as if it had been given directly by the
Administrative Agent.
SECTION 8.03. Administrative Agent's Reliance, Etc. Neither the
------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Bank that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
------------
(ii) may consult with legal counsel (including counsel for any Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations (whether written or oral)
made in or in connection with this Agreement; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement on the part of any Borrower or to
inspect the property (including the books and records) of any Borrower; (v)
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (vi) shall not have any duty
to ascertain, inquire into or verify the financial condition of the Company or
any of its Subsidiaries; (vii) shall have no duty to disclose to the Banks
information that is not required to be furnished by the Company to the
Administrative Agent at such time, but is voluntarily furnished by the Company
to the Administrative Agent (either in its capacity as Administrative Agent or
in its individual capacity); and (viii) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telegram) believed by it to be
genuine and signed or
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<PAGE>
sent by the proper party or parties. The Administrative Agent shall be entitled
to advice of counsel concerning the contractual arrangement between the
Administrative Agent and the Banks and all matters pertaining to the
Administrative Agent's duties hereunder.
SECTION 8.04. The Administrative Agent and Affiliates. With respect to
---------------------------------------
any financial institution which shall become the Administrative Agent hereunder,
and with respect to such financial institution's Commitment and the Advances
made by it, such financial institution shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though it
were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include such financial institution in its
individual capacity, if applicable. Each such financial institution and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, any Borrower,
any of their respective Subsidiaries and any Person who may do business with or
own securities of any Borrower or any such Subsidiary, all as if such financial
institution were not the Administrative Agent and without any duty to account
therefor to the Banks.
SECTION 8.05. Bank Credit Decision; Notice of Default. Each Bank
---------------------------------------
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Bank and based on the financial statements
referred to in Section 4.01 and such other documents and information as it has
------------
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default, or an event which would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both, unless the Agent has received written notice from a Bank or
the Company referring to this Agreement describing such Event of Default, or
such event which would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, and stating that such notice is a
"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give prompt notice thereof to the Banks.
SECTION 8.06. Indemnification. The Banks (other than the Designated
---------------
Bidders) agree to indemnify the Administrative Agent (to the extent not
reimbursed by the Borrowers), ratably according to the respective principal
amounts of the Notes held by each of them (or, if no Notes are outstanding at
the time or if any Notes are held by Persons that are not Banks, ratably
according to the respective amounts of their Commitments) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement;
provided that no Bank shall be liable for any portion of such liabilities,
- --------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the Administrative Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Bank
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<PAGE>
(other than the Designated Bidders) agrees to reimburse the Administrative Agent
promptly upon demand for its ratable share of any out-of-pocket expenses
(including counsel fees) incurred by the Administrative Agent in connection with
the administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, to the extent that the
Administrative Agent is not reimbursed for such expenses by the Borrowers. The
obligation of the Banks under this Section 8.06 shall survive payment of the
------------
Obligations and the termination of this Agreement.
SECTION 8.07. Successor Administrative Agent. The Administrative Agent
------------------------------
may resign at any time by giving written notice thereof to the Banks and the
Company and may be removed at any time with or without cause by the Majority
Banks. Upon any such resignation or removal, the Majority Banks shall have the
right to appoint another Bank as successor Administrative Agent or, if
acceptable to the Company, any other commercial bank organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000. If no successor Administrative
Agent shall have been so appointed by the Majority Banks, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent gives notice of resignation or the Majority Banks remove the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a commercial
bank organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $500,000,000 and
otherwise acceptable to the Company. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Article VIII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of
----------------
this Agreement or the Notes, nor any consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by all the Banks (other than the Designated Bidders),
directly do any of the following: (i) waive any of the conditions specified in
Section 3.01 or 5.04, (ii) increase the Commitments of the Banks or subject the
- ------------ ----
Banks to any additional obligations, (iii) reduce the principal of, or the
stated rate at which interest accrues on, the Notes or reduce the stated rate at
which the Facility Fee and the Utilization Fee are calculated, (iv) postpone any
date fixed for any payment of principal of, or interest on, the Committed
Advances or any fees or other amounts payable hereunder, (v) change the
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percentage of the Commitments, or of the aggregate unpaid principal amount of
the Notes, or the number of Banks which shall be required for the Banks or any
of them to take any action hereunder or (vi) amend this Section 9.01; provided,
------------ --------
further, that no amendment, waiver or consent shall, unless in writing and
- -------
signed by the Administrative Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any Note.
SECTION 9.02. Notices, Etc. (a) All notices and other communications
-------------
provided for hereunder shall be in writing (including telegraphic or telecopy
communication) and mailed, telegraphed, telecopied or delivered,
(i) if to the Company, at its address at 77 West Wacker Drive,
Chicago, Illinois 60601 Attention: Treasurer, telecopy number (312) 326-
8557;
(ii) if to any Borrowing Subsidiary, at the address specified in the
Assumption Letter pursuant to which it became a Borrowing Subsidiary, with
a copy to the Company at the address specified herein; provided that any
--------
such notice may be given solely to the Company, at the option of the party
giving such notice;
(iii) if to any bank listed on the signature pages hereof, at its
Domestic Lending Office specified opposite its name on Schedule I hereto;
----------
(iv) if to any other Bank, at its Domestic Lending Office specified
in the Assignment and Acceptance or Designation Agreement pursuant to which
it became a Bank;
(v) if to the Administrative Agent, at the Domestic Lending Office
specified opposite its name on Schedule I hereto;
----------
or as to the Borrowers and the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties, and
as to each such other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent. All
such notices and communications shall, when sent by overnight courier, mailed or
telecopied, be effective when delivered to such courier, deposited in the mails,
or telecopied and confirmed by return telecopy, respectively, except that
notices and communications to the Administrative Agent pursuant to Articles II,
-----------
III and VIII shall not be effective until received by the Administrative Agent.
- --- ----
(b) If any notice required under this Agreement is permitted to be made,
and is made, by telephone, actions taken or omitted to be taken in reliance
thereon by the Administrative Agent or by any Bank shall be binding upon the
Company and each other Borrower notwithstanding any inconsistency between the
notice provided by telephone and any subsequent writing in confirmation thereof
provided to the Administrative Agent or such Bank; provided that any such action
--------
taken or omitted to be taken by the Administrative Agent or such Bank shall have
been in good faith and in accordance with the terms of this Agreement.
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<PAGE>
SECTION 9.03. No Waiver; Remedies. No failure on the part of any Bank
-------------------
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Company agrees to pay on
------------------
demand all reasonable, documented out-of-pocket costs and expenses of the
Arranger and the Administrative Agent (including, without limitation, reasonable
fees and expenses of counsel), in connection with any amendments, modifications
or waivers of the provisions hereof, or in determining the rights and
obligations of the parties hereto under this Agreement and the Notes, or the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement and the other documents to be delivered hereunder; provided that
--------
if, in the event of any enforcement undertaken by the Banks hereunder, it shall
be determined that sufficient conflicts exist such that a single law firm
engaged by the Administrative Agent or the Majority Banks is precluded by law or
by standards of conduct from representing the Banks as a group, and such
conflicts would exist with respect to any other law firm representing the Banks
as a group, the Company agrees to pay on demand all reasonable, documented out-
of-pocket costs and expenses of each Bank, if any (including, without
limitation, reasonable fees and expenses of counsel), in connection with such
enforcement undertaking.
(b) The Company agrees to pay to the Administrative Agent such fees as
shall have been agreed to by the Administrative Agent and the Company in a
separate agreement regarding the provision by the Administrative Agent of
services as Administrative Agent under this Agreement.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the
----------------
continuance of any Event of Default and (ii) the declaration that the Advances
are due and payable pursuant to the provisions of Section 6.01, each Bank is
------------
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Bank to or for the credit or the account of any Borrower
against any and all of the obligations of such Borrower now or hereafter
existing under this Agreement and the Notes held by such Bank, irrespective of
whether or not such Bank shall have made any demand under this Agreement or such
Notes and although such obligations may be unmatured. Each Bank shall promptly
notify the Company after any such set-off and application made by such Bank,
provided that the failure to give such notice shall not affect the validity of
- --------
such set-off and application. The rights of each Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which such Bank may have.
SECTION 9.06. Binding Effect. This Agreement (other than Sections 2.01
-------------- -------------
and 2.03, which shall only become effective upon satisfaction of the conditions
----
set forth in Section 3.01) shall become effective when it shall have been
------------
executed by the Company and the Administrative Agent and when the Administrative
Agent shall have been notified by
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<PAGE>
each bank listed on the signature pages hereof that it has executed this
Agreement and thereafter shall be binding upon and inure to the benefit of the
Company, the Administrative Agent and each Bank and their respective successors
and assigns, except that neither the Company nor any Borrowing Subsidiary shall
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Banks.
SECTION 9.07. Assignments, Designations and Participations. (a) Each
--------------------------------------------
Bank (other than the Designated Bidders) may, upon obtaining the prior written
consent of the Company and the Administrative Agent (which consents shall not be
unreasonably withheld or delayed), and each Bank (including, without limitation,
the Designated Bidders) shall, if demanded by the Company in accordance with
Section 2.05(b), assign to one or more Eligible Assignees all or a portion of
- ---------------
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Committed Advances owing to it and
the Committed Notes held by it); provided, however, that:
-------- -------
(i) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement (other than
any right to make Uncommitted Advances, Uncommitted Advances owing to it
and Uncommitted Notes owing to it);
(ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Bank or an assignment of all of
a Bank's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $20,000,000 (or
an integral multiple of $1,000,000 in excess thereof);
(iii) each such assignment made as a result of a demand by the Company
pursuant to Section 2.05(b) and this Section 9.07(a) shall be arranged by
--------------- ---------------
the Company with the approval of the Administrative Agent, which approval
shall not be unreasonably withheld or delayed, and shall be either an
assignment of all of the rights and obligations of the assigning Bank under
this Agreement or an assignment of a portion of such rights and obligations
made concurrently with another such assignment or other such assignments
that, in the aggregate, cover all of the rights and obligations of the
assigning Bank under this Agreement;
(iv) no Bank shall be obligated to make any such assignment as a
result of a demand by the Company pursuant to this Section 9.07(a) unless
---------------
and until such Bank shall have received one or more payments from one or
more Eligible Assignees in an aggregate amount equal to the aggregate
outstanding principal amount of the Advances owing to such Bank, together
with accrued interest thereon to the date of payment of such principal
amount and from the Company or one or more Eligible Assignees in an
aggregate amount equal to all other amounts payable to such Bank under this
Agreement and the Notes (including, without limitation, any amounts owing
under Sections 2.12, 2.13 or 2.19); and
------------------- ----
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<PAGE>
(v) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with any Note subject to such
assignment and a processing and recordation fee of $3,500;
and provided, further, that the consent of the Company and the Administrative
-------- -------
Agent shall not be required with respect to an assignment to an Eligible
Assignee which is a Bank or an Affiliate thereof. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and (y) the Bank assignor thereunder shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Bank's rights and obligations under this Agreement, such Bank shall cease to be
a party hereto). Notwithstanding the foregoing, each Bank may, without the
Company's or the Administrative Agent's consent, assign all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and the Advances owing to it) to an affiliate of
such Bank or to another Bank.
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company or any
Borrowing Subsidiary or the performance or observance by the Company or any
Borrowing Subsidiary of any of their respective obligations under this Agreement
or any other instrument or document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement, together with
copies of the financial statements referred to in Section 4.01 and such other
------------
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Administrative Agent,
such assigning Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Administrative Agent to take such action as contractual
representative on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are required to
be performed by it as a Bank.
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(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee, and
consented to by the Company, together with any Note or Notes subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit A hereto, (i)
---------
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Company.
Within ten Business Days after its receipt of such notice, the Company shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note a new Note to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it (in the case of a Committed Note) or the Uncommitted
Advance or part thereof purchased by it (in the case of an Uncommitted Note)
pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained a Commitment or a part of such Uncommitted Advance hereunder, a new
Note to the order of the assigning Bank in an amount equal to the Commitment or
of such Uncommitted Advance retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit D-1 or Exhibit D-2 hereto (as the case may be).
----------- -----------
(d) Each Bank (other than the Designated Bidders) may, upon obtaining the
prior written consent of the Company and the Administrative Agent (which
consents shall not be unreasonably withheld or delayed), designate one or more
banks or other entities to have a right to make Uncommitted Advances as a Bank
pursuant to Section 2.03; provided, however, that (i) no such Bank shall be
------------ -------- -------
entitled to make more than one such designation, (ii) each such Bank making such
a designation shall retain the right to make Uncommitted Advances as a Bank
pursuant to Section 2.03, (iii) each such designation shall be to a Designated
------------
Bidder and (iv) the parties to each such designation shall execute and deliver a
Designation Agreement to the Administrative Agent, for its acceptance and
recording in the Register, together with the consent thereto executed by the
Company. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Designation Agreement, the designee
thereunder shall be a party hereto with a right to make Uncommitted Advances as
a Bank pursuant to Section 2.03 and the obligations related thereto.
------------
(e) By executing and delivering a Designation Agreement, the Bank making
the designation thereunder and its designee thereunder confirm and agree with
each other and the other parties hereto as follows: (i) such Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Company or any Borrowing Subsidiary or the performance or observance by the
Company or any Borrowing Subsidiary of any of their respective obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such designee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.01 and
------------
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Designation Agreement; (iv)
such
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<PAGE>
designee will, independently and without reliance upon the Administrative Agent,
such designating Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
designee confirms that it is a Designated Bidder; (vi) such designee appoints
and authorizes the Administrative Agent to take such action as contractual
representative on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such designee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Bank.
(f) Upon its receipt of a Designation Agreement executed by a designating
Bank and a designee representing that it is a Designated Bidder, and consented
to by the Company, the Administrative Agent shall, if such Designation Agreement
has been completed and is substantially in the form of Exhibit C hereto, (i)
---------
accept such Designation Agreement, (ii) record the information contained therein
in the Register and (iii) give prompt notice thereof to the Company.
(g) The Administrative Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assignment and Acceptance and each Designation
- ------------
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Banks and, with respect to Banks other than
Designated Bidders, the Commitment of, and principal amount of the Advances
owing to, each Bank from time to time (the "Register"). The entries in the
--------
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Company, the Administrative Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Company or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Bank (other than a Designated Bidder) may sell participations to
one or more banks or other entities in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Advances owing to it and the Note or Notes held
by it); provided, however, that (i) such Bank's obligations under this Agreement
-------- -------
(including, without limitation, its Commitment hereunder) shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Bank shall remain the
holder of any such Note for all purposes of this Agreement, (iv) the Company,
the Administrative Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement and (v) no participant under any such participation shall
have any right to approve any amendment or waiver of any provision of this
Agreement or any Note, or any consent to any departure by the Company or any
Borrowing Subsidiary therefrom, except to the extent that such amendment, waiver
or consent would reduce the principal of the Notes or the stated rate at which
interest, the Facility Fee or the Utilization Fee is calculated, in each case to
the extent subject to such participation, or postpone any date fixed for any
payment of principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation.
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<PAGE>
(i) Any Bank may, in connection with any assignment, designation or
participation or proposed assignment, designation or participation pursuant to
this Section 9.07, disclose to the assignee, designee or participant or proposed
------------
assignee, designee or participant, any information relating to the Company or
any other Borrower furnished to such Bank by or on behalf of the Company or such
other Borrower; provided that, prior to any such disclosure of non-public
--------
information, such Bank shall have obtained the Company's consent and the
assignee or participant or proposed assignee or participant shall agree in a
manner satisfactory to the Company to preserve the confidentiality of any
confidential information relating to the Company received by it from such Bank.
(j) Notwithstanding any other provision set forth in this Agreement, any
Bank may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
SECTION 9.08. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of
Illinois.
SECTION 9.09. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 9.10. Confidentiality. Each Bank agrees that it will use
---------------
reasonable efforts to keep confidential any information from time to time
supplied to it by the Company which the Company designates in writing at the
time of its delivery to the Bank is to be treated confidentially; provided,
--------
however, that nothing herein shall affect the disclosure of any such information
- -------
to: (i) the extent required by statute, rule, regulation or judicial process;
(ii) counsel for any Bank or to their respective accountants; (iii) bank
examiners and auditors; (iv) any Affiliate of such Bank; (v) any other Bank, or,
subject to Section 9.07(c), any transferee or prospective transferee of any
---------------
Advance, any Note or any Commitment; or (vi) any other Person in connection with
any litigation to which any one or more of the Banks is a party; provided
--------
further, however, that each Bank agrees that it will use reasonable efforts to
- ------- -------
promptly notify the Company of any request for information under this clause
(vi) or with respect to any request for information not enumerated in this
Section 9.10, if not otherwise prohibited from doing so.
- ------------
SECTION 9.11. Non-Reliance by the Banks. Each Bank by its signature to
-------------------------
this Agreement represents and warrants that (i) it has not relied in the
extension of the credit contemplated by this Agreement, nor will it rely in the
maintenance thereof, upon any assets of the Company or its Subsidiaries
consisting of Margin Stock as collateral and (ii) after reviewing the financial
statements of the Company and its Consolidated Subsidiaries referred to in
Section 4.01(e), such Bank has concluded therefrom that the consolidated cash
- ---------------
flow of the Company and its Consolidated Subsidiaries is sufficient to support
the credit extended to the Company pursuant to this Agreement.
-64-
<PAGE>
SECTION 9.12. No Indirect Security. Notwithstanding any Section or
--------------------
provision of this Agreement to the contrary, nothing in this Agreement shall (i)
restrict or limit the right or ability of the Company or any of its Subsidiaries
to pledge, mortgage, sell, assign, or otherwise encumber or dispose of any
Margin Stock, or (ii) create an Event of Default arising out of or relating to
any such pledge, mortgage, sale, assignment or other encumbrance or disposition.
SECTION 9.13. Indemnification. The Company agrees to indemnify and hold
---------------
harmless the Administrative Agent, each Bank, and their respective officers,
directors, employees and agents (any one of the foregoing being an "Indemnified
Party" and any two or more of the foregoing being "Indemnified Parties") from
and against, and pay the Indemnified Parties the amount of, any and all claims,
damages, liabilities, and reasonable, documented out-of-pocket costs and
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against an Indemnified
Party relating in whole or in part to this Agreement, the Notes, any documents
delivered in connection herewith and the transactions contemplated hereby, and
in connection with or arising out of or by reason of, or in connection with the
preparation of a defense of, any investigation, litigation or proceeding brought
by a Person other than the Indemnified Parties or the Company and its
Subsidiaries, arising out of, related to or in connection with (i) this
Agreement, the Notes, any of the transactions contemplated herein or the use or
proposed use of the proceeds of any Advances, (ii) any acquisition or proposed
acquisition by the Company or any of its Subsidiaries of all or any portion of
the stock or all or substantially all of the assets of any Person, or (iii) the
actual or alleged presence of Hazardous Materials on any property of the Company
or any of its Subsidiaries or any Environmental Action relating to any of them,
in each case whether or not such investigation, litigation or proceeding is
brought by the Company, any other Borrower, their respective shareholders or
creditors, an Indemnified Party or any other Person, and whether or not an
Indemnified Party is otherwise a party thereto, provided, however, that this
-------- -------
indemnification shall not apply to any claim, damage, liability, cost or expense
that is found in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from an Indemnified Party's gross negligence or
willful misconduct. The covenants of the Company contained in this Section 9.13
------------
and in Sections 9.04, 2.11, 2.12 and 2.19 shall survive the repayment of all
------------- ---- ---- ----
amounts due and payable under this Agreement and the termination of this
Agreement.
SECTION 9.14. Partial Invalidity. Wherever possible, each provision
------------------
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 9.15. WAIVER OF JURY TRIAL. Each of the parties hereto
--------------------
irrevocably waives any right to have a jury participate in resolving any
dispute, whether sounding in contract, tort or otherwise, arising out of,
connected with, related to or incidental to the relationship established among
them in connection with this Agreement or the transactions contemplated hereby
or the actions of the Company,
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<PAGE>
any Borrowing Subsidiary, the Administrative Agent or any Bank in the
negotiation, administration, performance or enforcement thereof. Each of the
parties hereto agrees that any such claim, demand, action or cause of action
shall be decided by bench trial without a jury and that any party hereto may
file an original counterpart or a copy of this Agreement with any court as
written evidence of the consent of the parties hereto to the waiver of their
right to trial by jury.
SECTION 9.16. Jurisdiction, Etc. (a) Each of the parties hereto
------------------
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any Illinois state court or federal court of the
United States of America sitting in Chicago, Illinois, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in any such Illinois state court or, to the extent permitted by law, in such
federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement or the Notes
in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any
Illinois state or federal court. Each of the parties hereto irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
SECTION 9.17. Termination of Existing Credit Agreement. The Company and
----------------------------------------
each of the Banks hereunder that is a party to the 1994 Credit Agreement
consents to the termination of the "Commitments" thereunder, effective on the
Effective Date, notwithstanding the notice requirements for such termination set
forth in Section 2.05 of the 1994 Credit Agreement. Because such Banks
hereunder constitute the "Majority Banks" (as defined in the 1994 Credit
Agreement) under the 1994 Credit Agreement, the 1994 Credit Agreement shall
terminate and all amounts payable thereunder shall be due and payable on the
Effective Date.
SECTION 9.18. Nonliability of Banks. The relationship between the
---------------------
Borrowers on the one hand and the Banks and the Administrative Agent on the
other hand shall be solely that of borrower and lender. Neither the
Administrative Agent, the Arranger nor any Bank shall have any fiduciary
responsibilities to the Borrower. Neither the Administrative Agent, the
Arranger nor any Bank undertakes any responsibility to the Borrowers to review
or inform the Borrowers of any matter in connection with any phase of the
Borrowers' business or operations. Neither the Administrative Agent, the
Arranger nor any Bank shall have any liability with respect to, and the
Borrowers waive, release and agree not to sue for, any special, indirect or
consequential damages suffered by the Borrowers in connection with, arising out
of, or in any way related to this Agreement or the transactions contemplated
thereby.
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<PAGE>
Remainder of page intentionally left blank
-67-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
R.R. DONNELLEY & SONS COMPANY
By:___________________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and as a Bank
By:___________________________________
Title:
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<PAGE>
BANK OF MONTREAL, as a Bank
By:___________________________________
Title:
-69-
<PAGE>
FIRST UNION NATIONAL BANK, as a Bank
By:__________________________________
Title:
-70-
<PAGE>
NATIONSBANK, N.A., as a Bank
By:__________________________________
Title:
-71-
<PAGE>
CITIBANK, N.A., as a Bank
By:__________________________________
Title:
-72-
<PAGE>
THE NORTHERN TRUST COMPANY, as a Bank
By:__________________________________
Title:
-73-
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
CHICAGO BRANCH, as a Bank
By:__________________________________
Title:
-74-
<PAGE>
WACHOVIA BANK, N.A., as a Bank
By:__________________________________
Title:
-75-
<PAGE>
SEAWAY NATIONAL BANK OF CHICAGO, as a Bank
By:__________________________________
Title:
-76-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Domestic Eurocurrency
Name of Bank Commitment Lending Office Lending Office
- ------------------------ ---------- --------------------------- ---------------------------
<S> <C> <C> <C>
The First National Bank $39,500,000 One First National Plaza
of Chicago Chicago, Illinois 60670
Attention: Deborah Stevens
Suite 088
Phone: 312-732-2532
FAX: 312-732-5161
Bank of Montreal $32,000,000 111 West Monroe Street
Chicago, Illinois 60690
Attention:
Phone:
FAX:
First Union National $32,000,000 Attention: Peter Steffan
Bank Phone: 704-383-9214
Fax: 704-398-7236
NationsBank, N.A. $25,000,000 Attention: Jack Williams
Phone: 704-398-3234
Fax: 704-398-0960
</TABLE>
<PAGE>
Citibank, N.A. $25,000,000 500 West Madison
35th Floor
Chicago, Illinois 60661
Attention: Carrie Stead
Phone: 312-627-3983
FAX: 312-627-3990
The Northern Trust $25,000,000 50 South LaSalle Street
Company Chicago, Illinois 60075
Attention: Mark Taylor
11th Floor
Phone: 312-557-1626
FAX: 312-630-5055
The Industrial Bank of $10,000,000 227 West Monroe Street
Japan, Limited, Suite 2600
Chicago Branch Chicago, Illinois 60606
Attention: Mark Motuelle
Phone: 312-855-8494
FAX: 312-855-8200
-2-
<PAGE>
Wachovia Bank, N.A. $10,000,000 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Todd Eagle
Phone:
FAX: 404-332-6898
Business and Credit Office:
70 West Madison
Suite 2440
Chicago, Illinois 60602
Attention:
James F. Kinoshita
Phone: 312-795-4331
FAX: 312-853-0693
Seaway National Bank of $ 1,500,000 645 East 87th Street
Chicago Chicago, Illinois 60619
Attention: Karl Swanson
Phone: 773-602-4101
FAX: 773-487-1850
-3-
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Five-Year Credit Agreement dated as of December 11,
1998 (as amended or modified from time to time, the "Five-Year Credit
----------------
Agreement") among R.R. Donnelley & Sons Company, a Delaware corporation (the
- ---------
"Company"), the Banks (as defined in the Five-Year Credit Agreement) parties
-------
thereto and The First National Bank of Chicago, as Administrative Agent for the
Banks (the "Administrative Agent"). Terms defined in the Five-Year Credit
--------------------
Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as
follows:
1. The Assignor sells and assigns to the Assignee, and the Assignee
purchases and assumes from the Assignor, an interest in and to the Assignor's
rights and obligations under the Five-Year Credit Agreement as of the date
hereof (other than in respect of Uncommitted Advances and Uncommitted Notes)
equal to the percentage interest specified on Schedule 1 hereto of all
outstanding rights and obligations under the Five-Year Credit Agreement (other
than in respect of Uncommitted Advances and Uncommitted Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Committed Advances owing to the Assignee will be as set forth on Schedule 1
hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Five-Year Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Five-Year Credit Agreement or any other instrument
or document furnished pursuant thereto; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company or any Borrowing Subsidiary or the performance or observance by
the Company or any Borrowing Subsidiary of any of their respective obligations
under the Five-Year Credit Agreement or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Committed Note held by the
Assignor and requests that the Administrative Agent exchange such Committed Note
for a new Committed Note payable to the order of the Assignee in an amount equal
to the Commitment assumed by the Assignee pursuant hereto or new Committed Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the Five-Year Credit Agreement,
respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the Five-Year
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
------------
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will,
-1-
<PAGE>
independently and without reliance upon the Administrative Agent, the Assignor
or any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Five-Year Credit Agreement; (iii) confirms that it
is an Eligible Assignee; (iv) appoints and authorizes the Administrative Agent
to take such action as contractual representative on its behalf and to exercise
such powers and discretion under the Five-Year Credit Agreement as are delegated
to the Administrative Agent by the terms thereof; (v) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Five-Year Credit Agreement are required to be performed by it as a Bank;
and (vi) attaches any U.S. Internal Revenue Service forms required under Section
-------
2.19 of the Five-Year Credit Agreement.
- ----
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Company for acceptance and then to the Administrative Agent for
acceptance and recording. The effective date for this Assignment and Acceptance
(the "Effective Date") shall be the date of acceptance hereof by the
--------------
Administrative Agent, unless otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Five-Year Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
--------
the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Five-Year Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the Five-Year Credit Agreement and the Notes in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and facility fees with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the Five-
Year Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
-2-
<PAGE>
SCHEDULE I
to
Assignment and Acceptance
dated _______________
Percentage interest assigned: ___%
Assignee's Commitment: $_____________
Aggregate outstanding principal
amount of Committed Advances
assigned: $_____________
Principal amount of Committed Note
payable to Assignee: $_____________
Principal amount of Committed Note
payable to Assignor: $_____________
Effective Date: _____________, ____
[NAME OF ASSIGNOR],
as Assignor
By:___________________
Title:
Dated:
[NAME OF ASSIGNEE], as
Assignee
By:___________________
Title:
Dated:
Applicable Lending Offices:
Domestic: [address]
Eurocurrency: [address]
Uncommitted
Advances: [address]
Accepted and approved,
-3-
<PAGE>
______________, _____
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By:_____________________
Title:
Accepted and approved,
______________, ____
R.R. DONNELLEY & SONS
COMPANY
By:_____________________
Title:
-4-
<PAGE>
EXHIBIT B
[Form of Assumption Letter]
__________________, ____
To the Banks parties to the
Five-Year Credit Agreement referred
to below
Ladies and Gentlemen:
Reference is made to the Five-Year Credit Agreement dated as of December
11, 1998 among R.R. Donnelley & Sons Company, the Banks named therein and The
First National Bank of Chicago, as Administrative Agent for such Banks (as
amended and in effect from time to time, the "Five-Year Credit Agreement").
Terms defined in the Five-Year Credit Agreement and capitalized herein are used
herein as defined therein.
The undersigned, ___________ (the "Subsidiary"), a _________________
corporation, proposes to become a "Borrowing Subsidiary" under the Five-Year
Credit Agreement, and accordingly agrees that from the date hereof it shall
become a "Borrowing Subsidiary" under the Five-Year Credit Agreement and agrees
that from the date hereof and until the payment in full of the principal of and
interest on all Advances made to it under the Five-Year Credit Agreement and
performance of all of its other obligations thereunder, and termination
hereunder of its status as a "Borrowing Subsidiary" as provided below, it shall
perform, comply with and be bound by each of the provisions of the Five-Year
Credit Agreement which are stated to apply to the "Company", a "Borrowing
Subsidiary" or a "Borrower". Without limiting the generality of the foregoing,
that Subsidiary represents and warrants that: (i) each of the representations
and warranties set forth in Sections 4(a), (b), (c) and (d) of the Five-Year
------------- --- --- ---
Credit Agreement is hereby made by such Subsidiary on and as of the date hereof
as if made on and as of the date hereof and as if such Subsidiary is the
"Company", this Assumption Letter is the "Agreement" referenced therein and each
Note issued by such Borrowing Subsidiary is the "Note" referenced therein, and
(ii) it has heretofore received a true and correct copy of the Five-Year Credit
Agreement (including any modifications thereof or supplements or waivers
thereto) as in effect on the date hereof.
So long as the principal of and interest on all Advances made to the
Subsidiary under the Five-Year Credit Agreement shall have been paid in full and
all other obligations of the Subsidiary shall have been fully performed, the
Subsidiary may by not less than five Business Days' prior notice to the Banks
terminate its status as a "Borrowing Subsidiary."
<PAGE>
The Subsidiary irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any Illinois state court or
federal court of the United States of America sitting in Chicago, Illinois, and
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Assumption Letter, the Five-Year Credit Agreement or the
Notes, or for recognition or enforcement of any judgment, and the Subsidiary
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such Illinois state
court or, to the extent permitted by law, in such federal court. The Subsidiary
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Assumption Letter shall
affect any right that any Bank or the Administrative Agent may otherwise have to
bring any action or proceeding relating to this Assumption Letter, the Five-Year
Credit Agreement or the Notes in the courts of any jurisdiction.
The Subsidiary irrevocably and unconditionally waives, to the fullest extent
it may legally and effectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Assumption Letter, the Five-Year Credit Agreement or the Notes
in any Illinois state or federal court. The Subsidiary irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
This Assumption Letter shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
IN WITNESS WHEREOF, the Subsidiary has duly executed and delivered this
Assumption Letter as of the date and year first above written.
[NAME OF BORROWING SUBSIDIARY]
By _______________________________
Title:
Address for Notices under
the Five-Year Credit Agreement:
Consented to:
R.R. DONNELLEY & SONS
COMPANY
By:_______________________
Title:
-2-
<PAGE>
EXHIBIT C
FORM OF DESIGNATION AGREEMENT
Dated_______________, ____
Reference is made to the Five-Year Credit Agreement dated as of December
11, 1998 (as amended or modified from time to time, the "Five-Year Credit
----------------
Agreement") among R.R. Donnelley & Sons Company, a Delaware corporation (the
- ---------
"Company"), the Banks (as defined in the Five-Year Credit Agreement) parties
- --------
thereto and The First National Bank of Chicago, as Administrative Agent for the
Banks (the "Administrative Agent"). Terms defined in the Five-Year Credit
--------------------
Agreement are used herein with the same meaning.
__________________ (the "Designor") and _________________ (the "Designee")
-------- --------
agree as follows:
1. The Designor designates the Designee, and the Designee accepts such
designation, to have a right to make Competitive Bid Advances pursuant to
Section 2.03 of the Five-Year Credit Agreement.
- ------------
2. The Designor makes no representation or warranty and assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the Five-Year Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of, the
Five-Year Credit Agreement or any other instrument or document furnished
pursuant thereto; and (ii) the financial condition of the Company or any
Borrowing Subsidiary or the performance or observance by the Company or any
Borrowing Subsidiary of any of their respective obligations under the Five-Year
Credit Agreement or any other instrument or document furnished pursuant thereto.
3. The Designee (i) confirms that it has received a copy of the Five-Year
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
------------
deemed appropriate to make its own credit analysis and decision to enter into
this Designation Agreement; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Designor or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Five-Year Credit Agreement; (iii) confirms that it is a Designated Bidder;
(iv) appoints and authorizes the Administrative Agent to take such action as
contractual representative on its behalf and to exercise such powers and
discretion under the Five-Year Credit Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; and (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Five-Year Credit Agreement are required to be performed by it as a Bank.
<PAGE>
4. Following the execution of this Designation Agreement by the Designor and
its Designee, it will be delivered to the Company for acceptance and then to the
Administrative Agent for acceptance and recording. The effective date for this
Designation Agreement (the "Effective Date") shall be the date of acceptance
--------------
hereof by the Administrative Agent, unless otherwise specified on the signature
page hereto.
5. Upon such acceptance and recording by the Administrative Agent, as of the
Effective Date, the Designee shall be a party to the Five-Year Credit Agreement
with a right to make Competitive Bid Advances as a Bank pursuant to Section 2.03
------------
of the Five-Year Credit Agreement and the rights and obligations of a Bank
related thereto.
6. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
7. This Designation Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Designation Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Designation Agreement.
IN WITNESS WHEREOF, the Designor and Designee have caused this Designation
Agreement to be executed by their officers thereunto duly authorized as of the
date specified thereon.
Effective Date: ____________________, ____
[NAME OF DESIGNOR],
as Designor
By:_______________________________
Title:
[NAME OF DESIGNEE],
as Designee
By:_______________________________
Title:
Applicable Lending Office (and
address for notices):
-2-
<PAGE>
Accepted and approved,
_____________, ____
THE FIRST NATIONAL BANK
OF CHICAGO
as Administrative Agent
By:_____________________
Title:
Accepted and approved,
______________, ____
R.R. DONNELLEY & SONS
COMPANY
By:_____________________
Title:
-3-
<PAGE>
EXHIBIT D-1
FORM OF COMMITTED NOTE
Dated:_______________, ____
FOR VALUE RECEIVED, the undersigned, [R.R. DONNELLEY & SONS COMPANY, a
Delaware corporation] [NAME OF APPLICABLE BORROWING SUBSIDIARY, a
__________________ corporation] (the "Company"), PROMISES TO PAY to the order of
-------
________________________ (the "Bank") for the account of its Applicable Lending
----
Office on the Termination Date (each as defined in the Five-Year Credit
Agreement referred to below) the aggregate principal amount of the Committed
Advances made by the Bank to the Company pursuant to the Five-Year Credit
Agreement dated as of December 11, 1998 among [the Company] [R.R. Donnelley &
Sons Company], the Bank and certain other banks parties thereto, and The First
National Bank of Chicago, as Administrative Agent for the Bank and such other
banks (as amended or modified from time to time, the "Five-Year Credit
----------------
Agreement"); the terms defined therein being used herein as therein defined)
outstanding on the Termination Date.
The Company promises to pay interest on the unpaid principal amount of each
Committed Advance made to it from the date of such Committed Advance until such
principal amount is paid in full, at such interest rates, and payable at such
times, as are specified in the Five-Year Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to The First National Bank of Chicago, as Administrative
Agent, at the address specified pursuant to Article II of the Five-Year Credit
Agreement, in same day funds. Each Committed Advance owing to the Bank by the
Company pursuant to the Five-Year Credit Agreement, and all payments made on
account of principal thereof, shall be recorded by the Bank and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This Promissory Note is one of the Committed Notes referred to in, and is
entitled to the benefits of, the Five-Year Credit Agreement. The Five-Year
Credit Agreement, among other things, (i) provides for the making of Committed
Advances by the Bank to the Company from time to time, the indebtedness of the
Company resulting from each such Committed Advance being evidenced by this
Promissory Note, and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
[R.R. DONNELLEY & SONS COMPANY]
[NAME OF APPLICABLE BORROWING
SUBSIDIARY]
By: _______________________
Title:
<PAGE>
ADVANCES AND PAYMENTS OF PRINCIPAL
AMOUNT OF UNPAID
AMOUNT OF PRINCIPAL PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
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<PAGE>
EXHIBIT D-2
FORM OF UNCOMMITTED NOTE
U.S. $_______________ Dated: _______________, ____
FOR VALUE RECEIVED, the undersigned, [R.R. DONNELLEY & SONS COMPANY, a
Delaware corporation] [NAME OF APPLICABLE BORROWING SUBSIDIARY, a
__________________ corporation] (the "Company"), PROMISES TO PAY to the order of
-------
________________________ (the "Bank") for the account of its Applicable Lending
----
Office (as defined in the Five-Year Credit Agreement dated as of December 11,
1998 among [the Company] [R.R. Donnelley & Sons Company], the Bank and certain
other banks parties thereto, and The First National Bank of Chicago, as
Administrative Agent for the Bank and such other banks (as amended or modified
from time to time, the "Five-Year Credit Agreement"; the terms defined therein
--------------------------
being used herein as therein defined) on _______________, 19__, the principal
amount of U.S.$______________.
The Company promises to pay interest on the unpaid principal amount hereof
from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:
Interest Rate: ____% per annum (calculated on the basis of a year of
_____ days for the actual number of days elapsed).
Interest Payment Date(s):
Both principal and interest are payable in lawful money of the United
States of America to The First National Bank of Chicago, for the account of the
Bank, at the address specified pursuant to Article II of the Five-Year Credit
Agreement, in same day funds.
This Promissory Note is one of the Uncommitted Notes referred to in, and is
entitled to the benefits of, the Five-Year Credit Agreement. The Five-Year
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereupon upon the happening of certain stated events.
The Company waives presentment, demand, protest and notice of any kind. No
failure to exercise, and no delay in exercising, any rights hereunder on the
part of the holder hereof shall operate as a waiver of such rights.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
[R.R. DONNELLEY & SONS COMPANY]
[NAME OF APPLICABLE BORROWING
SUBSIDIARY]
By:____________________________
Title:
<PAGE>
EXHIBIT E-1
NOTICE OF COMMITTED BORROWING
[Administrative Agent's
name and address]
[DATE]
Ladies and Gentlemen:
The undersigned, ________________, refers to the Five-Year Credit Agreement
dated as of December 11, 1998 (as amended, modified or supplemented from time to
time, the "Five-Year Credit Agreement", the terms defined therein being used
herein as therein defined), among [the undersigned,] [R.R. Donnelley & Sons
Company (the "Company"], certain Banks parties thereto and The First National
Bank of Chicago, as Administrative Agent for such Banks, and notifies you,
pursuant to Section 2.02 of the Five-Year Credit Agreement, that the undersigned
------------
requests a Committed Borrowing under the Five-Year Credit Agreement, and in that
connection sets forth below the information relating to such Committed Borrowing
(the "Proposed Committed Borrowing") as required by Section 2.02(a) of the Five-
---------------
Year Credit Agreement:
(i) The Business Day of the Proposed Committed Borrowing is
__________, ____.
(ii) The Type of Committed Advances comprising the Proposed Committed
Borrowing is [Base Rate Advances] [Eurocurrency Rate Advances].
(iii) The currency for the Proposed Committed Borrowing is [Dollars]
[type of Alternative Currency].
(iv) The aggregate amount of the Proposed Committed Borrowing is
$__________.
(v) The Interest Period for each Eurocurrency Rate Advance made as
part of the Proposed Committed Borrowing is ______ month[s].
The undersigned certifies that the following statements are true on the date
hereof, and will be true on the date of the Proposed Committed Borrowing:
(a) the representations and warranties contained in subsections (a),
(b), (c), (d), (f)(ii) and (h) through (p) of Section 4.01 of the Five-Year
------------
Credit Agreement are correct, before and after giving effect to the Proposed
Committed Borrowing and to the application of the proceeds therefrom, as
though made on and as of such date;
<PAGE>
(b) no event has occurred and is continuing, or would result from the
Proposed Committed Borrowing or from the application of the proceeds
therefrom, that constitutes an Event of Default or that would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both; and
(c) the aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to the
Proposed Committed Borrowing and the application of the proceeds thereof)
of [the undersigned] [the Company] and its Subsidiaries does not exceed the
maximum amount thereof presently authorized by [the undersigned's] [the
Company's] Board of Directors.
Very truly yours,
[NAME OF BORROWER]
By: __________________________
Title:
-2-
<PAGE>
EXHIBIT E-2
NOTICE OF UNCOMMITTED BORROWING
_________________________
_________________________
_________________________
[Date]
Attention: ____________________
Ladies and Gentlemen:
The undersigned, _____________, refers to the Five-Year Credit Agreement,
dated as of December 11, 1998 ( as amended, modified or supplemented from time
to time, the "Five-Year Credit Agreement", the terms defined therein being used
herein as therein defined), among [the undersigned] [R.R. Donnelley & Sons
Company (the "Company")], certain Banks parties thereto and The First National
Bank of Chicago, as Administrative Agent for such Banks, and notifies you
pursuant to Section 2.03 of the Five-Year Credit Agreement that the undersigned
------------
requests an Uncommitted Borrowing under the Five-Year Credit Agreement, and in
that connection sets forth the terms on which such Uncommitted Borrowing (the
"Proposed Uncommitted Borrowing") is requested to be made:
(A) Date: ________ ___________
(B) Amount: $______________________
(C) Type of Quote Requested:/1/
Uncommitted Borrowing Margin ___ Fixed Rate ___
(D) Maturity Date: ______________________
Prepayment terms: May [not] be prepaid,
[with] [without] penalty
Prepayment penalty:/2/ ______________________
(E) Interest Payment Date(s): ___________________
(F) Borrower:
(G) Other terms:
<PAGE>
The undersigned certifies that the following statements are true on the date
hereof, and will be true on the date of the Proposed Uncommitted Borrowing:
(a) the representations and warranties contained in subsections (a),
(b), (c), (d), (f)(ii) and (h) through (p) of Section 4.01 are correct,
before and after giving effect to the Proposed Uncommitted Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date;
(b) no event has occurred and is continuing, or would result from the
Proposed Uncommitted Borrowing or from the application of the proceeds
therefrom, that constitutes an Event of Default or that would constitute an
Event of Default but for the requirement that notice be given or time elapse
or both;
(c) the aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to the
Proposed Uncommitted Borrowing and to the application of proceeds therefrom)
of [the undersigned] [the Company] and its Subsidiaries does not exceed the
maximum amount thereof presently authorized by the Board of Directors of
[the undersigned] [the Company];
The undersigned confirms that the Proposed Uncommitted Borrowing is to be
made available to it in accordance with Section 2.03(a)(iv) of the Five-Year
-------------------
Credit Agreement.
[NAME OF BORROWER]
By: __________________________
Title:
-2-
<PAGE>
EXHIBIT F
FORM OF NOTICE OF CONVERSION OR CONTINUATION
TO: The First National Bank of Chicago, as Administrative Agent (the
"Administrative Agent") under that certain Five-Year Credit Agreement
dated as of December 11, 1998 (the "Five-Year Credit Agreement") by
and among R.R. Donnelley & Sons Company (the "Company"), the
Administrative Agent and the Banks parties thereto.
Pursuant to the terms and conditions of the Five-Year Credit Agreement,
this Notice of Conversion or Continuation ("Notice") represents the election of
the Company to [insert one of the following]:
/3/ convert $__________ in aggregate principal amount of Base Rate Advances to
Eurocurrency Rate Advances on __________, _____. The initial Interest Period
for such Eurocurrency Rate Advances is requested to be a __________ (_____)
month period. [and] /4/
/5/ convert $__________ in aggregate principal amount of Eurocurrency Rate
Advances with a current Interest Period ending _____________ to Base Rate
Advances on __________, _____.
/6/ continue as Eurocurrency Rate Advances $__________ in aggregate principal
amount of presently outstanding Eurocurrency Rate Advances with a current
Interest Period ending __________, for a _____ month period commencing on
__________, _____.
Unless otherwise defined herein, terms defined in the Five-Year Credit
Agreement shall have the same meanings in this Notice.
Dated: __________, ____.
[NAME OF BORROWER]
By____________________________
Title:________________________
<PAGE>
EXHIBIT G
Opinion of Counsel to the Company
December 11, 1998
To each of the Banks parties to
the "Five-Year Credit Agreement" (as defined below),
and to The First National Bank
of Chicago, as Administrative Agent
Re: R.R. Donnelley & Sons Company
-----------------------------
Ladies and Gentlemen:
We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company"), in connection with the Five-Year Credit Agreement
of even date herewith (the "Five-Year Credit Agreement") among the Company, the
financial institutions parties thereto (the "Banks") and The First National Bank
of Chicago, as Administrative Agent, and the transactions contemplated thereby.
This opinion is furnished to you at the request of the Company pursuant to
Section 3.01(a)(v) of the Five-Year Credit Agreement. Capitalized terms used
herein and not otherwise defined are used as defined in the Five-Year Credit
Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Five-Year Credit
Agreement and the promissory notes delivered on the date hereof to the Banks
signatory to the Five-Year Credit Agreement (the "Notes").
In rendering the opinions set forth herein, we have also examined originals
or copies, certified to our satisfaction, of such (i) certificates of public
officials, (ii) certificates of officers and representatives of the Company, and
(iii) other documents and records, and we have made such inquiries of officers
and representatives of the Company, as we have deemed relevant or necessary as
the basis for such opinions. We have relied as to factual matters upon, and
assumed the accuracy of, such certificates, the representations and warranties
of the Company made in the Five-Year Credit Agreement, and other statements,
documents and records supplied to us by the Company, and we have assumed the
genuineness of all signatures (other than signatures of officers of the Company)
and the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies.
In rendering the opinions set forth herein, we have assumed that:
<PAGE>
The First National Bank of Chicago, et al
December [11], 1998
Page 2
(i) all the parties to the Five-Year Credit Agreement, other than the
Company, are duly organized, validly existing, and in good standing under the
laws of their respective jurisdictions of organization and have the requisite
corporate power to enter into the Five-Year Credit Agreement; and
(ii) the execution and delivery of the Five-Year Credit Agreement have
been duly authorized by all necessary corporate action and proceedings on the
part of all parties thereto other than the Company; the Five-Year Credit
Agreement has been duly executed and delivered by all parties thereto and
constitutes the valid and binding obligation of all parties thereto other than
the Company, enforceable against such parties in accordance with its terms.
Based upon the foregoing and subject to the qualifications stated herein,
we are of the opinion that, as of the date hereof:
1. The Company has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware. The Company has the requisite
corporate power and authority to conduct its business as currently conducted.
2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Five-Year Credit Agreement and the
Notes. Such execution, delivery and performance:
(a) have been duly authorized by all necessary and proper corporate action
of the Company,
(b) do not violate any provision of the certificate of incorporation or
by-laws of the Company or require any approval of the Company's
stockholders,
(c) do not violate the General Corporation Law of the State of Delaware,
any law or regulation of the State of Illinois (including, without
limitation, any usury laws) or of the United States of America applicable
to the Company,
(d) do not contravene that certain Indenture dated as of November 1,1990,
between the Company and Citibank, N.A., as Trustee, or, to our knowledge,
any other material agreement or instrument binding on the Company.
3. The Five-Year Credit Agreement constitutes, and from and after the
initial Committed Borrowing the Committed Notes will constitute, the valid and
binding obligations of the Company, enforceable in accordance with their
respective terms.
-2-
<PAGE>
The First National Bank of Chicago, et al
December [11], 1998
Page 3
4. No approval, consent or authorization of, or filing or registration
with, any governmental department, agency or instrumentality is necessary for
the Company's execution or delivery of the Five-Year Credit Agreement or the
Notes, or for the Company's performance of any of the terms thereof.
Our opinions above are subject to the following qualifications:
(a) Our opinions relating to validity, binding effect and enforceability
in Paragraph 3 above are subject to limitations imposed by any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws affecting creditors' rights generally. In addition, our opinions
relating to enforceability in paragraph 3 above are subject to (i) the effect of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law) and (ii) limitations imposed by public policy under certain
circumstances on the enforceability of provisions indemnifying a party against
liability for its own wrongful or negligent acts. In applying principles of
equity referred to in clause (i) above, a court, among other things, might not
allow a creditor to accelerate maturity of a debt upon the occurrence of a
default deemed immaterial. Such principles applied by a court might include a
requirement that a creditor act reasonably and in good faith.
(b) Certain remedial and waiver provisions of the Five-Year Credit
Agreement may be unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of the Five-Year Credit Agreement;
however, the unenforceability of such provisions may result in delays in the
enforcement of the Administrative Agent's and the Banks' rights and remedies
under the Five-Year Credit Agreement (and we express no opinion as to the
economic consequences, if any, of such delays).
(c) We express no opinion as to the effect of the compliance or
noncompliance of the Administrative Agent or any of the Banks with any state or
federal laws or regulations applicable to the Administrative Agent or any of the
Banks because of the Administrative Agent's or any of the Banks' legal or
regulatory status, the nature of the business of the Administrative Agent or any
of the Banks or the qualification of any such party to conduct business in any
jurisdiction.
The foregoing opinions are limited to the laws of the United States, the
State of Illinois and the General Corporation Law of the State of Delaware, and
we express no opinion with respect to the laws of any other state or
jurisdiction.
Whenever in this opinion reference is made to our knowledge, such reference
is to the conscious awareness of Dennis V. Osimitz, Jeffrey S. Rothstein and
Tracey A. Nicastro of information regarding factual matters. With respect to
such matters, such persons have not, with your express permission and consent,
undertaken any investigation or inquiry either of other
-3-
<PAGE>
The First National Bank of Chicago, et al
December [11], 1998
Page 4
lawyers, files maintained by the firm, or officers or employees of the Company
or any of its Subsidiaries. The reference to "conscious awareness" as used in
this paragraph has the meaning given that phrase in the Third-Party Legal
-----------------
Opinion Report, Including the Legal Opinion Accord, of the Section of Business
- ------------------------------------------------------------------------------
Law, American Bar Association, 47 Bus. Law. 167, 192 (1991).
- -----------------------------
The opinions expressed herein are being delivered to you as of the date
hereof and are solely for your benefit in connection with the transactions
contemplated in the Five-Year Credit Agreement and may not be relied on in any
manner or for any purpose by any other person, nor any copies published,
communicated or otherwise made available in whole or in part to any other person
or entity without our express prior written consent, except that you may furnish
copies thereof to each party that becomes a Bank after the date hereof pursuant
to the Five-Year Credit Agreement, and such parties may rely on this opinion as
if it had been originally addressed to them.
We do not express any opinion, either implicitly or otherwise, on any issue
not expressly addressed in numbered Paragraphs 1 through 4. The opinions
expressed above are based solely on facts, laws and regulations existing and in
effect on the date hereof, and we assume no obligation to revise or supplement
this opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or otherwise,
notwithstanding that such changes may affect the legal analysis or conclusions
contained in this opinion.
Very truly yours,
-4-
<PAGE>
CERTIFICATE
I, ___________________, am the _____________ ___________________ of R.R.
Donnelley & Sons Company, a Delaware corporation (the "Company"). The Company
is entering into a Five-Year Credit Agreement dated as of December 11, 1998,
with the banks party thereto ("Banks") and The First National Bank of Chicago,
as Administrative Agent ("Administrative Agent") for such Banks (the "Five-Year
Credit Agreement").
The Five-Year Credit Agreement requires that Sidley & Austin issue a legal
opinion to the Administrative Agent and the Banks. In connection with such
legal opinion, the Company certifies to Sidley & Austin that:
1. Not more than twenty-five percent (25%) of the value of the assets
subject to any "arrangement" (as such term is used in Section 221.2(g)(1) of
Regulation U of the Board of Governors of the Federal Reserve System) under the
Five-Year Credit Agreement is represented by "margin stock" (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System).
2. The Company has not granted to the Administrative Agent or the Banks
any direct security for the Company's obligations to the Administrative Agent
and the Banks under the Five-Year Credit Agreement.
R.R. DONNELLEY & SONS COMPANY
By:_______________________
Title:
Dated: December 11, 1998
<PAGE>
EXHIBIT H
Opinion of Counsel to a Borrowing Subsidiary
[Date]
To each of the Banks parties to
the "Five-Year Credit Agreement" (as defined below),
and to The First National Bank
of Chicago, as Administrative Agent
Re: [Borrowing Subsidiary]
----------------------
Ladies and Gentlemen:
We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company") and __________________, a ___________ corporation
and Subsidiary of the Company (the "Borrowing Subsidiary"), in connection with
the Five-Year Credit Agreement dated as of December 11, 1998 (as the same has
been or may be amended, modified or supplemented, the "Five-Year Credit
Agreement") among the Company, the financial institutions parties thereto (the
"Banks") and The First National Bank of Chicago, as Administrative Agent, and
the transactions contemplated thereby.
This opinion is furnished to you at the request of the Company pursuant to
Section 3.02(d) of the Five-Year Credit Agreement. Capitalized terms used
herein and not otherwise defined are used as defined in the Five-Year Credit
Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Five-Year Credit
Agreement, the Assumption Letter of even date herewith executed by the Borrowing
Subsidiary and delivered to the Banks (the "Assumption Letter") and the
promissory notes executed by the Borrowing Subsidiary on the date hereof and
delivered to the Banks (the "Notes").
In rendering the opinions set forth herein, we have also examined originals
or copies, certified to our satisfaction, of such (i) certificates of public
officials, (ii) certificates of officers and representatives of the Company and
the Borrowing Subsidiary (including the certificate attached hereto (the
"Certificate")), and (iii) other documents and records, and we have made such
inquiries of officers and representatives of the Company and the Borrowing
Subsidiary, as we have deemed relevant or necessary as the basis for such
opinions. We have relied as to factual matters upon, and assumed the accuracy
of, such certificates, the representations and warranties of the Company and the
Borrowing Subsidiary made (or deemed made) in the Five-Year Credit Agreement and
the Assumption Letter, and other statements, documents and records
<PAGE>
supplied to us by the Company and the Borrowing Subsidiary, and we have assumed
the genuineness of all signatures (other than signatures of officers of the
Borrowing Subsidiary) and the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted to
us as certified or photostatic copies.
In rendering the opinions set forth herein, we have assumed that:
(i) all the parties to the Five-Year Credit Agreement and the Assumption
Letter, other than the Borrowing Subsidiary, are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization and have the requisite corporate power to enter into the Five-
Year Credit Agreement and the Assumption Letter; and
(ii) the execution and delivery of the Five-Year Credit Agreement have
been duly authorized by all necessary corporate action and proceedings on the
part of all parties thereto; the Five-Year Credit Agreement has been duly
executed and delivered by all parties thereto and constitutes the valid and
binding obligation of all parties thereto, other than the Borrowing Subsidiary,
enforceable against such parties in accordance with its terms.
Based upon the foregoing and subject to the qualifications stated herein,
we are of the opinion that, as of the date hereof:
1. The Borrowing Subsidiary has been duly organized and is validly
existing and in good standing under the laws of _____________. The Borrowing
Subsidiary has the requisite corporate power and authority to conduct its
business as currently conducted.
2. The Borrowing Subsidiary has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Assumption
Letter, the Five-Year Credit Agreement and the Notes. Such execution, delivery
and performance:
(a) have been duly authorized by all necessary and proper corporate action
of the Borrowing Subsidiary,
(b) do not violate any provision of the certificate of incorporation or by-
laws of the Borrowing Subsidiary or require any approval of the Borrowing
Subsidiary's stockholders,
(c) will not violate any law or regulation of ____________, the State of
Illinois (including, without limitation, any usury laws) or of the United
States of America applicable to the Borrowing Subsidiary, and
(d) do not contravene any agreement set forth on the Certificate, or, to
our knowledge, any other material agreement or instrument binding on the
Borrowing Subsidiary.
/7/ To be revised if the Borrowing Subsidiary is not a domestic
corporation.
<PAGE>
3. The Assumption Letter constitutes, and from and after the initial
Committed Borrowing to the Borrowing Subsidiary, the Notes will constitute, the
valid and binding obligations of the Borrowing Subsidiary, enforceable in
accordance with their respective terms.
4. No approval, consent or authorization of, or filing or registration
with, any governmental department, agency or instrumentality is necessary for
the Borrowing Subsidiary's execution or delivery of the Assumption Letter or the
Notes, or for the Borrowing Subsidiary's performance of any of the terms
thereof.
Our opinions above are subject to the following qualifications:
(a) Our opinions relating to validity, binding effect and enforceability
in Paragraph 3 above are subject to limitations imposed by any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws affecting creditors' rights generally. In addition, our opinions
relating to enforceability in paragraph 3 above are subject to (i) the effect of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law) and (ii) limitations imposed by public policy under certain
circumstances on the enforceability of provisions indemnifying a party against
liability for its own wrongful or negligent acts. In applying principles of
equity referred to in clause (i) above, a court, among other things, might not
allow a creditor to accelerate maturity of a debt upon the occurrence of a
default deemed immaterial. Such principles applied by a court might include a
requirement that a creditor act reasonably and in good faith.
(b) Certain remedial and waiver provisions of the Five-Year Credit
Agreement applicable to the Borrowing Subsidiary pursuant to the Assumption
Letter may be unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of the Assumption Letter; however, the
unenforceability of such provisions may result in delays in the enforcement of
the Administrative Agent's and the Banks' rights and remedies under the
Assumption Letter (and we express no opinion as to the economic consequences, if
any, of such delays).
(c) We express no opinion as to the effect of the compliance or
noncompliance of the Administrative Agent or any of the Banks with any state or
federal laws or regulations applicable to the Administrative Agent or any of the
Banks because of the Administrative Agent's or any of the Banks' legal or
regulatory status, the nature of the business of the Administrative Agent or any
of the Banks or the qualification of any such party to conduct business in any
jurisdiction.
The foregoing opinions are limited to the laws of the United States, the
State of Illinois and the corporate law of [jurisdiction where the Borrowing
Subsidiary is incorporated] and we express no opinion with respect to the laws
of any other state or jurisdiction.
[Whenever in this opinion reference is made to our knowledge, such
reference is to the conscious awareness of [insert appropriate names] of
information regarding factual matters. With respect to such matters, such
persons have not, with your express permission and consent, undertaken any
investigation or inquiry either of other lawyers, files maintained by the firm,
or
<PAGE>
Page 4
officers or employees of the Company or any of its Subsidiaries (including
without limitation the Borrowing Subsidiary). The reference to "conscious
awareness" as used in this paragraph has the meaning given that phrase in the
Third-Party Legal Opinion Report, Including the Legal Opinion Accord, of the
- ----------------------------------------------------------------------------
Section of Business Law, American Bar Association, 47 Bus. Law. 167, 192
- -------------------------------------------------
(1991).]
The opinions expressed herein are being delivered to you as of the date
hereof and are solely for your benefit in connection with the transactions
contemplated in the Five-Year Credit Agreement and may not be relied on in any
manner or for any purpose by any other person, nor any copies published,
communicated or otherwise made available in whole or in part to any other person
or entity without our express prior written consent, except that you may furnish
copies thereof to each party that becomes a Bank after the date hereof pursuant
to the Five-Year Credit Agreement, and such parties may rely on this opinion as
if it had been originally addressed to them.
We do not express any opinion, either implicitly or otherwise, on any issue
not expressly addressed in numbered Paragraphs 1 through 4. The opinions
expressed above are based solely on facts, laws and regulations existing and in
effect on the date hereof, and we assume no obligation to revise or supplement
this opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or otherwise,
notwithstanding that such changes may affect the legal analysis or conclusions
contained in this opinion.
Very truly yours,
-4-
<PAGE>
By:______________________
Title:
<PAGE>
Dated: ____________________
<PAGE>
EXHIBIT 4(E)
EXECUTION COPY
364-DAY CREDIT AGREEMENT
Dated as of December 11, 1998
Among
R.R. DONNELLEY & SONS COMPANY
as Borrower,
-- --------
THE BANKS NAMED HEREIN
as Banks
-- -----
and
THE FIRST NATIONAL BANK OF CHICAGO
as Administrative Agent
-----------------------
FIRST CHICAGO CAPITAL MARKETS, INC.
as Arranger
-----------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS........................................................ 1
SECTION 1.01. Certain Defined Terms.......................................................... 1
SECTION 1.02. Computation of Time Periods.................................................... 15
SECTION 1.03. Accounting Terms; Modifications due to Implementation of Euro.................. 15
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES...................................................... 16
SECTION 2.01. The Committed Advances......................................................... 16
SECTION 2.02. Making the Committed Advances.................................................. 16
SECTION 2.03. The Uncommitted Advances....................................................... 20
SECTION 2.04. Facility Fee and Utilization Fee............................................... 24
SECTION 2.05. Reduction and Termination of the Commitments................................... 25
SECTION 2.06. Payment; Conversion and Continuation........................................... 25
SECTION 2.07. Interest on Committed Advances................................................. 26
SECTION 2.08. Additional Interest on Eurocurrency Rate Advances.............................. 27
SECTION 2.09. Interest Rate Determination.................................................... 27
SECTION 2.10. Prepayments.................................................................... 28
SECTION 2.11. Funding Indemnification........................................................ 28
SECTION 2.12. Increased Costs and Reduced Return............................................. 29
SECTION 2.13. Illegality..................................................................... 30
SECTION 2.14. Payments and Computations...................................................... 30
SECTION 2.15. Sharing of Payments, Etc....................................................... 31
SECTION 2.16. Currency Equivalents........................................................... 32
SECTION 2.17. Borrowing Subsidiaries......................................................... 33
SECTION 2.18. Reserved....................................................................... 33
SECTION 2.19. Taxes.......................................................................... 33
SECTION 2.20. Defaulting Banks............................................................... 35
SECTION 2.21. Mitigation..................................................................... 37
SECTION 2.22. European Economic and Monetary Union........................................... 37
SECTION 2.23. Extension of Termination Date.................................................. 38
SECTION 2.24. Increase of Aggregate Commitments.............................................. 39
ARTICLE III CONDITIONS PRECEDENT.................................................................. 40
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03................ 40
SECTION 3.02. Conditions Precedent to Initial Advance to Each Borrowing Subsidiary........... 41
SECTION 3.03. Conditions Precedent to Each Committed Borrowing............................... 42
SECTION 3.04. Conditions Precedent to Each Uncommitted Borrowing............................. 43
ARTICLE IV REPRESENTATIONS AND WARRANTIES......................................................... 43
SECTION 4.01. Representations and Warranties of the Company................................. 43
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE V COVENANTS OF THE COMPANY................................................................ 46
SECTION 5.01. Compliance with Laws, Etc...................................................... 46
SECTION 5.02. Interest Coverage Ratio........................................................ 46
SECTION 5.03. Reporting Requirements......................................................... 46
SECTION 5.04. Use of Proceeds................................................................ 47
SECTION 5.05. Limitation on Liens, Etc....................................................... 48
SECTION 5.06. Merger; Sale of Assets......................................................... 49
SECTION 5.07. Books and Records; Inspection.................................................. 49
SECTION 5.08. Corporate Existence............................................................ 50
SECTION 5.10. Payment of Taxes............................................................... 50
ARTICLE VI EVENTS OF DEFAULT...................................................................... 50
SECTION 6.01. Events of Default.............................................................. 50
ARTICLE VII GUARANTEE............................................................................. 52
SECTION 7.01. Unconditional Guarantee........................................................ 52
SECTION 7.02. Validity....................................................................... 53
SECTION 7.03. Waivers........................................................................ 53
SECTION 7.04. Subrogation.................................................................... 53
SECTION 7.05. Acceleration................................................................... 53
SECTION 7.06. Reinstatement.................................................................. 54
SECTION 7.07. Continuing Guaranty; Assignments............................................... 54
ARTICLE VIII THE ADMINISTRATIVE AGENT............................................................. 54
SECTION 8.01. Reserved....................................................................... 54
SECTION 8.02. Authorization and Action....................................................... 54
SECTION 8.03. Administrative Agent's Reliance, Etc........................................... 55
SECTION 8.04. The Administrative Agent and Affiliates........................................ 56
SECTION 8.05. Bank Credit Decision; Notice of Default........................................ 56
SECTION 8.06. Indemnification................................................................ 56
SECTION 8.07. Successor Administrative Agent................................................. 57
ARTICLE IX MISCELLANEOUS.......................................................................... 57
SECTION 9.01. Amendments, Etc................................................................ 57
SECTION 9.02. Notices, Etc................................................................... 58
SECTION 9.03. No Waiver; Remedies............................................................ 58
SECTION 9.04. Costs and Expenses............................................................. 59
SECTION 9.05. Right of Set-off............................................................... 59
SECTION 9.06. Binding Effect................................................................. 59
SECTION 9.07. Assignments, Designations and Participations................................... 60
SECTION 9.08. Governing Law.................................................................. 64
SECTION 9.09. Execution in Counterparts...................................................... 64
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 9.10. Confidentiality................................................................ 64
SECTION 9.11. Non-Reliance by the Banks...................................................... 64
SECTION 9.12. No Indirect Security........................................................... 64
SECTION 9.13. Indemnification................................................................ 65
SECTION 9.14. Partial Invalidity............................................................. 65
SECTION 9.15. WAIVER OF JURY TRIAL........................................................... 65
SECTION 9.16. Jurisdiction, Etc.............................................................. 66
SECTION 9.17. Termination of Existing Credit Agreement....................................... 66
SECTION 9.18. Nonliability of Banks.......................................................... 66
</TABLE>
-iii-
<PAGE>
EXHIBITS
EXHIBIT A - Form of Assignment and Acceptance
EXHIBIT B - Form of Assumption Letter
EXHIBIT C - Form of Designation Agreement
EXHIBIT D-1 - Form of Committed Note
EXHIBIT D-2 - Form of Uncommitted Note
EXHIBIT E-1 - Form of Notice of Committed Borrowing
EXHIBIT E-2 - Form of Notice of Uncommitted Borrowing
EXHIBIT F - Form of Notice of Continuation/Conversion
EXHIBIT G - Form of Commitment Increase Consent
EXHIBIT H - Form of Sidley & Austin Opinion
EXHIBIT I - Form of Opinion of Counsel to Borrowing Subsidiary
-iv-
<PAGE>
EXECUTION COPY
364-DAY CREDIT AGREEMENT
Dated as of December 11, 1998
R.R. DONNELLEY & SONS COMPANY, a Delaware corporation (the "Company"), the
banks listed on the signature pages hereof and THE FIRST NATIONAL BANK OF
CHICAGO, as Administrative Agent (as hereinafter defined), agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Acceptance Deadline" has the meaning specified in Section
------------------- -------
2.03(a)(iii).
------------
"Administrative Agent" means First Chicago, in its capacity as the
--------------------
contractual representative for all of the Banks for purposes of this
Agreement, as designated and appointed in accordance with Article VIII, and
------------
any successor thereto as provided herein.
"Advance" means a Committed Advance or an Uncommitted Advance.
-------
"Affiliate" means, with respect to any Person, any other Person that,
---------
directly or indirectly, controls, is controlled by or is under common
control with such Person.
"Affordable Housing Debt" means Debt of the Company or of any of its
-----------------------
Subsidiaries which is associated with the direct or indirect investment by
the Company or such Subsidiary in affordable housing where the expected tax
benefits of such investment exceed the total amount of the future annual
payments required as part of such investment.
"Agreement" shall mean this 364-Day Credit Agreement, as the same may
---------
be amended, modified, supplemented or restated from time to time.
"Alternative Currency" means Sterling, German Marks, Swiss Francs, Yen
--------------------
and any other currency (other than Dollars) (i) which is readily available,
freely transferable and convertible into Dollars in the international
currency and exchange markets, (ii) in which deposits are customarily
offered to banks
-1-
<PAGE>
in the London interbank market and (iii) as to which an equivalent amount
in Dollars may be readily calculated, including the Euro from and after the
Euro Implementation Date.
"Applicable Lending Office" means, with respect to each Bank, such
-------------------------
Bank's Domestic Lending Office in the case of a Base Rate Advance, and such
Bank's Eurocurrency Lending Office in the case of a Eurocurrency Rate
Advance and, in the case of an Uncommitted Advance, the office of such Bank
notified by such Bank to the Administrative Agent as its Applicable Lending
Office with respect to such Uncommitted Advance.
"Applicable Margin" means on any day 0.19%.
-----------------
"Arranger" means First Chicago Capital Markets, Inc.
--------
"Assignment and Acceptance" means an Assignment and Acceptance
-------------------------
executed by a Bank (other than a Designated Bidder) and an Eligible
Assignee and accepted by the Administrative Agent and the Company,
substantially in the form of Exhibit A hereto.
---------
"Assumption Letter" means a letter of a Subsidiary of the Company
-----------------
addressed to the Banks in substantially the form of Exhibit B hereto
---------
pursuant to which such Subsidiary agrees to become a "Borrowing Subsidiary"
and agrees to be bound by the terms and conditions hereof.
"Available Commitment" has the meaning specified in Section 2.01.
-------------------- ------------
"Banks" means the banks listed on Schedule I hereto and each Person
----- ----------
that becomes a party hereto pursuant to Section 9.07(a), (b) and (c), and,
--------------- --- ---
except when used in reference to a Committed Advance, a Committed
Borrowing, a Committed Note, a Commitment or a related term, each
Designated Bidder.
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the corporate base rate of interest announced by First
Chicago from time to time, changing when and as said corporate base
rate changes; and
(b) 1/2 of 1% per annum above the Federal Funds Rate.
"Base Rate Advance" means a Committed Advance which bears interest at
-----------------
a rate based upon the Base Rate, as provided in Section 2.07(a).
---------------
"Borrower" means the Company or any Borrowing Subsidiary.
--------
"Borrowing" means a Committed Borrowing or an Uncommitted Borrowing.
---------
-2-
<PAGE>
"Borrowing Subsidiary" means any Subsidiary of the Company duly
--------------------
designated by the Company pursuant to Section 2.17 hereof to make
------------
Borrowings hereunder, which Subsidiary shall have delivered an Assumption
Letter to the Administrative Agent in accordance with Section 2.17.
------------
"Business Day" means a day of the year (other than a Saturday or
------------
Sunday) on which banks are not required or authorized by law to close in
New York City and Chicago and, if the applicable Business Day relates to
any Eurocurrency Rate Advances, on which dealings are carried on in the
London interbank market (and, if such Eurocurrency Rate Advances are
denominated in the Euro, a day upon which such clearing system as is
determined by the Administrative Agent to be suitable for clearing or
settlement of the Euro is open for business).
"Category Status" means Category 1 Status, Category 2 Status, Category
---------------
3 Status, Category 4 Status or Category 5 Status, as appropriate.
"Category 1 Status" exists at any date if at such date the Public Debt
-----------------
Rating announced by S&P is AA- (or the equivalent) or better or the Public
--
Debt Rating announced by Moody's is Aa3 (or the equivalent) or better.
"Category 2 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is A (or the equivalent) or better or the
--
Public Debt Rating announced by Moody's is A2 (or the equivalent) or
better, and (ii) Category 1 Status does not exist.
"Category 3 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is A- (or the equivalent) or better or the
--
Public Debt Rating announced by Moody's is A3 (or the equivalent) or
better, and (ii) neither Category 1 Status nor Category 2 Status exists.
"Category 4 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is BBB (or the equivalent) or better or the
--
Public Debt Rating announced by Moody's is Baa2 (or the equivalent) or
better, and (ii) none of Category 1 Status, Category 2 Status or Category 3
Status exists.
"Category 5 Status" exists at any date if at such date (i) the Public
-----------------
Debt Rating announced by S&P is lower than BBB (or the equivalent) and the
---
Public Debt Rating announced by Moody's is lower than Baa2 (or the
equivalent), or (ii) neither S&P nor Moody's shall have a Public Debt
--
Rating in effect at such date.
"Commission" means the Securities and Exchange Commission or any
----------
federal body succeeding to its functions.
"Commitment" has the meaning specified in Section 2.01.
---------- ------------
-3-
<PAGE>
"Committed Advance" means an advance by a Bank to a Borrower as part
-----------------
of a Committed Borrowing and refers to a Base Rate Advance or a
Eurocurrency Rate Advance, each of which shall be a "Type" of Committed
----
Advance.
"Committed Borrowing" means a borrowing consisting of simultaneous
-------------------
Committed Advances of the same Type made by each of the Banks to a Borrower
pursuant to Section 2.01.
------------
"Committed Note" means a promissory note, in substantially the form of
--------------
Exhibit D-1 hereto, duly executed by the Company or a Borrowing Subsidiary
-----------
and payable to the order of a Bank in the amount of its Commitment,
including any amendment, modification, renewal or replacement of such
promissory note.
"Consolidated EBIT" means, for any period, on a consolidated basis for
-----------------
the Company and its Consolidated Subsidiaries, the sum of the amounts for
such period of (a) Consolidated Net Income (excluding non-recurring or
extraordinary gains, losses, expenses and charges but including cash
charges and payments during such period related to extraordinary or non-
recurring gains, losses, charges and expenses), plus (b) charges against
----
income for foreign, federal, state and local taxes, plus (c) Consolidated
----
Interest Expense plus (or minus) (d) pre-tax income (or loss) from
---- -----
discontinued operations.
"Consolidated Interest Expense" means, for any period, the sum of
-----------------------------
total interest expense of the Company and its Consolidated Subsidiaries,
whether paid or accrued, as determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
-----------------------
earnings (or loss) after taxes of the Company and its Consolidated
Subsidiaries for such period, determined in accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary the
-----------------------
accounts of which would be consolidated with those of the Company in its
consolidated financial statements at such date in accordance with GAAP;
provided, that for purposes of Sections 5.02 and 5.03, "Consolidated
-------- ------------- ----
Subsidiary" shall mean any subsidiary the accounts of which would be
consolidated with those of the Company in its consolidated financial
statements at such date in accordance with GAAP.
"Consolidated Tangible Net Worth" means, as of any date, an amount
-------------------------------
equal to the sum of (i) the par or stated value of the outstanding shares
of all classes of capital stock of the Company, (ii) paid-in capital and
capital surplus of the Company and (iii) retained earnings of the Company,
as each of which would appear on a consolidated balance sheet of the
Company and its Consolidated Subsidiaries prepared as of the last day of
the most recently completed fiscal quarter in accordance with GAAP, less
----
the aggregate net
-4-
<PAGE>
amount of (i) all assets so appearing which in accordance with GAAP are
deemed intangible, such intangible assets to specifically include, but not
be limited to, licenses, copyrights, trademarks, tradenames, patents and
goodwill, and (ii) any write-up in the book value of assets made after
December 31, 1997, other than any such write-up to an appraised fair market
value in accordance with the purchase accounting requirements of GAAP.
"Continuation Notice" has the meaning specified in Section 2.23.
------------------- ------------
"Continuing Bank" has the meaning specified in Section 2.23.
--------------- ------------
"Debt" means (but without duplication of any item) (i) indebtedness
----
for borrowed money, (ii) obligations evidenced by bonds, debentures, notes
or other similar instruments, (iii) obligations as lessee under leases
which shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, and (iv) obligations
under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise
assure a creditor against loss in respect of, indebtedness or obligations
of others of the kinds referred to in clause (i), (ii) or (iii) above.
"Defaulted Advance" means, with respect to any Bank at any time, the
-----------------
amount of any Advance required to be made by such Bank to the Borrower
pursuant to Section 2.01 or Section 2.03(a) at or prior to such time that
------------ ---------------
has not been so made as of such time; provided, however, that any Advance
-------- -------
made by the Administrative Agent for the account of such Bank pursuant to
Section 2.02(e) shall not be considered a Defaulted Advance even if, at
---------------
such time, such Bank shall not have reimbursed the Administrative Agent
therefor as provided in Section 2.02(e). If part of a Defaulted Advance
---------------
shall be deemed made pursuant to Section 2.20(a), the remaining part of
---------------
such Defaulted Advance shall be considered a Defaulted Advance originally
required to be made pursuant to Section 2.01 or Section 2.03(a) on the same
------------ ---------------
date as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Bank at any time, any
----------------
amount required to be paid by such Bank to the Administrative Agent or any
other Bank hereunder at or prior to such time that has not been so paid as
of such time, including, without limitation, any amount required to be paid
by such Bank to (a) the Administrative Agent pursuant to Section 2.02(e) to
---------------
reimburse the Administrative Agent for the amount of any Advance made by
the Administrative Agent for the account of such Bank, (b) any other Bank
pursuant to Section 2.15 to purchase any participation in Advances owing to
------------
such other Bank and (c) the Administrative Agent pursuant to Section 8.06
------------
to reimburse the Administrative Agent for such Bank's ratable share of any
amount required to be paid by the Banks to the Administrative Agent as
provided therein. If part of a Defaulted Amount shall be deemed paid
pursuant to Section 2.20(b), the remaining part of such Defaulted Amount
---------------
-5-
<PAGE>
shall be considered a Defaulted Amount originally required to be hereunder
on the same date as the Defaulted Amount so deemed paid in part.
"Defaulting Bank" means, at any time, any Bank that, at such time, (a)
---------------
owes a Defaulted Advance or a Defaulted Amount or (b) shall take or be the
subject of any action or proceeding of a type described in Section 6.01(f).
---------------
"Designated Bidder" means (a) an Eligible Assignee or (b) a special
-----------------
purpose corporation that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and
that issues (or the parent of which issues) commercial paper rated at least
"Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the then
equivalent grade) by S&P that, in the case of either clause (a) or clause
(b), (i) is organized under the laws of the United States or any State
thereof, (ii) shall have become a party hereto pursuant to Section 9.07(d),
---------------
(e) and (f), and (iii) is not otherwise a Bank.
--- ---
"Designation Agreement" means a designation agreement entered into by
---------------------
a Bank (other than a Designated Bidder) and a Designated Bidder, and
accepted by the Administrative Agent and the Company, in substantially the
form of Exhibit C hereto.
---------
"Dollar Amount" means, for any date of determination:
-------------
(a) with respect to any amount denominated in Dollars, such amount;
and
(b) with respect to an amount denominated in any Alternative Currency,
the amount of Dollars into which the Administrative Agent could, in
accordance with its practice from time to time in the London interbank
foreign exchange market, convert such amount of Alternative Currency at its
spot rate of exchange applicable to the relevant transaction at or about
11:00 a.m., London time, on the date of such determination, for the
delivery of Dollars two Business Days thereafter. For purposes of this
Agreement, the Dollar Amount of any amount received by a Bank hereunder
shall be determined as of the date of such receipt.
"Dollars" and the sign "$" each means the lawful currency of the
------- -
United States.
"Domestic Lending Office" means, with respect to any Bank, the office
-----------------------
of such Bank specified as its "Domestic Lending Office" opposite its name
on Schedule I hereto or in the Assignment and Acceptance pursuant to which
----------
it became a Bank, as the case may be, or such other office of such Bank as
such Bank may from time to time specify to the Company and the
Administrative Agent.
"Effective Date" has the meaning specified in Section 3.01.
-------------- ------------
-6-
<PAGE>
"Eligible Assignee" means (i) a Bank (other than a Designated Bidder);
-----------------
(ii) an Affiliate of a Bank (other than a Designated Bidder); (iii) a
commercial bank organized under the laws of the United States or any State
thereof, and having a combined capital and surplus of at least
$500,000,000; (iv) a commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development, has a combined capital and surplus of at least $500,000,000
and is acting through a branch or agency located in the United States, and
(v) any other Person approved by the Company and the Administrative Agent,
such approvals not to be unreasonably withheld or delayed (it being
understood that the Company may reasonably withhold its approval of any
such other Person if at the time it would become a Bank hereunder payments
to it would not be exempt from United States withholding tax).
"Environmental Action" means any administrative, regulatory or
--------------------
judicial action, suit, demand, demand letter, claim, notice of
noncompliance or violation, notice of liability or potential liability,
investigation, proceeding, consent order or consent agreement relating in
any way to any Environmental Law, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health,
safety or the environment, including, without limitation, (a) by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
-----------------
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial interpretation relating to the environment, health, safety or
Hazardous Materials.
"Environmental Permit" means any permit, approval, indemnification
--------------------
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
-----
amended from time to time, and the regulations promulgated and the rulings
issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
---------------
ERISA is a member of the Company's controlled group, or under common
control with the Company, as determined under Section 414 of the Internal
Revenue Code.
"ERISA Event" means (a) the occurrence of a reportable event, within
-----------
the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by the
-7-
<PAGE>
PBGC; (b) the application for a minimum funding waiver with respect to a
Plan; (c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA
(including any such notice with respect to a plan amendment referred to in
Section 4041(e) of ERISA); (d) the cessation of operations at a facility of
the Company or any of its ERISA Affiliates in the circumstances described
in Section 4062(e) of ERISA; (e) the withdrawal by the Company or any of
its ERISA Affiliates from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (f) the failure by the Company or any of its ERISA Affiliates to
make a payment to a Plan if the conditions for the imposition of a lien
under Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that could constitute grounds for the termination of, or the appointment of
trustee to administer, a Plan.
"Euro" and/or "EUR" means the euro referred to in Council Regulation
---- ---
(EC) No. 1103/97 dated June 17, 1997 passed by the Council of the European
Union, or, if different, the then lawful currency of the member states of
the European Union that participate in the third stage of Economic and
Monetary Union.
"Euro Implementation Date" means the first date (currently expected to
------------------------
be January 1, 1999) on which the Euro becomes the currency of some or all
of the member states of the European Union.
"Eurocurrency Lending Office" means, with respect to any Bank, the
---------------------------
office of such Bank specified as its "Eurocurrency Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
----------
to which it became a Bank (or, if no such office is specified, its Domestic
Lending Office), or such other office of such Bank as such Bank may from
time to time specify to the Company and the Administrative Agent.
"Eurocurrency Liabilities" has the meaning assigned to that term in
------------------------
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurocurrency Rate" means, with respect to any Eurocurrency Rate
-----------------
Advance for any specified Interest Period or for the term of any
Uncommitted Advance with respect to which interest is calculated by
reference to the Eurocurrency Rate, either:
(i) the rate of interest per annum equal to the rate for deposits
in Dollars or the applicable Alternative Currency of such Eurocurrency
Rate Advance with a maturity approximately equal to such Interest
Period which appears on
-8-
<PAGE>
Dow Jones Markets (Telerate) Page 3740 or 3750, as applicable, or, if
there is more than one such rate, the average of such rates rounded to
the nearest 1/100 of 1% (if such average is not a multiple of 1/16 of
1%), as of 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, or
(ii) if no such rate of interest appears on Dow Jones Markets
(Telerate) Page 3740 or 3750, as applicable, for any specified
Interest Period, or if Dow Jones Markets (Telerate) Page 3740 or 3750
is unavailable for any reason, the applicable per annum London
interbank offered rate for deposits in Dollars or the applicable
Alternative Currency appearing on Reuters Screen FRBD as of 11:00 a.m.
(London time) two Business Days prior to the first day of such
Interest Period, and having a maturity equal to such Interest Period.
"Eurocurrency Rate Advance" means a Committed Advance which bears
-------------------------
interest at a rate based upon the Eurocurrency Rate, as provided in Section
-------
2.07(c).
-------
"Eurocurrency Rate Reserve Percentage" of any Bank (other than a
------------------------------------
Designated Bidder) for any Interest Period for a Eurocurrency Rate Advance
means the reserve percentage applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for such
Bank with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurocurrency Rate Advances of such currency is determined) having a term
equal to such Interest Period.
"Eurocurrency Rate Uncommitted Borrowing" means an Uncommitted
---------------------------------------
Borrowing comprised of Uncommitted Advances denominated in Dollars, bearing
interest based upon the Eurocurrency Rate.
"Events of Default" has the meaning specified in Section 6.01.
----------------- ------------
"Extension Request" has the meaning specified in Section 2.23.
----------------- ------------
"Facility Fee" has the meaning specified in Section 2.04.
------------ ------------
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published for such day
-9-
<PAGE>
(or, if such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"First Chicago" means The First National Bank of Chicago, a national
-------------
banking association, in its individual capacity, and its successors.
"Fixed Rate Uncommitted Borrowing" means an Uncommitted Borrowing
--------------------------------
consisting of Uncommitted Advances bearing interest at a fixed percentage
rate per annum (expressed in the form of a decimal to no more than four
decimal places) specified by the respective Banks making such Uncommitted
Advances pursuant to the procedure described in Section 2.03.
------------
"GAAP" has the meaning specified in Section 1.03.
---- ------------
"German Marks" means the lawful currency of the Federal Republic of
------------
Germany.
"Hazardous Materials" means petroleum and petroleum products,
-------------------
byproducts or breakdown products, radioactive materials, asbestos-
containing materials, radon gas and any other chemicals, materials or
substances designated, classified or regulated as being "hazardous" or
"toxic", or words of similar import, under any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial interpretation.
"Insurance Policy Debt" means Debt of the Company or any of its
---------------------
Subsidiaries under policies of life insurance now or hereafter owned by the
Company or any of its Subsidiaries under which policies the sole recourse
for such borrowing is against such policies.
"Interest Coverage Ratio" means the ratio, determined on a
-----------------------
consolidated basis for the Company and its Consolidated Subsidiaries in
accordance with GAAP as of the end of any fiscal quarter, of Consolidated
EBIT to Consolidated Interest Expense, in each case determined as of the
last day of such fiscal quarter for the four-quarter period then ended.
"Interest Period" means, for each Eurocurrency Rate Advance comprising
---------------
part of the same Committed Borrowing, the period commencing on the date of
such Eurocurrency Rate Advance or the date of any conversion or
continuation thereof, and ending on the last day of the period selected by
a Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months, in each case as a
Borrower may select, upon notice received by the Administrative Agent
pursuant to Section 2.02 or 2.06; provided, however, that
------------ ---- -------- -------
-10-
<PAGE>
(i) Interest Periods commencing on the same date for
Eurocurrency Rate Advances comprising part of the same Committed
Borrowing shall be of the same duration;
(ii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, provided that if such extension would cause the last day
--------
of such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next preceding
Business Day;
(iii) whenever the first day of any Interest Period occurs on a
day in an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month; and
(iv) no Interest Period may terminate later than the Termination
Date (or, if the Company has made the Term Loan Election, the Maturity
Date).
"Lien" means, with respect to any asset, any security interest,
----
mortgage, pledge, lien, claim, charge or encumbrance of any kind in respect
of such asset.
"Majority Banks" means at any time Banks holding more than 50% of the
--------------
then aggregate unpaid principal amount of the Committed Advances held by
the Banks, or, if no such principal amount is then outstanding, Banks
having more than 50% of the Commitments.
"Margin Stock" has the meaning specified in Regulation U issued by the
------------
Board of Governors of the Federal Reserve System.
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole, (ii) the legality, validity
or enforceability of this Agreement or the Notes or (iii) the ability of
the Company to perform its obligations under this Agreement and the Notes.
"Material Subsidiary" means a Subsidiary of the Company which, at the
-------------------
time of determination, (i) shall own assets comprising in excess of 10% of
all of the assets of the Company and its consolidated Subsidiaries on a
consolidated basis, or (ii) has operating income for the four fiscal
quarters most recently ended in excess of 10% of the operating income of
the Company and its consolidated Subsidiaries on a consolidated basis.
-11-
<PAGE>
"Maturity Date" means the earlier of (a) the first anniversary of the
-------------
Termination Date and (b) the date on which all amounts payable hereunder
have become due and payable pursuant to Section 6.01.
------------
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan, as defined in Section
------------------
4001(a)(3) of ERISA, to which the Company or any of its ERISA Affiliates is
making or accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
----------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and at least one Person other than
the Company and its ERISA Affiliates or (b) was so maintained and in
respect of which the Company or any of its ERISA Affiliates could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"National Currency Unit" means the unit of currency (other than a Euro
----------------------
unit) of each member state of the European Union that participates in the
third stage of Economic and Monetary Union.
"Non-Extending Bank" has the meaning specified in Section 2.23.
------------------ ------------
"Note" means a Committed Note or an Uncommitted Note.
----
"Notice of Committed Borrowing" has the meaning specified in Section
----------------------------- -------
2.02(a).
-------
"Notice of Conversion or Continuation" has the meaning specified in
------------------------------------
Section 2.06(b).
---------------
"Notice of Uncommitted Borrowing" has the meaning specified in Section
------------------------------- -------
2.03(a).
-------
"PBGC" means the Pension Benefit Guaranty Corporation and its
----
successors and assigns.
"Person" means an individual, partnership, corporation (including a
------
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
-12-
<PAGE>
"Pro Rata Share" means, at any time with respect to any Bank, the
--------------
ratio (expressed as a percentage) that such Bank's Commitment bears to the
aggregate Commitments of all Banks at such time or, at any time after the
Commitments have been terminated, the ratio (expressed as a percentage)
that such Bank's outstanding Committed Advances bears to the aggregate
outstanding Committed Advances of all Banks at such time.
"Public Debt Rating" means, on any date, the rating that has been most
------------------
recently announced by S&P or Moody's, as the case may be, for any class of
long-term senior non-credit-enhanced unsecured debt issued by the Company,
changing when and as the applicable rating agency publicly announces a
change in its Public Debt Rating.
"Quote Deadline" has the meaning specified in Section 2.03(a)(ii).
-------------- -------------------
"Register" has the meaning specified in Section 9.07(g).
-------- ---------------
"Replacement Bank" has the meaning specified in Section 2.23(b).
---------------- ---------------
"Request Deadline" has the meaning specified in Section 2.03(a)(i).
---------------- ------------------
"Responsible Officer" means the Executive Vice President and Chief
-------------------
Financial Officer of the Company, the Vice President and Treasurer of the
Company, or any other officer of the Company or any other Borrower
responsible for overseeing or reviewing compliance with this Agreement or
any Note.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-
---
Hill Companies, Inc.
"Single Employer Plan" means a single employer plan, as defined in
--------------------
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Company or any of its ERISA Affiliates and no Person other than the Company
and its ERISA Affiliates or (b) was so maintained and in respect of which
the Company or any of its ERISA Affiliates could have liability under
Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Sterling" means the lawful currency of the United Kingdom.
--------
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership, limited liability company, association or other business
entity of which securities or other ownership interests having (a) ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions or (b) having the ability to direct the
management of such corporation, partnership, limited liability company,
association or other business entity, are at the time directly or
indirectly owned or controlled by such Person, by such Person and one or
more of its
-13-
<PAGE>
other Subsidiaries or by one or more of such Person's other Subsidiaries;
provided however, that Stream International Inc., a Delaware corporation
--------
("Stream"), shall not be considered a "Subsidiary" of the Company until the
------
earlier of (i) the date of the first regularly scheduled annual meeting of
Stream after such time as the Company has gained ordinary voting power to
elect a majority of the board of directors of Stream and (ii) the date on
which the Company elects the majority of a new board of directors of
Stream.
"Swiss Francs" means the lawful currency of Switzerland.
------------
"Termination Date" means the earlier of (i) December 10, 1999 (or such
----------------
later date as is established pursuant to Section 2.23(d)) or (ii) the date
---------------
the Commitments are terminated in whole pursuant to Section 2.05 or 6.01.
------------ ----
"Term Loan Election" has the meaning specified in Section 2.06.
------------------ ------------
"Uncommitted Advance" means an advance by a Bank to a Borrower as part
-------------------
of an Uncommitted Borrowing resulting from the auction bidding procedure
described in Section 2.03.
------------
"Uncommitted Borrowing" means a borrowing consisting of simultaneous
---------------------
Uncommitted Advances from each of the Banks whose offer to make one or more
Uncommitted Advances as part of such borrowing has been accepted by a
Borrower under the auction bidding procedure described in Section 2.03.
------------
"Uncommitted Borrowing Margin" means, with respect to any Eurocurrency
----------------------------
Rate specified by a Borrower in a Notice of Uncommitted Borrowing and any
offer made by a Bank in response to such Notice of Uncommitted Borrowing,
the margin (expressed as a percentage rate per annum) to be added to or
subtracted from such Eurocurrency Rate in order to determine the interest
rate per annum at which such Bank is willing to, and offers to, make an
Uncommitted Advance to such Borrower as part of a Eurocurrency Rate
Uncommitted Borrowing.
"Uncommitted Note" means a promissory note, in substantially the form
----------------
of Exhibit D-2 hereto, duly executed by the Company or a Borrowing
-----------
Subsidiary and evidencing an Uncommitted Advance made by such Bank,
including any amendment, modification, renewal or replacement of such
promissory note.
"Utilization Fee" has the meaning specified in Section 2.04.
--------------- ------------
"Withdrawal Liability" has the meaning specified in Part 1 of Subtitle
--------------------
E of Title IV of ERISA.
-14-
<PAGE>
"Year 2000 Problem" means anticipated costs, problems and
-----------------
uncertainties associated with the inability of certain computer
applications to effectively handle data including dates on and after
January 1, 2000.
"Yen" means the lawful currency of Japan.
---
"1994 Credit Agreement" means that certain Credit Agreement dated as
---------------------
of December 21, 1994, among the Company, the banks listed on the signature
pages thereto, and Citibank, N.A., as Administrative Agent, as amended,
modified, restated or supplemented from time to time.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
SECTION 1.03. Accounting Terms; Modifications due to Implementation of
--------------------------------------------------------
Euro. (a) All accounting terms not specifically defined herein shall be
- ----
construed in accordance with generally accepted accounting principles consistent
with those applied in the preparation of the financial statements then most
recently delivered by the Company to the Banks in accordance with Section 5.03
------------
("GAAP"); provided, however, that, if any changes in accounting principles from
those used in the preparation of the consolidated financial statements of the
Company and its Subsidiaries for the fiscal year of the Company ended December
31, 1997 (as delivered to the Lenders pursuant to Section 4.01(e)) occur by
---------------
reason of the promulgation of rules, regulations, pronouncements, opinions or
other requirements of the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or agencies
with similar functions) and such changes would affect (or would result in a
change in the method of calculation of) the covenant set forth in Section 5.02,
------------
or any of the defined terms related thereto contained in Section 1.01, then upon
------------
the request of any party hereto, the Company, the Administrative Agent and the
Banks shall enter into negotiations in good faith, if and to the extent
necessary, to amend such covenant or such terms as would be affected by such
changes in GAAP, in accordance with Section 9.01, in such manner as would
------------
maintain the economic terms of such covenant as in effect under this Agreement,
prior to giving effect to the occurrence of any such changes; and provided
further, however, that until the amendment of the covenant and the defined terms
referred to in the immediately preceding proviso becomes effective, such
covenant and defined terms shall be performed, observed and determined, and any
determination of compliance with such covenant shall be made, as though no such
changes in accounting principles had been made and the Company shall deliver to
the Banks, in addition to the consolidated financial statements otherwise
required to be delivered to the Banks under Sections 5.03(a) or 5.03(b) during
---------------- -------
such period, a statement of reconciliation conforming such consolidated
financial statements to GAAP prior to such changes.
(b) If the Administrative Agent determines that modifications to this
Agreement are necessary as a result of the commencement of the third stage of
European Economic and Monetary Union and the occurrence of the Euro
Implementation Date, then the Company, the Administrative Agent and the Banks
shall enter into negotiations in good faith to amend this Agreement in such
manner as to put the parties in the same position as if the Euro
-15-
<PAGE>
Implementation Date had not occurred. No such modifications shall become
effective until this Agreement has been amended in accordance with Section 9.01
------------
to incorporate such modifications.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
---------------------------------
SECTION 2.01. The Committed Advances. Each Bank severally agrees, on the
----------------------
terms and conditions hereinafter set forth, to make Committed Advances to the
Borrowers from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an aggregate amount with respect to
all Borrowers not to exceed at any time outstanding an amount (such Bank's
"Available Commitment") equal to (i) the amount set forth opposite such Bank's
name on Schedule I hereto or, if such Bank has entered into any Assignment and
----------
Acceptance, set forth for such Bank in the Register, as such amount may be
reduced pursuant to Section 2.05 (such Bank's "Commitment") minus (ii) such
------------ -----
Bank's Pro Rata Share of the aggregate amount of the Uncommitted Advances then
outstanding. Each Committed Borrowing shall be in an aggregate amount of not
less than $20,000,000 or an integral multiple of $1,000,000 in excess thereof
or, if the requested currency for such Committed Advance is not Dollars, an
equivalent amount (determined in accordance with Section 2.16) and multiple in
------------
the requested Alternative Currency, and, subject to Section 2.02, shall consist
------------
of Committed Advances of the same Type made on the same day to the same Borrower
by the Banks ratably according to their respective Commitments in the currency
so requested. Within the limits of each Bank's Available Commitment, a Borrower
may borrow under this Section 2.01, prepay pursuant to Section 2.10, and
------------ ------------
reborrow under this Section 2.01.
------------
SECTION 2.02. Making the Committed Advances. (a) Each Committed
-----------------------------
Borrowing shall be made on notice by the Company (or, if such Borrower is a
Borrowing Subsidiary, by the Company on behalf of such Borrowing Subsidiary) to
the Administrative Agent (which shall give each Bank prompt notice thereof by
telecopy), given not later than 10:00 A.M. (Chicago time) on (i) the date of a
proposed Committed Borrowing comprised of Base Rate Advances, (ii) the third
Business Day prior to the date of a proposed Committed Borrowing comprised of
Eurocurrency Rate Advances to be denominated in Dollars, and (iii) the fourth
Business Day prior to the date of a proposed Committed Borrowing comprised of
Eurocurrency Rate Advances to be denominated in an Alternative Currency. Each
such notice of a Committed Borrowing (a "Notice of Committed Borrowing") shall
be by telecopy confirmed immediately in writing, in substantially the form of
Exhibit E-1 hereto, specifying therein the requested (i) date of such Committed
- -----------
Borrowing, (ii) Type of Committed Advances comprising such Committed Borrowing,
which, in the case of a Committed Borrowing denominated in an Alternative
Currency, shall be Eurocurrency Rate Advances, (iii) currency for such Committed
Borrowing, which shall be in Dollars or an Alternative Currency, (iv) aggregate
amount of such Committed Borrowing, (v) in the case of a Committed Borrowing
consisting of Eurocurrency Advances, the initial Interest Period for each
Committed Advance comprising such Committed Borrowing, and (vi) whether such
Committed Borrowing is to be made by the Company or by a specified Borrowing
Subsidiary. The Administrative Agent shall, promptly after such time as the
Company or
-16-
<PAGE>
such Borrower may no longer revoke the Notice of Committed Borrowing without any
liability to the Banks, notify each Bank and the Company or such Borrower of the
applicable interest rate under Section 2.07(a) or (b). Each Bank shall, before
--------------- ---
12:00 P.M. (Chicago time) on the date of such Committed Borrowing, make
available for the account of its Applicable Lending Office to the Administrative
Agent at the Domestic Lending Office of the Bank then acting as Administrative
Agent, in federal or otherwise immediately available funds, such Bank's Pro Rata
Share of such Committed Borrowing. After the Administrative Agent receives such
funds and upon fulfillment of the applicable conditions set forth in Article
-------
III, the Administrative Agent will make such funds available to the applicable
- ---
Borrower at the Administrative Agent's aforesaid address.
(b) Anything in subsection (a) above to the contrary notwithstanding:
(i) If with respect to a request for a Committed Borrowing of
an Alternative Currency other than Sterling, German Marks, Swiss Francs or
Yen, any Bank shall, prior to 10:00 A.M. (Chicago time) on the second
Business Day before the requested date of such Committed Borrowing, notify
the Administrative Agent that the requested Alternative Currency is not
practically available to such Bank in the amount required to make its
Committed Advance in connection therewith; or
(ii) If any Bank shall, prior to making any requested Committed
Borrowing consisting of Eurocurrency Rate Advances in an Alternative
Currency, notify the Administrative Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or that any central bank or other governmental authority asserts
that it is unlawful, for such Bank or its Eurocurrency Lending Office or
any other Applicable Lending Office to perform its obligations hereunder to
make Eurocurrency Rate Advances in such currency or to fund or maintain
Eurocurrency Rate Advances in such currency hereunder; or
(iii) If the Majority Banks shall, prior to making any requested
Committed Borrowing of an Alternative Currency other than Sterling, German
Marks, Swiss Francs, Yen or the Euro, notify the Administrative Agent or
the Administrative Agent shall reasonably determine that currency control
or other exchange regulations are imposed in the country in which such
currency is issued which result in the introduction of different types of
such currency or that there is a change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls which would make it impracticable for such Advance to be
denominated in the Alternative Currency;
then, upon receipt of such notice, the Administrative Agent shall so notify the
Company and the applicable Borrower (if other than the Company) and the Company
or such Borrower may, without incurring an obligation to indemnify for losses,
costs or expenses under Section 2.02(d), by notice to the Administrative Agent
---------------
(which shall promptly notify each Bank), either
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<PAGE>
(x) withdraw the applicable Notice of Committed Borrowing, in which
case the Committed Borrowing shall not occur;
(y) request that such Committed Borrowing be made by the Banks in
Dollars as a Committed Borrowing comprised of either Eurocurrency Rate
Advances or Base Rate Advances, in which case the original Notice of
Committed Borrowing shall be deemed to be a Notice of Committed Borrowing
which requests a Committed Borrowing in an aggregate principal amount in
Dollars equivalent, on the date the Company or such Borrower so notifies
the Administrative Agent, to the amount of the originally requested
currency for such Type of Committed Advances (determined in accordance with
Section 2.16); provided that such request may not be made by the Company or
------------ --------
such Borrower if the requested Type of Committed Advances is Eurocurrency
Rate Advances and the request by the Company or such Borrower is not given
to the Administrative Agent prior to 2:00 P.M. (London time) on the second
Business Day before the requested date of such Committed Borrowing; or
(z) only in the case of a Bank giving a notice described in Section
-------
2.02(b)(ii) above, request that such Committed Borrowing be made by the
-----------
Banks (other than the notifying Bank) and that no Committed Advance be made
by the notifying Bank in connection with such Committed Borrowing.
In the case of any notice given under clause (y) above, the Company or such
Borrower shall specify in such notice the amount and type of Committed Advance
to be made by each Bank in connection therewith. Any notice under this
subsection (b) shall be given no later than 2:00 P.M. (London time) two Business
Days before the date of the requested Committed Borrowing, may be given by
telephone and, if by telephone, shall be confirmed promptly in writing. If
neither the Company nor the applicable Borrower shall provide a timely notice as
contemplated in clause (x), (y) or (z) above in response to a notice by any Bank
under clause (i) or (ii) above, the applicable Notice of Committed Borrowing
shall be deemed withdrawn.
(c) Anything in subsection (a) above to the contrary notwithstanding, if
the Majority Banks shall, no later than 5:00 P.M. (Chicago time) three Business
Days before the date of any requested Committed Borrowing, continuation or
conversion consisting of Eurocurrency Rate Advances, or any continuation thereof
or conversion thereto, notify the Administrative Agent that the Eurocurrency
Rate for any Interest Period for such Eurocurrency Rate Advances, plus
additional interest, if any, payable under Section 2.08, will not adequately
------------
reflect the cost to such Majority Banks of making, funding, converting to or
continuing their respective Eurocurrency Rate Advances for such Committed
Borrowing for such Interest Period, then the Administrative Agent shall promptly
notify the Company, the applicable Borrower (if other than the Company) and the
Banks of such circumstances and upon receipt of such notice, the Company or such
Borrower may, without incurring an obligation to indemnify for losses, costs or
expenses under Section 2.02(d), by notice to the Administrative Agent (which
---------------
shall promptly notify each Bank), either:
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<PAGE>
(i) withdraw the applicable Notice of Committed Borrowing, in which
case the Committed Borrowing shall not occur;
(ii) withdraw the applicable Notice of Conversion or Continuation, in
which case the conversion or continuation of such Committed Borrowing shall
not occur; or
(iii) request that such Committed Borrowing, continuation or
conversion be made by the Banks in Dollars as a Committed Borrowing,
continuation or conversion, in which case the original Notice of Committed
Borrowing, or Notice of Conversion or Continuation shall be deemed to be a
Notice of Committed Borrowing, or Notice of Conversion or Continuation
which requests a Committed Borrowing, continuation or conversion in an
aggregate principal amount in Dollars equivalent, on the date the Company
or such Borrower so notifies the Administrative Agent, to the amount of the
originally-requested currency for such Committed Advances; provided that
--------
such request may not be made by the Company or such Borrower if the request
by the Company or such Borrower is not given to the Administrative Agent
prior to 2:00 P.M. (London time) on the second Business Day before the
requested date of such Committed Borrowing, continuation or conversion.
In the case of any notice given under clause (iii) above, the Company or such
Borrower shall specify in such notice the amount and Type of Committed Advances
to be made, continued or converted by the Banks in connection therewith. Any
notice under this subsection (c) shall be given no later than 2:00 P.M. (London
time) two Business Days before the date of the requested Committed Borrowing,
may be given by telephone, and, if by telephone, shall be confirmed promptly in
writing. From and after the date the Administrative Agent receives the notice
described in Section 2.02(c), the Banks' obligation to make Eurocurrency
---------------
Advances for any affected Interest Period shall be suspended until the Majority
Banks notify the Administrative Agent that the circumstances giving rise to such
notice no longer exist. If neither the Company nor the applicable Borrower
shall provide a timely notice as contemplated in clauses (i), (ii) or (iii)
above with respect to a Notice of Committed Borrowing, the applicable Notice of
Committed Borrowing shall be deemed withdrawn. If neither the Company nor the
applicable Borrower shall provide timely a notice as contemplated in clauses
(i), (ii) or (iii) above with respect to a Notice of Continuation or Conversion,
the Company or such applicable Borrower shall be deemed to have made the request
described in clause (iii).
(d) Each Notice of Committed Borrowing and Notice of Conversion or
Continuation may be revoked by the Company or, if other than the Company, the
applicable Borrower, by notice to the Administrative Agent without any liability
on the part of the Company or such Borrower at any time prior to (i) 10:00 A.M.
(Chicago time) on the date of a proposed Committed Borrowing, continuation or
conversion comprised of Base Rate Advances, (ii) 11:00 A.M. (London time) on the
second Business Day prior to the date of a proposed Committed Borrowing,
continuation or conversion comprised of Eurocurrency Rate Advances to be
denominated in Dollars, and (iii) 11:00 A.M. (London time) on the third Business
Day prior to the date of a proposed Committed Borrowing, continuation or
conversion comprised of Eurocurrency Rate Advances to be denominated in an
Alternative Currency. In the case of any Committed Borrowing, continuation or
conversion which the
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<PAGE>
related Notice of Committed Borrowing, or Notice of Conversion or Continuation,
specifies is to be comprised of Eurocurrency Rate Advances, unless the Company
or the applicable Borrower revokes such Notice of Committed Borrowing or Notice
of Conversion or Continuation in accordance with the preceding sentence and
except as otherwise provided in Sections 2.02(b) and (c), the Company or such
---------------- ---
Borrower shall indemnify each Bank against any loss, cost or expense reasonably
incurred by such Bank as a result of any failure to fulfill on or before the
date specified in such Notice of Borrowing or Notice of Conversion or
Continuation for such Committed Borrowing, conversion or continuation, the
applicable conditions set forth in Article III, including, without limitation,
-----------
any loss (excluding loss of anticipated profits), cost or expense reasonably
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund the Committed Advance to be made by such Bank as
part of such Committed Borrowing, conversion or continuation, when such
Committed Advance, as a result of such failure, is not made, continued or
converted on such date.
(e) Unless the Administrative Agent shall have received notice from a Bank
prior to the date of any Committed Borrowing that such Bank will not make
available to the Administrative Agent such Bank's Pro Rata Share of such
Committed Borrowing, the Administrative Agent may assume that such Bank has made
such Pro Rata Share available to the Administrative Agent on the date of such
Committed Borrowing in accordance with subsection (a) of this Section 2.02 and
------------
the Administrative Agent may, in reliance upon such assumption, make a
corresponding amount available to the applicable Borrower on such date. If and
to the extent that such Bank shall not have so made such Pro Rata Share
available to the Administrative Agent, such Bank and such Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to such Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of such Borrower, the
interest rate applicable at the time to Committed Advances comprising such
Committed Borrowing and (ii) in the case of such Bank, the Federal Funds Rate.
If such Bank shall repay such corresponding amount to the Administrative Agent,
such amount so repaid shall constitute such Bank's Committed Advance as part of
such Committed Borrowing for purposes of this Agreement.
(f) A Bank's failure to make the Committed Advance to be made by it as
part of any Committed Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Committed Advance on the date of such
Committed Borrowing. No Bank shall be responsible for the failure of any other
Bank to make the Committed Advance to be made by such other Bank on the date of
any Committed Borrowing.
SECTION 2.03. The Uncommitted Advances. (a) Each Bank severally agrees
------------------------
that any Borrower may make Uncommitted Borrowings in Dollars from time to time
on any Business Day during the period from the date hereof until 30 days before
the Termination Date in the manner set forth below; provided that, following the
--------
making of each Uncommitted Borrowing, the aggregate amount with respect to all
Borrowers of the Advances then outstanding shall not exceed the aggregate amount
of the Commitments of the Banks.
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<PAGE>
(i) A Borrower may request, and the Company may request for the
benefit of any Borrowing Subsidiary, an Uncommitted Borrowing to be made by
such Borrower under this Section 2.03 by delivering to the Administrative
------------
Agent, by telecopier not later than the applicable Request Deadline a
notice of an Uncommitted Borrowing (a "Notice of Uncommitted Borrowing"),
in substantially the form of Exhibit E-2 hereto, specifying therein (A) the
-----------
requested date of the proposed Uncommitted Borrowing, (B) the aggregate
amount of the proposed Uncommitted Borrowing, (C) that each Bank submitting
an offer shall quote an Uncommitted Borrowing Margin, or that each Bank
submitting an offer shall quote a fixed interest rate per annum without
reference to the Eurocurrency Rate, (D) maturity date for repayment of each
Uncommitted Advance to be made as part of such Uncommitted Borrowing (which
maturity date may not be earlier than seven (7) days, or later than 180
days after the date of the proposed Uncommitted Borrowing or later than the
Termination Date) and whether such Uncommitted Advance may be prepaid, and
if so, whether with or without penalty, (E) interest payment date or dates
relating thereto, (F) Borrower and (G) other material terms to be
applicable to such Uncommitted Borrowing. The Administrative Agent shall
promptly notify each Bank of its receipt of each such Notice of Uncommitted
Borrowing by sending each Bank a copy thereof. "Request Deadline" means
----------------
(x) in the case of a Fixed Rate Uncommitted Borrowing, 4:00 P.M. (Chicago
time) on the Business Day prior to the date of such proposed Uncommitted
Borrowing and (y) in the case of a Eurocurrency Rate Uncommitted Borrowing,
4:00 P.M. (Chicago time) four (4) Business Days prior to the date of such
proposed Uncommitted Borrowing.
(ii) Each Bank shall, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more Uncommitted Advances to such Borrower
as part of such proposed Uncommitted Borrowing at a rate or rates of
interest specified by such Bank, in its sole discretion, by notifying the
Administrative Agent not later than the applicable Quote Deadline of the
minimum amount (if any) and maximum amount of each Uncommitted Advance
which such Bank would be willing to make as part of such proposed
Uncommitted Borrowing (which amounts may, subject to the proviso to the
first sentence of this Section 2.03(a), exceed such Bank's Commitment, if
---------------
any), the Uncommitted Borrowing Margin or Margins to be applied in the
determination of the rate or rates of interest therefor (or, if the Notice
of Uncommitted Borrowing shall have requested that fixed rates per annum be
quoted, the fixed rate or rates per annum therefor) and such Bank's
Applicable Lending Office with respect to such Uncommitted Advance. If any
Bank shall elect not to make such an offer, such Bank shall so notify the
Administrative Agent before the applicable Quote Deadline, and such Bank
shall not be obligated to, and shall not, make any Uncommitted Advance as
part of such Uncommitted Borrowing; provided that the failure by any Bank
--------
to give such notice shall not cause such Bank to be obligated to make any
Uncommitted Advance as part of such proposed Uncommitted Borrowing. The
Administrative Agent shall promptly notify the Company and, if applicable,
the applicable Borrowing Subsidiary of each Bank's response
-21-
<PAGE>
pursuant to this paragraph (ii); provided, that if First Chicago shall
--------
elect to make an offer under this paragraph (ii), such offer shall be
delivered to the Company and, if applicable, the Borrowing Subsidiary not
later than one-half hour prior to the applicable Quote Deadline. Each
Borrower shall be entitled to assume that each quote of an Uncommitted
Borrowing Margin or a fixed rate per annum by a Bank includes, and such
Bank shall not be entitled to claim as additional interest or costs under
Section 2.08 or otherwise, any costs to such Bank in the nature of a
------------
reserve requirement, assessment or other charge in connection with the
Uncommitted Advance to which such quote relates, except that such Bank
shall be entitled to claim increased costs and additional compensation
under Section 2.12(a) and (b) and Section 2.19, but solely with respect to
--------------- --- ------------
the changes described in such provisions that occur after the date such
Uncommitted Advance is made. "Quote Deadline" means, (x) in the case of a
--------------
Fixed Rate Uncommitted Borrowing, 9:00 A.M. (Chicago time) on the date of
such proposed Uncommitted Borrowing and (y) in the case of a Eurocurrency
Rate Uncommitted Borrowing, 9:00 A.M. (Chicago time) three Business Days
prior to the date of such proposed Uncommitted Borrowing.
(iii) Such Borrower, or the Company on behalf of such Borrower,
shall, in turn, before the applicable Acceptance Deadline, either
(A) cancel, without incurring an obligation on the part of such
Borrower or the Company to indemnify for losses, costs or expenses
under Section 2.02(d), such Uncommitted Borrowing by giving the
---------------
Administrative Agent notice to that effect, in which case such
Uncommitted Borrowing shall not be made, or
(B) accept one or more of the offers made by any Bank or Banks
pursuant to paragraph (ii) above, in its sole discretion but in any
event in ascending order of the fixed rates of interest or Uncommitted
Borrowing Margins (as applicable) offered by all of the Banks
responding to such Notice of Uncommitted Borrowing, by giving notice
to the Administrative Agent of the relevant Banks and the respective
amounts of each Uncommitted Advance (each of which amounts shall be
equal to or greater than the minimum amount, and equal to or less than
the maximum amount, offered to be made by the respective Bank for such
Uncommitted Advance pursuant to Section 2.02(a)(ii) above) and reject
-------------------
any remaining offers made by Banks pursuant to such Section by giving
the Administrative Agent notice to that effect. The Company (either
for itself or on behalf of a Borrowing Subsidiary) may not accept
offers which, in the aggregate, exceed the requested Uncommitted
Borrowing specified in the applicable Notice of Uncommitted Borrowing.
If two or more Banks bid at the same Uncommitted
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<PAGE>
Borrowing Margin or fixed rate of interest, as the case may be, and
the amount of accepted offers is less than the aggregate amount of
such offers, the amount to be borrowed from such Banks as part of such
Uncommitted Borrowing shall be allocated pro rata on the basis of the
--- ----
maximum amount offered by each such Bank at such fixed rates or
Uncommitted Borrowing Margins in connection with such Uncommitted
Borrowing.
The Administrative Agent shall promptly notify the Banks of each notice it
receives pursuant to this paragraph (iii). "Acceptance Deadline" means,
--------------------
(x) in the case of an Uncommitted Borrowing to be denominated in Dollars,
10:00 A.M. (Chicago time) on the date of such proposed Uncommitted
Borrowing and (y) in the case of an Uncommitted Borrowing to be denominated
in an Alternative Currency, 4:00 P.M. (Chicago time) three Business Days
prior to the date of such proposed Uncommitted Borrowing.
(iv) If such Borrower accepts, or the Company accepts on such
Borrower's behalf, one or more of the offers made by any Bank or Banks
pursuant to Section 2.03(a)(iii)(B) above, the Administrative Agent shall
-----------------------
in turn promptly notify (A) each Bank that has made an offer pursuant to
Section 2.03(a)(ii) of the date and aggregate amount of such Uncommitted
-------------------
Borrowing and whether or not any offer or offers so made by such Bank have
been accepted by such Borrower, (B) each Bank that is to make an
Uncommitted Advance as a part of such Uncommitted Borrowing, of the amount
of each Uncommitted Advance to be made by such Bank as part of such
Uncommitted Borrowing, and (C) each Bank that is to make an Uncommitted
Advance as part of such Uncommitted Borrowing, upon receipt, that the
Administrative Agent has received forms of documents appearing to fulfill
the applicable conditions set forth in Article III. Each Bank that is to
-----------
make an Uncommitted Advance as part of such Uncommitted Borrowing shall,
before 1:00 P.M. (Chicago time) on the date of such Uncommitted Borrowing
specified in the notice received from the Administrative Agent pursuant to
clause (A) of the preceding sentence or any later time when such Bank shall
have received notice from the Administrative Agent pursuant to subclause
(C) of the preceding sentence, make available to the Administrative Agent
at the Administrative Agent's Domestic Lending Office, in federal or
otherwise immediately available funds, such Bank's portion of such
Uncommitted Borrowing. After the Administrative Agent receives such funds
and when the applicable conditions set forth in Article III have been
-----------
fulfilled, the Administrative Agent will make such funds available to the
applicable Borrower at the Administrative Agent's aforesaid address.
Promptly after (x) each Uncommitted Borrowing, the Administrative Agent
will notify each Bank of the amount and date of the Uncommitted Borrowing
and the maturity date thereof and the Available Commitment of each Bank
after giving effect to such Uncommitted Borrowing and (y) the prepayment of
any Uncommitted Borrowing by or on behalf of such Borrower, the
Administrative Agent will notify each Bank of the amount and date of each
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<PAGE>
such prepayment and the Available Commitment of each Bank after giving
effect thereto.
(b) Each Uncommitted Borrowing shall be in an aggregate amount of not less
than $25,000,000 or an integral multiple of $1,000,000 in excess thereof, or if
the requested currency for such Advance is not Dollars, the equivalent of such
amount (determined in accordance with Section 2.16) or multiple in the requested
------------
Alternative Currency.
(c) Within the limits and on the conditions set forth in this Section
-------
2.03, each Borrower may from time to time borrow under this Section 2.03, repay
- ---- ------------
pursuant to subsection (d) below, and reborrow under this Section 2.03; provided
------------ --------
that an Uncommitted Borrowing shall not be made within three Business Days of
any other Uncommitted Borrowing.
(d) Each Borrower shall repay to the Administrative Agent, for the account
of each Bank which has made an Uncommitted Advance to such Borrower, on the
maturity date of each such Uncommitted Advance (such maturity date being that
specified for repayment of such Uncommitted Advance in the related Notice of
Uncommitted Borrowing delivered pursuant to Section 2.03(a)(i) above) the then
------------------
unpaid principal amount of such Uncommitted Advance. A Borrower shall not have
the right to prepay any principal amount of any Uncommitted Advance without the
consent of the Bank making such Advance.
(e) Each Borrower shall pay interest on the unpaid principal amount of
each Uncommitted Advance made to it, from the date of such Uncommitted Advance
to the date the principal amount of such Uncommitted Advance is repaid in full,
at the rate of interest for such Uncommitted Advance specified by the Bank
making such Uncommitted Advance in its notice with respect thereto delivered
pursuant to Section 2.03(a)(ii) above, payable on the interest payment date or
-------------------
dates specified for such Uncommitted Advance in the related Notice of
Uncommitted Borrowing delivered pursuant to Section 2.03(a)(i) above.
------------------
(f) The Borrower of any Uncommitted Advance shall, promptly upon request
by the Bank making such Uncommitted Advance (either in the quote delivered by
such Bank pursuant to Section 2.03(a)(ii) or by notice to the Administrative
-------------------
Agent), execute and deliver to the Administrative Agent an Uncommitted Note
payable to the order of such Bank in a principal amount equal to the principal
amount of such Uncommitted Advance and otherwise on such terms as were agreed to
for such Uncommitted Advance in accordance with Section 2.03.
------------
SECTION 2.04. Facility Fee and Utilization Fee. (a) The Company and each
--------------------------------
Borrowing Subsidiary jointly and severally agree to pay to the Administrative
Agent, for the account of each Bank other than a Designated Bidder, a facility
fee ("Facility Fee") on the average daily Commitment of such Bank from the date
hereof until the Termination Date (or, if the Company has made the Term Loan
Election, until the Maturity Date), payable in arrears on the first Business Day
of each January, April, July and October during the term of such Bank's
Commitment, commencing January 4, 1999, and on the Termination Date (or, if the
Company has made the Term Loan Election, on the Maturity Date), at a rate per
annum equal to 0.06%.
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<PAGE>
(b) To the extent, and for so long as, (i) the average daily aggregate
outstanding principal amount of Advances at any time exceeds one-half of the
aggregate Commitments at such time, and (ii) Category 3 Status, Category 4
---
Status or Category 5 Status exists, the Company and each Borrowing Subsidiary,
jointly and severally, agree to pay to each Bank other than a Designated Bidder
a utilization fee (the "Utilization Fee") equal to 0.05% per annum of the
aggregate principal amount of such Bank's Advances at such time. The
Utilization Fee shall be payable on each date the Facility Fee is payable.
(c) Notwithstanding the foregoing, (i) any Facility Fee or Utilization Fee
accrued with respect to any Commitment of a Defaulting Bank during the period
prior to the time such Bank became a Defaulting Bank and unpaid at such time
shall not be payable by the Borrowers so long as such Bank shall be a Defaulting
Bank, except to the extent such Facility Fee or Utilization Fee was due and
payable prior to such time, and (ii) no Facility Fee or Utilization Fee shall
accrue on the Commitment of a Defaulting Bank so long as such Bank is a
Defaulting Bank.
SECTION 2.05. Reduction and Termination of the Commitments. (a) The
--------------------------------------------
Company shall have the right, upon at least four (4) days' notice to the
Administrative Agent to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Banks, provided that the aggregate
--------
amount of the Commitments of the Banks shall not be reduced to an amount which
is less than the aggregate principal amount of the Uncommitted Advances then
outstanding and provided, further, that each partial reduction shall be in an
-------- -------
aggregate amount of $10,000,000 or any integral multiple of $1,000,000 in excess
thereof.
(b) Provided that no Event of Default shall have occurred and be
continuing, the Company may at any time replace any Bank, in whole but not in
part, by (i) giving such Bank and the Administrative Agent not less than ten
(10) Business Days' prior notice thereof, which notice shall be irrevocable and
effective only when received by such Bank and the Administrative Agent and shall
specify the effective date of such replacement, and (ii) effecting an assignment
of all of the Bank's Commitment and Advances in accordance with Section 9.07.
------------
(c) On the Termination Date, if the Company has made the Term Loan
Election in accordance with Section 2.06(a) prior to such date, and from time to
---------------
time thereafter upon each prepayment of the Advances, the aggregate Commitments
of the Banks shall be automatically and permanently reduced on a pro rata basis
--- ----
by an amount equal to the amount by which (i) the aggregate Commitments
immediately prior to such reduction exceeds (ii) the aggregate unpaid principal
-------
amount of all Advances (determined in the case of any Advances denominated in an
Alternative Currency by reference to the Dollar Amount) outstanding at such
time.
SECTION 2.06. Payment; Conversion and Continuation. (a) On the
------------------------------------
Termination Date, the Borrowers shall, subject to the next succeeding sentence,
repay to the Administrative Agent for the ratable account of the Banks, the
entire unpaid principal amount of the Advances made by each Bank. The Company
may, upon not less than 15 days' notice to the Administrative Agent, elect (the
"Term Loan Election") to convert all of the Advances outstanding on the
------------------
Termination Date in effect at such time into a term loan
-25-
<PAGE>
which the Borrowers shall repay in full, together with all accrued interest,
ratably to the Banks on the Maturity Date, with any prepayment thereof subject
to Section 2.11; provided that the Term Loan Election may not be exercised if an
------------ --------
event shall have occurred and be continuing which constitutes an Event of
Default or which would constitute an Event of Default but for the requirement
that notice be given or time elapse or both on the date of notice of the Term
Loan Election or on the date on which the Term Loan Election is to be effected.
All Advances converted to a term loan pursuant to this Section 2.06(a) shall
continue to constitute Advances except that the Borrowers may not reborrow
pursuant to Section 2.01 after all or any portion of the Advances have been
prepaid pursuant to Section 2.10.
(b) Any Borrower may elect (x) to convert Base Rate Advances or any
portion thereof to Eurocurrency Rate Advances, (y) to convert Eurocurrency Rate
Advances or any portion thereof into Base Rate Advances, or (z) to continue any
Eurocurrency Rate Advance or any portion thereof for an additional Interest
Period; provided, however, that the aggregate amount of Base Rate Advances being
-------- -------
converted into Eurocurrency Rate Advances or of Eurocurrency Rate Advances being
continued shall, in the aggregate, equal $20,000,000 or an integral multiple of
$1,000,000 in excess thereof. The applicable Interest Period for the
continuation of any Eurocurrency Rate Advance shall commence on the day on which
the immediately-preceding Interest Period expires. Each conversion or
continuation shall be allocated among the Committed Advances of each Bank in
accordance with its Pro Rata Share of the amount so converted or continued.
Each such election shall be in substantially the form of Exhibit F (a "Notice of
---------
Conversion or Continuation") and shall be made by giving the Administrative
Agent notice by 10:00 a.m. (Chicago time) on the date of such conversion or
continuation, in the case of a conversion to a Base Rate Advance, giving the
Administrative Agent at least three Business Days' prior written notice thereof
in the event of a conversion to or continuation of a Eurocurrency Advance
specifying, in each case (i) whether a conversion or continuation is to take
place, (ii) what Advances are to be converted or continued, and if converted,
the Type of Advance to which it is to be converted, (iii) the amount of the
conversion or continuation, (iv) the Interest Period therefor and (v) in the
case of a conversion, the date of conversion (which date shall be a Business
Day). The Administrative Agent shall promptly notify each Bank of its receipt
of a Notice of Conversion or Continuation by sending such Bank a copy thereof.
If, within the time period required under the terms of this Section 2.06(b), the
---------------
Administrative Agent does not receive a Notice of Conversion or Continuation
from the applicable Borrower containing an election to continue or convert any
Advances for an additional Interest Period, then, upon the expiration of the
Interest Period therefor, such Advances will be automatically converted to Base
Rate Advances.
SECTION 2.07. Interest on Committed Advances. Each Borrower shall pay
------------------------------
interest on the unpaid principal amount of each Committed Advance made by each
Bank to it from the date of such Committed Advance until such principal amount
shall be paid in full, at the following rates per annum:
(a) Base Rate Advances. During such period as such Committed Advance is a
------------------
Base Rate Advance, a rate per annum equal at all times to the Base Rate in
effect from time to time, payable quarterly in arrears on the first Business Day
of each January, April, July and October, commencing January 4, 1999, and on the
Termination Date (or, if the Company has
-26-
<PAGE>
made the Term Loan Election, on the Maturity Date). The Administrative Agent
shall give notice to the Company and the applicable Borrower (if other than the
Company) and each Bank of any change in the Base Rate promptly after such change
occurs, but the Administrative Agent's failure to give such notice shall not
affect the obligation of the Company or such Borrower to pay interest at such
rate when it becomes due and payable.
(b) Eurocurrency Rate Advances. During such period as such Committed
--------------------------
Advance is a Eurocurrency Rate Advance, a rate per annum equal at all times
during each Interest Period for such Committed Advance to the sum of the
Eurocurrency Rate for such Interest Period plus the Applicable Margin, payable
on the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day which occurs during such
Interest Period every three months from the first day of such Interest Period
and on the date such Eurocurrency Rate Advance shall be converted or paid in
full.
(c) Default Interest. Notwithstanding the foregoing provisions of this
----------------
Section 2.07, any amount of principal and fees and, to the extent permitted by
- ------------
law, interest, that is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall bear interest, from the date on which such
amount is due until such amount is paid in full, payable in arrears on the date
such amount shall be paid in full and on demand, at a rate per annum equal at
all times to 1% per annum above (i) in the case of principal, the rate of
interest otherwise thereto from time to time in accordance with the terms
hereof, and (ii) in the case of interest and fees, the Base Rate in effect from
time to time.
SECTION 2.08. Additional Interest on Eurocurrency Rate Advances. Each
-------------------------------------------------
Borrower shall pay to each Bank other than Designated Bidders, so long as and to
the extent such Bank shall be required under regulations of the Board of
Governors of the Federal Reserve System (or any similar authority outside the
United States, in the case of Committed Advances in Alternative Currencies) to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or any other category of liabilities that
includes deposits by reference to which the interest rate on Eurocurrency Rate
Advances in the applicable Alternative Currency is determined) and such Bank's
performance under this Agreement (and other like agreements) shall have given
rise to additional reserve requirements for such Bank thereunder, additional
interest on the unpaid principal amount of each Committed Advance constituting a
Eurocurrency Rate Advance of such Bank made to such Borrower, from the date of
such Committed Advance until such principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the Eurocurrency Rate for the applicable Interest Period for
such Committed Advance from (ii) the rate obtained by dividing such Eurocurrency
Rate by a percentage equal to 100% minus the Eurocurrency Rate Reserve
Percentage of such Bank for such Interest Period, payable on each date on which
interest is payable on such Committed Advance. Such Bank shall, not later than
the last day of the applicable Interest Period, provide notice to the
Administrative Agent, the Company and, if other than the Company, the applicable
Borrower of any such additional interest arising in connection with such
Committed Advance. Such additional interest so notified on a timely basis by
any Bank shall be payable to the Administrative Agent for the account of such
Bank on the dates specified for payment of interest for such Committed Advance
in Section 2.07.
------------
SECTION 2.09. Interest Rate Determination. (a) Reserved.
---------------------------
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<PAGE>
(b) The Administrative Agent shall give prompt notice to the Company and
the applicable Borrower (if other than the Company) and each of the Banks (other
than the Designated Bidders) of the applicable interest rate determined by the
Administrative Agent for purposes of Section 2.07(a) or (b).
--------------- ---
(c) On the date on which the aggregate unpaid principal amount of
Eurocurrency Rate Advances comprising any Committed Borrowing shall be reduced,
by payment, prepayment or otherwise, to less than $20,000,000, such Advances
shall automatically convert into Base Rate Advances and such conversion shall be
subject to Section 2.11.
------------
SECTION 2.10. Prepayments. A Borrower may prepay, on any Business Day
-----------
following notice by 11:00 a.m. (Chicago time) on such Business Day to the
Administrative Agent (in the case of Base Rate Advances) and on three Business
Days' prior notice to the Administrative Agent (in the case of Eurocurrency Rate
Advances), each Committed Borrowing made to such Borrower, in whole or in part.
Such notice shall include the proposed date and aggregate principal amount of
such prepayment, and if such notice is given, such Borrower shall prepay such
principal amount, together with accrued interest to the date of such prepayment
on the principal amount prepaid. Any amounts payable, if any, pursuant to
Section 2.11 hereof in connection with any prepayment shall be paid on the date
- ------------
of such prepayment; provided, however, that each partial prepayment shall be in
-------- -------
an aggregate principal amount of not less than $10,000,000 or an integral
multiple of $1,000,000 in excess thereof. Subject to Sections 2.12 and 2.13,
------------- ----
each prepayment of a Committed Borrowing shall be made to each Bank in
accordance with such Bank's Pro Rata Share thereof. The Company shall, on the
first Business Day of each January, April, July and October, if the aggregate
outstanding principal Dollar Amount of all Advances, calculated by the
Administrative Agent on the seventh Business Day prior to such payment date and
reported to the Company by the fifth Business Day prior to such payment date,
exceeds (as the result of fluctuations in applicable foreign exchange rates or
otherwise) 105% of the then aggregate amount of the Banks' Commitments
(calculated as aforesaid), prepay a Committed Borrowing or Borrowings (in whole
or in part, and in any case as selected by the Company) in an aggregate Dollar
Amount (calculated as aforesaid, and rounded upward, if necessary, to the
nearest $1,000,000) equal to the excess of:
(i) the aggregate principal Dollar Amount (calculated as
aforesaid) of Advances outstanding, over
(ii) the then aggregate amount of the Banks' Commitments
(calculated as aforesaid).
Each prepayment of any Committed Borrowing (in whole or in part) made pursuant
to this Section 2.10 shall be without premium or penalty, but shall be subject
------------
to the provisions of Section 2.11. Any mandatory prepayment of a Committed
------------
Borrowing shall be made to the Administrative Agent for the account of each Bank
based on such Bank's Pro Rata Share of such Committed Borrowing and shall
include accrued and unpaid interest on the principal amount prepaid and all
amounts owing under Section 2.11.
------------
-28-
<PAGE>
SECTION 2.11. Funding Indemnification. If any payment of principal of
-----------------------
any Advance (other than a Base Rate Advance) is made other than on the last day
of an Interest Period for such Advance, as a result of acceleration of the
maturity of the Advances pursuant to Section 6.01 or for any other reason, or if
------------
any Eurocurrency Rate Advance is converted to a Base Rate Advance pursuant to
Section 2.13(b) on any day other than the last day of an Interest Period for
- ---------------
such Eurocurrency Rate Advance, the applicable Borrower shall, upon demand by
any Bank (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank any amounts required to
compensate such Bank for any additional losses, costs or expenses which it may
reasonably incur as a result of such payment or conversion, including without
limitation any loss (excluding loss of anticipated profits), cost or expense
reasonably incurred as a result of the liquidation or re-employment of deposits
or other funds acquired by such Bank to fund or maintain such Advance.
SECTION 2.12. Increased Costs and Reduced Return. (a) Subject to the
----------------------------------
limitation in Section 2.03(a)(ii), if, due to either (i) the introduction of or
-------------------
any change (other than any change by way of imposition or increase of reserve
requirements, in the case of Eurocurrency Rate Advances, included in the
Eurocurrency Rate Reserve Percentage), after the date hereof, in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) issued after the date hereof, there
shall be any increase in the cost to any Bank of agreeing to make, making,
funding or maintaining Eurocurrency Rate Advances, by an amount reasonably
deemed by such Bank to be material, then from time to time, within ten days
after demand by such Bank (with a copy of such demand to the Administrative
Agent), such Borrower shall pay to the Administrative Agent for the account of
such Bank additional amounts sufficient to compensate such Bank for such
increased cost; provided that no Borrower shall be obligated to pay any such
--------
amount to the extent such amount results from a change, guideline or request
which took effect more than 90 days prior to the date of such demand.
(b) Subject to the limitation in Section 2.03(a)(ii), if any Bank shall
-------------------
have determined that the adoption, after the date hereof, of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive issued after the date hereof regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's capital as a consequence of its obligations
hereunder to a level below that which such Bank could have achieved but for such
adoption, change or compliance by an amount reasonably deemed by such Bank to be
material, then from time to time, within ten days after demand by such Bank
(with a copy of such demand to the Administrative Agent), the Company shall pay
to the Administrative Agent for the account of such Bank such additional amount
or amounts as will compensate such Bank, in light of such circumstances, to the
extent such Bank reasonably determines such reduction to be allocable to the
existence of such Bank's Commitment; provided that no Borrower shall be
--------
obligated to pay any such amount to the extent such amount results from an
adoption, change, request or
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<PAGE>
directive which took effect or was issued more than 90 days prior to the date of
such demand.
(c) Each Bank will promptly notify the Administrative Agent and the
Company of any event of which it has knowledge, occurring after the date hereof,
which would entitle such Bank to compensation pursuant to this Section 2.12. A
------------
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall create a
rebuttable presumption as to the correctness of such additional amount or
amounts. Each Bank agrees not to request any payment under this Section 2.12
------------
unless similar requests are then generally being made by such Bank of other
borrowers similarly situated, and to use a reasonable basis for calculating
amounts allocable to its Commitment hereunder.
SECTION 2.13. Illegality. (a) If any Bank shall determine (which
----------
determination shall be rebuttably presumed correct as to all parties) at any
time that the making or continuance of its Eurocurrency Rate Advances has become
unlawful because of the introduction of or any change in or in the
interpretation of any law or regulation or because of the assertion of
unlawfulness by any central bank or other governmental authority, then, in any
such event, such Bank shall give prompt notice (by telephone confirmed in
writing) to the Administrative Agent of such determination (which notice the
Administrative Agent shall promptly transmit to each Borrower and the other
Banks).
(b) Upon the giving of the notice to the Company referred to in subsection
(a) above, if the affected Advances are then outstanding, each Borrower shall,
upon at least one Business Day's written notice to the Administrative Agent and
the affected Bank, or if permitted by applicable law no later than the date
permitted thereby, in such Borrower's sole discretion, either (i) prepay the
principal amount of all outstanding Advances of such Bank to which such notice
relates, together with accrued interest thereon to the date of payment, or (ii)
convert each such Advance into a Base Rate Advance denominated in Dollars and,
in each case, be obligated to reimburse the Banks in respect thereof pursuant to
Section 2.11 hereof. If more than one Bank gives notice pursuant to Section
- ------------ -------
2.13(a) at any time, then all outstanding Advances of the affected Type or
- -------
currency of such Banks must be treated in the same manner by the Borrowers
pursuant to this subsection 2.13(b) and the Banks' obligations to make, convert
------------------
or continue Eurocurrency Rate Advances shall be suspended until the
Administrative Agent notifies the Borrowers that the circumstances causing such
suspension no longer exist.
SECTION 2.14. Payments and Computations. (a) The Company and each
-------------------------
Borrowing Subsidiary shall make each payment hereunder and under the Notes
without set-off, counterclaim or other deduction by causing a wire transfer of
immediately-available funds to be initiated to the Administrative Agent in an
amount equal to such payment not later than 12:00 noon (Chicago time) on the day
when due from the Company or such Borrowing Subsidiary. The Administrative
Agent will promptly thereafter cause to be distributed like funds relating to
the payment of principal or interest or fees ratably (other than amounts payable
pursuant to Sections 2.03, 2.05(b), 2.08, 2.11, 2.12, 2.15, 2.19 or 2.20) to the
------------- ------- ---- ---- ---- ---- ---- ----
Banks for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to any Bank to such
Bank for the account of its Applicable Lending Office, in each case to be
applied in accordance with the
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<PAGE>
terms of this Agreement. All such payments shall be made in Dollars, except that
payments of principal of and interest on Borrowings in an Alternative Currency
shall be made in such Alternative Currency or, where such Alternative Currency
has converted to the Euro, in the Euro; provided that if the applicable Borrower
fails to make any payment of principal or interest with respect to any Borrowing
in an Alternative Currency (including the Euro) on the due date thereof because
such Alternative Currency has ceased to be freely transferable and convertible
into Dollars in the international currency and exchange markets, such failure
shall not constitute an Event of Default or an event which would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both, if such Borrower pays the equivalent in Dollars of such payment on the due
date thereof. In addition to any such Dollar payment, such Borrower agrees to
pay to each affected Bank an indemnity payment within five Business Days after
such Borrower shall have received a certificate from such Bank setting forth in
reasonable detail the amount of any loss, cost, damage or expense suffered by
such Bank as a consequence of such inability to make any such payment in such
Alternative Currency on the due date thereof. Each Bank agrees to use reasonable
efforts to avoid or minimize all such loss, cost, damage or expense.
(b) All computations of interest based on the Base Rate, or the
Eurocurrency Rate applicable to Borrowings denominated in Sterling, shall be
made by the Administrative Agent on the basis of a year of 365 or 366 days, as
the case may be, and all computations of interest based on the Eurocurrency Rate
(as to all other currencies) or the Federal Funds Rate, all computations of
interest pursuant to Section 2.08 and all computations of the Facility Fee and
------------
the Utilization Fee shall be made by the Administrative Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or fees are payable. Each determination by the Administrative Agent
(or, in the case of Section 2.08, by a Bank) of an interest rate or fee owing
------------
hereunder shall create a rebuttable presumption as to the correctness of such
determination.
(c) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fee, as the case may be;
provided, however, if such extension would cause payment of interest on or
- -------- -------
principal of Eurocurrency Rate Advances to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
(d) Unless the Administrative Agent shall have received notice from the
applicable Borrower prior to the date on which any payment is due to the Banks
hereunder that such Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent
such Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds Rate.
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<PAGE>
SECTION 2.15. Sharing of Payments, Etc. If any Bank shall obtain any
-------------------------
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Committed Advances made by it (other
than pursuant to Sections 2.08, 2.11, 2.12, 2.13(b), 2.19 or 2.20) in excess of
------------- ---- ---- ------- ---- ----
its ratable share of payments on account of the Committed Advances obtained by
all the Banks, such Bank shall forthwith purchase from the other Banks such
participations in the Committed Advances made by them as shall be necessary to
cause such purchasing Bank to share the excess payment ratably with each of
them, provided, however, that if all or any portion of such excess payment is
-------- -------
thereafter recovered from such purchasing Bank, such purchase from each Bank
shall be rescinded and such Bank shall repay to the purchasing Bank the purchase
price to the extent of such recovery together with an amount equal to such
Bank's ratable share (according to the proportion of (i) the amount of such
Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. Each Borrower
agrees that any Bank so purchasing a participation from another Bank with
respect to Advances made to such Borrower pursuant to this Section 2.15 may, to
------------
the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Bank were the direct creditor of such Borrower in the amount of such
participation.
SECTION 2.16. Currency Equivalents. (a) For purposes of this Article
-------------------- -------
II, (i) the equivalent in Dollars of any Alternative Currency shall be
- --
determined by using the arithmetical mean of the buy and sell spot rates at
which First Chicago's principal office in London exchanges Dollars for such
Alternative Currency in the interbank market in London at 11:00 A.M. (London
time) two Business Days prior to the date on which such equivalent is to be
determined, (ii) the equivalent in any Alternative Currency of any other
Alternative Currency shall be determined by using the arithmetical mean of the
buy and sell spot rates at which First Chicago's principal office in London
exchanges such Alternative Currency for the equivalent in such other Alternative
Currency in London at 11:00 A.M. (London time) two Business Days prior to the
date on which such equivalent is to be determined, and (iii) the equivalent in
any Alternative Currency of Dollars shall be determined by using the
arithmetical mean of the buy and sell spot rates at which First Chicago's
principal office in London exchanges such Alternative Currency for Dollars in
London at 11:00 A.M. (London time) two Business Days prior to the date on which
such equivalent is to be determined. The equivalent in Dollars of each
Eurocurrency Rate Advance made in an Alternative Currency shall be recalculated
hereunder on each day that it is necessary to determine the unused portion of
each Bank's Commitment, or any or all of the Advances on such date.
(b) If for the purpose of obtaining a judgment in any court with respect
to any obligation of a Borrower hereunder, it shall become necessary for the
Administrative Agent or any Bank entitled to receive payments hereunder to
convert any amount into a currency other than the currency denominated hereunder
for such obligation, then such conversion shall be made on the basis of rates
(the "Exchange Rates") determined in the manner described in subsection (a)
above (or, if the applicable currency to be converted is not at the time of
conversion available in the interbank market in London, then in such other
interbank market as the Administrative Agent shall determine to have adequate
availability of such currency) and the date with respect to which such an
equivalent is to be determined shall be
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<PAGE>
the first Business Day preceding the date on which final judgment is entered. If
pursuant to any such judgment conversion is to be made with respect to a date
other than the date referred to above, and there shall occur a change between
the Exchange Rates in effect on such date and the Exchange Rates in effect on
the date of payment, (i) the applicable Borrower agrees to pay such additional
amounts (if any) as may be necessary to ensure that the amount paid is the
amount in such other currency which, when converted at the Exchange Rates as in
effect on the date of payment or distribution, is the amount then due hereunder
in the relevant currency and (ii) such Borrower shall not be required to pay any
amount in excess of the amount determined to be payable in connection with such
obligation, calculated on the basis of the Exchange Rates in effect on the first
Business Day preceding the date on which final judgment is entered. Any amount
due from a Borrower under this subsection (b) shall be due as a separate debt
and is not to be affected by or merged into any judgment being obtained for any
other sums due hereunder.
SECTION 2.17. Borrowing Subsidiaries. The Company may at any time or
----------------------
from time to time add as a party to this Agreement any Subsidiary of the Company
to be a "Borrowing Subsidiary" hereunder by causing such Subsidiary to execute
and deliver a duly completed Assumption Letter to the Administrative Agent, with
the written consent of the Company at the foot thereof. Upon such execution,
delivery and consent such Subsidiary shall for all purposes be a party hereto as
a Borrowing Subsidiary as fully as if it had executed and delivered this
Agreement. So long as the principal of and interest on all Advances made to any
Borrowing Subsidiary under this Agreement shall have been paid in full and all
other obligations of such Borrowing Subsidiary shall have been fully performed,
such Borrowing Subsidiary may, by not less than five Business Days' prior notice
to the Administrative Agent (which shall promptly notify the Banks thereof),
terminate its status as a "Borrowing Subsidiary."
SECTION 2.18. Reserved.
--------
SECTION 2.19. Taxes. (a) Any and all payments by a Borrower hereunder
-----
or under the Notes shall be made in accordance with Section 2.14, free and clear
------------
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank and the Administrative Agent, taxes
---------
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Bank or the Administrative Agent is organized or
any political subdivision thereof and taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If any Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Bank or the Administrative Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
-------
2.19) such Bank or the Administrative Agent (as the case may be) receives an
- ----
amount equal to the sum it would have received had no deductions been made, (ii)
such Borrower shall make such deductions and (iii) such Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
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<PAGE>
(b) In addition, each Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Taxes").
(c) Each Borrower will indemnify each Bank and the Administrative Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.19) paid by such Bank or the Administrative Agent and any liability
- ------------
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted; provided, that the Borrowers shall have no obligation under this
--------
subsection (c) to indemnify any Bank or the Administrative Agent if a Borrower
shall have performed its obligations under subsection (a) and (b), thereby
providing such Bank or the Administrative Agent (as the case may be) the
wherewithal to make payment, or demonstrate that payment has been made, of any
such Taxes or Other Taxes, and such Bank or the Administrative Agent (as the
case may be) shall not have effected such payment or made such demonstration of
payment on a timely basis to the relevant taxing authorities. This
indemnification shall be made to the Administrative Agent for the account of
such Bank or the Administrative Agent (as the case may be) within 30 days from
the date such Bank or the Administrative Agent makes written demand therefor
(with a copy, in the case of a demand by a Bank, of such demand to the
Administrative Agent).
(d) Notwithstanding the foregoing, unless, prior to the date of the
initial Committed Borrowing (in the case of a Bank listed on Schedule I hereto),
----------
and prior to the effective date of the Assignment and Acceptance by which it
became a Bank (in the case of bank that became a Bank pursuant to such
Assignment and Acceptance), and in each case from time to time thereafter, if
requested by any Borrower,
(i) each Bank organized under the laws of a jurisdiction outside the
United States shall have provided the Company with the forms prescribed by
the Internal Revenue Service of the United States certifying as to such
Bank's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to such Bank
hereunder or other documents satisfactory to the Company which shall
indicate that all payments to be made to such Bank hereunder are not
subject to United States withholding tax or are subject to such taxes at a
rate reduced to zero by an applicable tax treaty, neither the Company nor
any other Borrower shall have any obligation under the last sentence of
Section 2.19(a) to make any payments to or for the benefit of such Bank in
---------------
excess of the amounts otherwise payable under this Agreement, and
(ii) each Bank organized under the laws of a jurisdiction outside the
jurisdiction where any Borrowing Subsidiary is incorporated shall have
taken all steps prescribed by the applicable governmental authority in the
jurisdiction where such Borrowing Subsidiary is located so that such Bank
is exempt from applicable withholding taxes with respect to all payments to
be
-34-
<PAGE>
made to such Bank hereunder or so that all payments to be made to such
Bank hereunder are not subject to applicable withholding taxes or are
subject to such taxes at a rate reduced to zero by an applicable tax
treaty, neither the Company nor any other Borrower shall have any
obligation under the last sentence of Section 2.19(a) to make any payments
---------------
to or for the benefit of such Bank in excess of the amounts otherwise
payable under this Agreement; provided, however, that the applicable
-------- -------
Borrower shall make the payments required by the last sentence of Section
-------
2.19(a) if the obligation to withhold arises from a change in applicable
-------
law after the date hereof (or, with respect to payments to a new Applicable
Lending Office designated pursuant to Section 2.21, after the date such
------------
Bank designates such new Applicable Lending Office).
Unless the applicable Borrower has received forms or other documents, including
Form 1001, Form 4224 or any other applicable tax forms from the United States or
any other applicable jurisdiction, such forms to be satisfactory to the Company,
indicating that payments hereunder are not subject to any withholding tax or are
subject to such tax at a rate reduced to zero by an applicable tax treaty, the
applicable Borrower shall withhold taxes from such payments at the applicable
statutory rate in the case of payments to or for any Bank organized under the
laws of a jurisdiction outside the United States (or in the case of a Borrowing
Subsidiary incorporated outside the United States, any Bank organized under the
laws outside of the jurisdiction where such Borrowing Subsidiary is
incorporated). Should a Bank become subject to Taxes because of its failure or
inability to deliver a form required hereunder, the Company shall take such
steps not requiring the expenditure of money as the Bank shall reasonably
request to assist the Bank to recover such Taxes.
SECTION 2.20. Defaulting Banks. (a) If at any time (i) any Bank shall
----------------
be a Defaulting Bank, (ii) such Defaulting Bank shall owe a Defaulted Advance to
the Borrower and (iii) the Borrower shall be required to make any payment
hereunder or under any Note to or for the account of such Defaulting Bank, then
the Borrower may, so long as no Event of Default shall have occurred and be
continuing at such time and to the fullest extent permitted by applicable law,
set off and otherwise apply the amount owed by the Borrower to or for the
account of such Defaulting Bank against the obligation of such Defaulting Bank
to make such Defaulted Advance. If the Borrower shall so set off and otherwise
apply the amount owed by the Borrower to or for the account of such Defaulting
Bank against the obligation of such Defaulting Bank to make any such Defaulted
Advance on any date, the amount so set off and otherwise applied by the Borrower
shall constitute for all purposes of this Agreement and the Notes an Advance by
such Defaulting Bank made on the date of such setoff. Such Advance shall be a
Base Rate Advance and shall be considered, for all purposes of this Agreement,
to comprise part of the Borrowing in connection with which such Defaulted
Advance was originally required to have been made pursuant to Section 2.01 or
------------
Section 2.03(a), as the case may be, even if the other Advances comprising such
- ---------------
Borrowing shall be Eurocurrency Rate Advances on the date such Advance is deemed
to be made pursuant to this Section 2.20(a). The Borrower shall notify the
---------------
Administrative Agent at any time the Borrower makes a setoff under this Section
-------
2.20(a) and shall specify in such notice (A) the name of the Defaulting Bank and
- -------
the Defaulted Advance required to be made by such Defaulting Bank and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this Section 2.20(a). Any part of such payment otherwise
---------------
-35-
<PAGE>
required to be made by the Borrower to or for the account of such Defaulting
Bank that is paid by the Borrower, after giving effect to the amount set off and
otherwise applied by the Borrower pursuant to this Section 2.20(a), shall be
---------------
applied by the Administrative Agent as specified in Section 2.20(b) or 2.20(c).
--------------- -------
(b) If at any time (i) any Bank shall be a Defaulting Bank, (ii) such
Defaulting Bank shall owe a Defaulted Amount to the Administrative Agent or any
of the other Banks and (iii) the Borrower shall make any payment hereunder or
under any Note to the Administrative Agent for the account of such Defaulting
Bank, then the Administrative Agent may, on its behalf or on behalf of such
other Banks and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Bank to the payment of each such Defaulted Amount to the extent required to pay
such Defaulted Amount. If the Administrative Agent shall so apply any such
amount to the payment of any such Defaulted Amount on any date, the amount so
applied by the Administrative Agent shall constitute for all purposes of this
Agreement and the Notes payment to such extent of such Defaulted Amount on such
date. Any such amount so applied by the Administrative Agent shall be retained
by the Administrative Agent or distributed by the Administrative Agent to such
other Banks, ratably in accordance with their respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent and such
other Banks and, if the amount of such payment made by the Borrower shall at any
time be insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent and the other Banks, in the following order of priority:
(A) first, to the Administrative Agent for any Defaulted Amounts
-----
owing to the Administrative Agent (solely in its capacity as Administrative
Agent) at such time; and
(B) second, to the other Banks for any Defaulted Amounts owing to the
------
other Banks (solely in their capacity as Banks) at such time, ratably in
accordance with such respective Defaulted Amounts owing to each other Bank
(solely in its capacity as a Bank) at such time.
Any part of such payment made by the Borrower for the account of such Defaulting
Bank remaining, after giving effect to the amount applied by the Administrative
Agent pursuant to this Section 2.20(b), shall be applied by the Administrative
---------------
Agent as specified in Section 2.20(c).
---------------
(c) If at any time, (i) any Bank shall be a Defaulting Bank, (ii) such
Defaulting Bank shall not owe a Defaulted Advance or a Defaulted Amount and
(iii) the Borrower, the Administrative Agent or any other Bank shall be required
to pay or to distribute any amount hereunder or under any Note to or for the
account of such Defaulting Bank, then the Borrower or such other Bank shall pay
such amount to the Administrative Agent to be held by the Administrative Agent,
to the fullest extent permitted by applicable law, in escrow or the
Administrative Agent shall, to the fullest extent permitted by applicable law,
hold in escrow such amount otherwise held by it. Any funds held by the
Administrative Agent in escrow under this Section 2.20(c) shall be deposited by
---------------
the Administrative Agent in an account with First Chicago, in the name and under
the control of the Administrative Agent, but subject to the provisions of this
Section 2.20(c). The terms applicable to such account,
- ---------------
-36-
<PAGE>
including the rate of interest payable with respect to the credit balance of
such account from time to time, shall be First Chicago's standard terms
applicable to escrow accounts maintained with it. Any interest credited to such
account from time to time shall be held by the Administrative Agent in escrow
under, and applied by the Administrative Agent from time to time in accordance
with the provisions of, this Section 2.20(c). The Administrative Agent shall, to
---------------
the fullest extent permitted by applicable law, apply all funds so held in
escrow from time to time to the extent necessary to make any Advances required
to be made by such Defaulting Bank and to pay any amount payable by such
Defaulting Bank hereunder to the Administrative Agent or any other Bank, as and
when such Advances or such amounts are required to be made or paid and, if the
amount so held in escrow shall any time be insufficient to make and pay all such
Advances and all such amounts required to be made or paid at such time, in the
following order of priority:
(A) first, to the Administrative Agent for any amounts due and
-----
payable by such Defaulting Bank to the Administrative Agent hereunder
(solely in its capacity as Administrative Agent) at such time;
(B) second, to the other Banks for any amounts due and payable by
------
such Defaulting Bank to the other Banks hereunder (solely in their capacity
as Banks) at such time, ratably in accordance with such respective amounts
due and payable to each other Bank (solely in its capacity as Bank) at such
time; and
(C) third, to the Borrower for any Advances required to be made by
-----
such Defaulting Bank pursuant to the Commitment of such Defaulting Bank at
such time.
If such Defaulting Bank shall, at any time, cease to be a Defaulting Bank,
any funds held by the Administrative Agent in escrow at such time with respect
to such Defaulting Bank shall be distributed by the Administrative Agent to such
Defaulting Bank and applied by such Defaulting Bank to the amounts owing to such
Defaulting Bank at such time under this Agreement in accordance with the terms
of this Agreement.
(d) The rights and remedies against a Defaulting Bank under this Section
-------
2.20 are in addition to other rights and remedies that the Borrower may have
- ----
against such Defaulting Bank with respect to any Defaulted Advance and that the
Administrative Agent or any other Bank may have against such Defaulting Bank
with respect to any Defaulted Amount.
SECTION 2.21. Mitigation. Any Bank claiming any additional amounts
----------
payable pursuant to Sections 2.12 or 2.19 or subject to Section 2.13 shall use
------------- ---- ------------
its reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to change the jurisdiction of its Applicable Lending
Office if the making of such a change would avoid the need for, or reduce the
amount of, any such additional amounts which may thereafter accrue under
Sections 2.12 or 2.19 or would avoid the unavailability of Eurocurrency Rate
- ------------- ----
Advances under Section 2.13 and would not, in any such case, in the judgment of
------------
such Bank, be otherwise disadvantageous to such Bank.
SECTION 2.22. European Economic and Monetary Union. (a) Advances After
------------------------------------ --------------
the Euro Implementation Date. If any Advance made (or to be made) on or after
- ----------------------------
the Euro
-37-
<PAGE>
Implementation Date is capable of being made in either the Euro or in a National
Currency Unit, then the Company shall, by notice to the Administrative Agent,
select whether such Advance shall be made in the Euro or in such National
Currency Unit.
(b) Rounding and Other Consequential Changes. With effect from and after
----------------------------------------
the Euro Implementation Date, without prejudice to any method of conversion or
rounding prescribed by any legislative measures of the Council of the European
Union, each reference in this Agreement to a fixed amount or to fixed amounts in
a National Currency Unit to be paid to or by the Administrative Agent shall,
notwithstanding any other provision of this Agreement and to the extent the Euro
has replaced such National Currency Unit, be replaced by a reference to such
comparable and convenient fixed amount or fixed amounts of the Euro as the
Administrative Agent may from time to time reasonably specify.
SECTION 2.23. Extension of Termination Date. (a) The Company may, by
-----------------------------
written notice to the Administrative Agent (each such notice being an "Extension
Request") given no more than 59 days nor less than 30 days prior to each
anniversary date of this Agreement, extend the then applicable Termination Date
to a date 364 days after the then- applicable Termination Date; provided,
however, that such extension shall be effective only with respect to a Bank
which, by a written notice (a "Continuation Notice") to the Company and the
Administrative Agent given no more than 30 days and no less than 15 days before
such anniversary date, consents to such extension (each Bank giving a
Continuation Notice thereafter being referred to as a "Continuing Bank" and each
Bank other than a Continuing Bank being a "Non-Extending Bank"); provided
further, however, that the Borrowers shall not have made the Term Loan Election
for Advances outstanding on such Termination Date prior to such time; provided
further, however, that such extension shall be effective only if the aggregate
Commitments of the Continuing Banks are not less than 51% of the aggregate
Commitments in effect at the date the Company gives the applicable Extension
Request. Within five Business Days after the Administrative Agent receives an
Extension Request it shall notify each Bank thereof. If any Bank fails to
notify the Administrative Agent in writing of its consent to, or refusal of, any
such Extension Request at least 15 days prior to such anniversary date, such
Bank shall be deemed to be a Non-Extending Bank with respect to such Extension
Request. The Commitment of each Non-Extending Bank shall terminate on the
Termination Date in effect for such Non-Extending Bank immediately prior to such
Extension Request, and on such Termination Date the Company shall pay the
Administrative Agent, for the account of such Non-Extending Banks, an amount
equal to such Non-Extending Banks' Advances plus accrued but unpaid interest and
fees thereon; provided that the Company has not replaced such Non-Extending
--------
Banks pursuant to Section 2.23(b) below.
---------------
(b) A Non-Extending Bank shall be obligated, at the request of the Company
and subject to the Non-Extending Bank receiving payment in full of (i) the
principal amount of all Advances owing to such Non-Extending Bank, and (ii) all
accrued interest and fees owing to such Non-Extending Bank and all other amounts
owing to such Non-Extending Bank hereunder, to assign without recourse,
representation, warranty (other than good title to its Advances) or expense to
such Non-Extending Bank, at any time prior to the Termination Date applicable to
such Non-Extending Bank, all of its rights (other than rights that would survive
the termination of this Agreement pursuant to Section 9.13) and obligations
------------
hereunder to one or more Eligible Assignees (the "Replacement Banks") nominated
by the
-38-
<PAGE>
Company and willing to take the place of such Non-Extending Bank; provided that
--------
each such Replacement Bank satisfies all the requirements of this Agreement and
the Administrative Agent shall have consented to such assignment, which consent
shall not be unreasonably withheld. Each such Replacement Bank shall become a
Continuing Bank hereunder in replacement for the Non-Extending Bank.
(c) If the Termination Date shall have been extended in respect of
Continuing Banks in accordance with Section 2.23(a), any notice of borrowing
---------------
specifying a date for the borrowing of an Advance occurring after the
Termination Date applicable to a Non-Extending Bank or requesting an Interest
Period extending beyond such date shall (a) have no effect in respect of such
Non-Extending Bank and (b) not specify a requested aggregate principal amount
exceeding the Aggregate Commitment excluding the Commitments of all such Non-
Extending Banks.
(d) If the Termination Date shall have been extended in respect of
Continuing Banks in accordance with this Section 2.23, all references herein to
------------
the "Termination Date" shall, with respect to all parties hereto other than Non-
Extending Banks, refer to the Termination Date as so extended.
SECTION 2.24. Increase of Aggregate Commitments. (a) The Company may
---------------------------------
from time to time, on the terms set forth below, request that the aggregate
amount of the Commitments be increased to an amount which does not exceed
$400,000,000; provided, however, that an increase in the Commitments hereunder
-------- -------
may only be made at a time when (i) no Event of Default or event which, with
notice or the passage of time or both, would constitute an Event of Default
shall have occurred and be continuing or would result therefrom and (ii) the
Public Debt Rating from S&P is at least BBB- and the Public Debt Rating from
Moody's is at least Baa3.
(b) If the Company requests an increase in the aggregate Commitments:
(i) each of the Banks shall be given the opportunity to participate
in the increased aggregate Commitments (x) initially, ratably in accordance
with its Pro Rata Share, and (y) next, to the extent that the requested
increase in the aggregate Commitments is not fulfilled pursuant to the
preceding clause (x) and subject to Section 2.24(d) below, in such
---------------
additional amounts as any Bank and the Company agree, and
(ii) if, after each Bank has been afforded an opportunity to increase
its Commitment to satisfy the Company's requested increase, the aggregate
increase in the Commitments offered by the Banks is less than the Company's
requested increase, then the Company shall consult with the Administrative
Agent as to the number, identity and requested Commitments of additional
financial institutions which the Company may, with the written consent of
the Administrative Agent (which consent shall not be unreasonably withheld)
invite to participate in the aggregate Commitments.
(c) No Bank shall have any obligation to increase its Commitment pursuant
to a request by the Company hereunder. No Bank shall be deemed to have approved
an increase in its Commitment unless such approval is in writing. Failure on
the part of any Bank to
-39-
<PAGE>
respond to a request by the Company within 30 days of such Bank's receipt of
notice of such request hereunder shall be deemed a rejection of such request.
(d) In no event shall any Bank's Commitment, after giving effect to an
increase in its Commitment hereunder, exceed 25% of the aggregate Commitments
under this Agreement.
(e) If the Company and one or more of the Banks (or other financial
institutions) shall agree upon such an increase in the aggregate Commitments
hereunder (i) the Company, the Administrative Agent and each Bank or other
financial institution increasing its Commitment or extending a new Commitment
shall enter into a consent in substantially the form of Exhibit G hereto and
---------
(ii) the Company shall furnish new Notes to each financial institution that is
extending a new Commitment and to each Bank which is increasing its Commitment.
Notwithstanding anything else to the contrary contained in Section 2.06(b), if
---------------
an increase in the aggregate Commitments pursuant to this Section 2.24 occurs
------------
during an Interest Period for an outstanding Committed Borrowing, (a) such
Committed Borrowing may not be continued or converted pursuant to Section
-------
2.06(b) and (b) such Committed Borrowing shall be due and payable at the end of
- -------
the current Interest Period applicable thereto, without prejudice to the
Company's right, subject to the terms and conditions of this Agreement, to
reborrow all or any portion of the amount of such Committed Borrowing.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and
----------------------------------------------------------
2.03. Sections 2.01 and 2.03 shall become effective on the first day (the
- ---- ------------- ----
"Effective Date") on which all of the following conditions precedent have been
satisfied:
(a) The Administrative Agent shall have received the following, in
form and substance reasonably satisfactory to the Administrative Agent and
(except for the Committed Notes) in sufficient copies for the Banks:
(i) This Agreement, executed by the Company, the
Administrative Agent and each of the Banks;
(ii) A Committed Note executed by the Company, payable to each
Bank;
(iii) A certificate of the Secretary of the Company certifying
(A) copies attached thereto of the resolutions of the Board of
Directors of the Company authorizing and empowering certain officers
of the Company to effect such borrowings as such officers may deem
necessary or desirable for proper corporate purposes, subject to the
limitations set forth in such resolutions, (B) copies attached thereto
of the Certificate of Incorporation and by-laws of the Company, and
(C) the names and true signatures of the officers of the
-40-
<PAGE>
Company authorized to sign this Agreement and the Notes and other
documents to be executed and delivered by the Company hereunder;
(iv) A certificate of a duly authorized officer of the Company,
dated the Effective Date, certifying that as of such date, (A) the
representations and warranties contained in Section 4.01 are correct
------------
on and as of the Effective Date and (B) no event shall have occurred
and be continuing that constitutes an Event of Default or which would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both;
(v) A favorable opinion of Sidley & Austin, counsel for the
Company, substantially in the form of Exhibit H hereto; and
---------
(vi) Evidence that all amounts owing under the 1994 Credit
Agreement are being paid in full, and that the 1994 Credit Agreement
is being terminated, no later than the Effective Date;
(b) The Company shall have paid all accrued fees and expenses of the
Arranger, the Administrative Agent and the Banks which are due and payable
on the Effective Date (including, without limitation, the reasonable fees
and expenses of counsel for the Arranger and the Administrative Agent);
(c) There shall have occurred no material adverse change in the
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole, since December 31, 1997;
(d) There shall exist no action, suit or proceeding (investigative,
judicial or otherwise) against the Company or any of its Subsidiaries
pending before any court or arbitrator or any governmental body, agency or
official, or to the knowledge of any Responsible Officer of the Company,
threatened, that could reasonably be expected (i) to have a Material
Adverse Effect or (ii) to materially and adversely affect the legality,
validity or enforceability of this Agreement or any Note;
(e) The representations and warranties contained in Section 4.01
------------
shall be correct on and as of the Effective Date, as though made on and as
of such date; and
(f) No event shall have occurred and be continuing which constitutes
an Event of Default or which would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
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<PAGE>
For purposes of determining compliance with the conditions specified above,
each Bank shall be deemed to have consented to, approved and accepted, and to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Banks unless
the officer of the Administrative Agent responsible for the transactions
contemplated by this Agreement shall have received notice from such Bank prior
to the proposed Effective Date, as notified by the Administrative Agent to the
Banks, specifying its objection thereto. The Administrative Agent shall
promptly notify the Banks of the occurrence of the Effective Date.
SECTION 3.02. Conditions Precedent to Initial Advance to Each Borrowing
---------------------------------------------------------
Subsidiary. The obligation of each Bank to make its initial Advance hereunder
- ----------
to any Borrowing Subsidiary is subject to the conditions precedent that the
Effective Date shall have occurred and the Administrative Agent shall have
received on or before the day of the initial Borrowing by such Borrowing
Subsidiary the following, each in form and substance reasonably satisfactory to
the Administrative Agent and in sufficient copies for the Banks:
(a) The Assumption Letter executed and delivered by such Borrowing
Subsidiary and containing the written consent of the Company at the foot
thereof, as contemplated by Section 2.17 hereof;
------------
(b) A Committed Note executed by such Borrowing Subsidiary, payable
to each Bank;
(c) Certified copies of the resolutions of the Board of Directors of
such Borrowing Subsidiary approving the Assumption Letter and all other
documents evidencing corporate action and governmental approvals, if any,
required with respect to the Assumption Letter;
(d) A certificate of the Secretary or an Assistant Secretary of such
Borrowing Subsidiary certifying the names and true signatures of the
officers of such Borrowing Subsidiary authorized to sign the Assumption
Letter and the other documents to be executed and delivered by such
Borrowing Subsidiary hereunder; and
(d) An opinion of counsel to such Borrowing Subsidiary, substantially
in the form of Exhibit I hereto and as to such other matters as the
---------
Administrative Agent shall reasonably request.
SECTION 3.03. Conditions Precedent to Each Committed Borrowing. The
------------------------------------------------
obligation of each Bank to make a Committed Advance on the occasion of each
Committed Borrowing (including the initial Committed Borrowing) shall be subject
to the further conditions precedent that the Effective Date shall have occurred
and on the date of such Committed Borrowing the following statements shall be
true (and each of the giving of the applicable Notice of Committed Borrowing and
the acceptance by the applicable Borrower of the proceeds of such Committed
Borrowing shall constitute a representation and warranty by such Borrower that
on the date of such Committed Borrowing such statements are true):
(i) The representations and warranties contained in subsections (a),
(b), (c), (d), (f)(ii) and (h) through (q) of Section 4.01 are correct on
------------
and as of
-42-
<PAGE>
the date of such Committed Borrowing, before and after giving effect to
such Committed Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date;
(ii) No event has occurred and is continuing, or would result from
such Committed Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or which would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both; and
(iii) The aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to such
Committed Borrowing and the application of the proceeds thereof) of the
Company and its Subsidiaries does not exceed the maximum amount then
authorized by the Company's Board of Directors.
SECTION 3.04. Conditions Precedent to Each Uncommitted Borrowing. Each
--------------------------------------------------
bidding Bank's obligation to make an Uncommitted Advance as part of an
Uncommitted Borrowing (including the initial Uncommitted Borrowing) is subject
to the conditions precedent that on the date of such Uncommitted Borrowing the
following statements shall be true (and each of the giving of the applicable
Notice of Uncommitted Borrowing and the acceptance by such Borrower of the
proceeds of such Uncommitted Borrowing shall constitute a representation and
warranty by such Borrower that on the date of such Uncommitted Borrowing such
statements are true):
(a) The representations and warranties contained in subsections (a),
(b), (c), (d), f(ii) and (h) through (q) of Section 4.01 are correct on and
------------
as of the date of such Uncommitted Borrowing, before and after giving
effect to such Uncommitted Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date,
(b) No event has occurred and is continuing, or would result from
such Uncommitted Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or which would constitute
an Event of Default but for the requirement that notice be given or time
elapse or both, and
(c) The aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to the
application of the proceeds of such Uncommitted Borrowing) of the Company
and its Subsidiaries does not exceed the maximum amount thereof then
authorized by the Company's Board of Directors.
-43-
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. Representations and Warranties of the Company. The
--------------------------------- -----------
Company represents and warrants to the Banks as follows:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Agreement.
(b) The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers, have
been duly authorized by all necessary corporate action, and do not
contravene (i) the Company's certificate of incorporation, as amended, or
by-laws or (ii) law or any contractual restriction binding on or affecting
the Company.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required
for the due execution, delivery and performance by the Company of this
Agreement.
(d) This Agreement has been, and each of the Notes when delivered
hereunder will have been, duly executed and delivered by the applicable
Borrower. This Agreement is, and each of the Notes when delivered
hereunder will be, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with their respective terms,
subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to
general principles of equity.
(e) The consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of December 31, 1997, and the related
consolidated statements of income, cash flow and shareholders' equity of
the Company and its Consolidated Subsidiaries for the fiscal year then
ended, copies of which have been furnished to each Bank, fairly present the
financial condition of the Company and its Consolidated Subsidiaries as at
such date and the consolidated results of the operations of the Company and
its Consolidated Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles, and since
December 31, 1997, there has been no material adverse change in the
business, financial condition, operations, properties or performance of the
Company and its Subsidiaries, taken as a whole.
(f) There are no actions, suits or proceedings (investigative,
judicial or otherwise) against the Company or any of its Subsidiaries
pending before any court or arbitrator or any governmental body, agency or
official, or, to the knowledge of any Responsible Officer of the Company,
threatened, that could reasonably be expected (i) to have a Material
Adverse Effect or (ii) to
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<PAGE>
materially and adversely affect the legality, validity or enforceability of
this Agreement or any Note.
(g) Reserved.
(h) Following application of the proceeds of each Advance to the
Company, not more than 25% of the value of the assets (either of the
Company only or of the Company and its Consolidated Subsidiaries) will be
Margin Stock subject to any restriction contained in any agreement or
instrument between the Company and any Bank or any affiliate of any Bank
relating to Debt within the scope of Section 6.01(e).
---------------
(i) The Company is not principally engaged in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.
(j) The Advances to each Borrower, and all related obligations of
such Borrower under this Agreement, rank pari passu with all other
---- -----
unsecured indebtedness for money borrowed or raised by such Borrower that
is not, by its terms, expressly subordinated to other such indebtedness of
such Borrower.
(k) No Borrower is an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company
Act of 1940, as amended.
(l) (i) All necessary Environmental Permits have been obtained and
are in effect for the operations and properties of the Company and its
Subsidiaries, and the Company and its Subsidiaries are in compliance with
all such Environmental Permits, except to the extent that the failure to so
obtain or comply could not reasonably be expected to have a Material
Adverse Effect; and (ii) no circumstances exist that could reasonably be
expected to (A) form the basis of an Environmental Action against the
Company or any of its Subsidiaries or any of their properties that could
reasonably be expected to have a Material Adverse Effect or (B) cause any
such property to be subject to any restrictions on ownership, occupancy,
use or transferability under any Environmental Law that could reasonably be
expected to have a Material Adverse Effect.
(m) None of the properties owned or leased by the Company or any of
its Subsidiaries is the subject of any investigation or cleanup, whether
voluntary or required pursuant to any Environmental Law or ordered by any
governmental authority, that could reasonably be expected to have a
Material Adverse Effect.
(n) No ERISA Event has occurred or is reasonably expected to occur
with respect to any Plan.
-45-
<PAGE>
(o) Neither the Company nor any of its ERISA Affiliates (i) has
incurred or is reasonably expected to incur any Withdrawal Liability with
respect to any Multiemployer Plan or (ii) has been notified by the sponsor
of a Multiemployer Plan that such Multiemployer Plan is in reorganization
or has been terminated, within the meaning of Title IV of ERISA, and no
such Multiemployer Plan is reasonably expected to be in reorganization or
to be terminated, within the meaning of Title IV of ERISA.
(p) As of the last annual actuarial valuation date, the aggregate
current liability (as defined in Section 412 of the Internal Revenue Code)
under the Plans does not exceed the aggregate fair market value of the
assets of such Plans by more than $50,000,000.
(q) The Company's effort to address the problems which may arise in
connection with the Year 2000 Problem in its core business includes (i)
evaluating internal computing infrastructure, business applications and
shop-floor systems for issues related to the Year 2000 Problem, (ii)
replacing or renovating systems and applications as necessary to resolve
such issues, and (iii) testing the replaced or renovated systems and
applications. As of the date of this Agreement, the Company expects that
all phases of such efforts will be completed before December 31, 1999. In
addition to its internal remediation activities, the Company is continuing
to evaluate the Year 2000 Problem with respect to key suppliers and vendors
and other external companies, including customers whose systems interact
with those of the Company. As of the date of this Agreement, the Company
expects to complete this evaluation before December 31, 1999.
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
So long as any Advance shall remain unpaid or any Bank shall have any
Commitment hereunder, unless the Majority Banks shall otherwise consent in
writing:
SECTION 5.01. Compliance with Laws, Etc. The Company will comply, and
--------------------------
cause each of its Subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders, except for laws, rules,
regulations and orders the violation of which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.02. Interest Coverage Ratio. The Company will, as of the end of
-----------------------
each fiscal quarter after the Effective Date, maintain an Interest Coverage
Ratio of not less than 2.0 to 1.
SECTION 5.03. Reporting Requirements. The Company will furnish to the
----------------------
Banks:
(a) within 60 days after the end of each of the first three quarters
of each fiscal year of the Company, but in no case earlier than when such
report
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<PAGE>
shall be required to be filed with the Commission, a copy of the Company's
Form 10-Q filed with the Commission for such quarter, or any similar
quarterly report required to be filed by the Company with the Commission;
provided that if the Company shall no longer be required to so
--------
file with the Commission, the Company will nonetheless thereafter continue
to furnish to the Banks such financial statements and related materials as
would have comprised such filings, at such times as the Company would have
otherwise delivered the same to the Commission;
(b) within 120 days after the end of each fiscal year of the Company,
but in no case earlier than when such report shall be required to be filed
with the Commission, a copy of the Company's Form 10-K filed with the
Commission for such year, or any similar annual report required to be filed
by the Company with the Commission; provided that if the Company shall no
--------
longer be required to so file with the Commission, the Company will
nonetheless thereafter continue to furnish to the Banks such financial
statements and related materials as would have comprised such filings, at
such times as the Company would have otherwise delivered the same to the
Commission;
(c) simultaneously with the delivery of the reports referred to in
clauses (a) and (b) above, a certificate of a designated financial officer
of the Company (i) setting forth in reasonable detail the calculations
required to establish whether the Company was in compliance with the
requirements of Section 5.02 on the date of such financial statements and
------------
(ii) stating whether there exists on the date of such certificate any Event
of Default or condition or event which with notice or lapse of time or both
would become an Event of Default and, if any Event of Default or any such
condition or event then exists, setting forth the details thereof and the
action which the Company is taking with respect thereto;
(d) promptly after the sending or filing thereof, copies of all
reports which the Company sends to any of its security holders, and copies
of all reports and registration statements (other than Form S-8 or any
similar form) which the Company or any Borrowing Subsidiary files with the
Commission or any national securities exchange;
(e) promptly following any Responsible Officer's knowledge thereof,
notice in writing of (i) the occurrence of any Event of Default or
condition or event which with notice or lapse of time or both would become
an Event of Default and, if any Event of Default or any such condition or
event then exists, setting forth the details thereof and the action which
the Company is taking with respect thereto, or (ii) the institution of, or
any adverse final judgment in, any litigation, arbitration proceeding or
governmental proceeding which, in the Company's judgment, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
and
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<PAGE>
(f) such other pertinent information (including information relating
to the Company's plan to address the Year 2000 Problem) as any Bank may
reasonably request.
SECTION 5.04. Use of Proceeds. The Borrowers will use the proceeds of
---------------
the Advances made under this Agreement only for general corporate purposes
otherwise permitted under this Agreement, including, without limitation, mergers
and acquisitions, the purchase of stock of other Persons, the repurchase of
shares of capital stock of the Company, the repayment of indebtedness, the
funding of employee benefit plans of the Company or its Subsidiaries and for
other lawful purposes; provided that, no Borrower shall use the proceeds of any
--------
Advances made hereunder to acquire 20% or more of the outstanding shares of the
capital stock of any Person unless (a) at the time of such acquisition, such
Person shall have consented to such acquisition either by having entered into an
agreement with the Company or a subsidiary of the Company contemplating a merger
of such Person with or into the Company or such subsidiary or by its Board of
Directors having authorized, approved or consented to such acquisition, or (b)
such Borrower shall have obtained the prior written consent with respect thereto
of (i) in the case of any Committed Borrowing the proceeds of which shall be
used to facilitate such acquisition, the Banks and (ii) in the case of any
Uncommitted Borrowing the proceeds of which shall be used to facilitate such
acquisition, the Banks extending Uncommitted Advances in connection therewith;
provided further that if the applicable Borrower shall have specified the
- -------- -------
intended use of proceeds of an Uncommitted Borrowing in the Notice of
Uncommitted Borrowing with respect thereto, each Bank electing to offer to make
one or more Uncommitted Advances in response thereto shall be deemed to have
provided the written consent required under this Section 5.04 for such use of
------------
the proceeds of such Uncommitted Advances.
SECTION 5.05. Limitation on Liens, Etc. The Company will not create or
-------------------------
suffer to exist, or permit any of its Consolidated Subsidiaries to create or
suffer to exist, any Lien, upon or with respect to any of its properties (other
than Margin Stock), whether now owned or hereafter acquired, or assign, or
permit any of its Consolidated Subsidiaries to assign, any right to receive
income, in each case to secure any Debt of any Person or entity, other than:
(a) Liens arising in connection with the obligations of the Company
or any Subsidiary under industrial revenue bonds;
(b) Liens on assets of a Subsidiary of a Borrower to secure Debt of
such Subsidiary to any Borrower;
(c) Purchase money Liens claimed by sellers of goods on ordinary
trade terms provided that no financing statement has been filed to perfect
such Liens, and provided that no such Lien shall extend to assets of any
character other than the goods being acquired;
(d) Liens securing Debt existing as of December 31, 1997;
(e) Liens securing Debt on property of a corporation or firm (or
division thereof) that becomes a Subsidiary of the Company or of any of its
Subsidiaries after the date hereof in accordance with Section 5.06 and
------------
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<PAGE>
existing at the time such corporation is merged or consolidated with the
Company or any Subsidiary, at the time such corporation or firm (or
division thereof) becomes a Subsidiary of the Company or any of its
Subsidiaries, or at the time of a sale, lease or other disposition of the
properties of a corporation or a firm (or division thereof) as an entirety
or substantially as an entirety to the Company or a Subsidiary, provided
that such Liens were not created in contemplation of such merger,
consolidation, acquisition, sale, lease or disposition and do not extend to
assets other than those of the Person merged into or consolidated with the
Company or such Subsidiary or acquired by the Company or such Subsidiary;
(f) Liens on life insurance policies owned by the Company or any
Subsidiary, securing Insurance Policy Debt;
(g) Purchase money Liens constituting the interest of a lessor under
a lease that would be capitalized on the lessee's balance sheet in
accordance with GAAP, or under a sale-leaseback transaction, in each case
relating to equipment, provided that after giving effect thereto, no Event
of Default under Section 5.02 shall exist;
------------
(h) Any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Liens referred to in
the foregoing subsections (a) through (g); provided that, in the case of
--------
Liens referred to in the foregoing subsections (c), (d), (e), (f) and (g),
the principal amount of Debt secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or
replacement, and that such extension, renewal or replacement Lien shall be
limited to all or a part of the property which is subject to the Lien so
extended, renewed or replaced (plus improvements on such property); and
(i) Additional Liens securing Debt other than as may be included in
the foregoing subsections (a) through (h), provided, that the aggregate
--------
outstanding principal amount of such Debt shall not at any time exceed 10%
of Consolidated Tangible Net Worth at such time.
SECTION 5.06. Merger; Sale of Assets. The Company will not, and will not
----------------------
permit its Material Subsidiaries to, merge or consolidate with or into any other
Person, or sell, transfer, lease or otherwise dispose of all or substantially
all of its assets (whether now owned or hereafter required), except that:
(i) the Company or a Material Subsidiary may acquire another
corporation by merger, provided that, if the Company is a party to such
merger, the Company is the surviving corporation, and provided further that
after giving effect to such merger, no Event of Default (or event which,
with the giving of notice or the passing of time or both would constitute
an Event of Default) shall exist; and
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<PAGE>
(ii) any Material Subsidiary may merge or consolidate with or into,
or sell or otherwise dispose of any or all of its assets to, the Company or
another Subsidiary, and any Material Subsidiary that is not a Borrowing
Subsidiary may sell all or substantially all of its assets; provided that
(a) after giving effect to such merger, consolidation, sale or other
disposition, no Event of Default (or any event which, with the giving of
notice or the passing of time or both would constitute an Event of Default)
shall exist, and (b) in the case of an asset sale by such a Material
Subsidiary, the assets to be sold do not constitute all or substantially
all of the assets of the Company and its Subsidiaries, taken as a whole.
SECTION 5.07. Books and Records; Inspection. The Company will, and will
-----------------------------
cause each of its Subsidiaries to, (a) maintain complete and accurate books and
records, in which full and correct entries shall be made of all financial
transactions of the Company and each such Subsidiary in accordance with
generally accepted accounting principles, and (b) permit any Bank, the
Administrative Agent and their respective employees and agents, at such
reasonable times during normal business hours and as often as may be reasonably
requested, to inspect any of the properties of the Company or any of its
Subsidiaries and to inspect and make copies of the material books and records of
the Company and its Subsidiaries and to discuss the affairs and finances of the
Company and its Subsidiaries with their officers; provided that such Bank or the
--------
Administrative Agent shall have delivered a written request for such inspection
to the Company prior to the date of any such inspection.
SECTION 5.08. Corporate Existence. Subject to the Company's rights under
-------------------
Section 5.06, the Company will, and will cause each of its Material Subsidiaries
- ------------
to, at all times maintain its corporate existence and preserve and keep, or
cause to be preserved and kept, in full force and effect its rights and
franchises material to its businesses.
SECTION 5.09. Conduct of Business. The Company shall not, and shall not
-------------------
permit any Material Subsidiary to, engage in any line of business other than (A)
the businesses engaged in by the Company and its Subsidiaries on the date hereof
and (B) any business or activities substantially similar or related thereto
(which shall include, without limitation, other businesses related to the
handling and/or distribution of data used or processed in the businesses engaged
in by the Company and its Subsidiaries on the date hereof).
SECTION 5.10. Payment of Taxes. The Company will pay and discharge, and
----------------
cause each of its Material Subsidiaries to pay and discharge, before the same
shall become delinquent, all material taxes, assessments and governmental
charges or levies imposed upon it or its property; provided, however, that
-------- -------
neither the Company nor any of its Material Subsidiaries shall be required to
pay or discharge any such tax, assessment, charge or levy that is being
contested in good faith and by proper proceedings and as to which appropriate
reserves are being maintained in accordance with GAAP, as long as no action has
been commenced to enforce any Lien securing any such tax, assessment, charge or
levy.
ARTICLE VI
EVENTS OF DEFAULT
-----------------
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<PAGE>
SECTION 6.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
(a) A Borrower shall fail to pay when due any installment of
principal of any Advance; or
(b) A Borrower shall fail to pay any fee under this Agreement, or any
installment of interest on any Advance, within ten (10) days after the due
date thereof; or
(c) Any written representation or warranty made by a Borrower herein
or in connection with this Agreement shall prove to have been incorrect in
any material respect when made; or
(d) The Company shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 5.02, 5.03(a), (b) or (e), 5.04,
---- ------- --- --- ----
5.05, 5.06, 5.07, 5.08, 5.09 or 5.10, or (ii) any other term, covenant or
---- ---- ---- ---- ---- ----
agreement contained in this Agreement, other than in (a) or (b) above, on
its part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been given
to the Company by the Majority Banks through the Administrative Agent; or
(e) The Company or any Material Subsidiary shall fail to pay any
principal of or premium or interest on any Debt, or any obligations in
respect of acceptances, letters of credit or other similar instruments, of
the Company or such Material Subsidiary which is outstanding in a principal
amount of at least $50,000,000 in the aggregate (but excluding Debt arising
under this Agreement), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt or other obligation; or any other event shall occur or condition shall
exist under any agreement or instrument relating to any such Debt or other
obligation and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of
such Debt or other obligation; or any Debt or other such obligation in
which the outstanding principal exceeds $50,000,000 shall be otherwise
declared to be due and payable (by acceleration or otherwise) or required
to be prepaid, redeemed, defeased or otherwise repurchased by the Company
or any Material Subsidiary (other than by a regularly-scheduled required
prepayment), or any offer to prepay, redeem, defease or purchase such Debt
shall be required to be made, prior to the stated maturity thereof; or
(f) The Company or any Material Subsidiary shall generally not pay
its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of
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<PAGE>
creditors; or any proceeding shall be instituted by or against the Company
or any Material Subsidiary seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of
a receiver, trustee, or other similar official for it or for any
substantial part of its property, and in the event of any such proceeding
instituted against the Company or any Material Subsidiary (but not
instituted by it), such proceeding shall remain undismissed or unstayed for
a period of 60 days or shall result in the entry of an order for relief,
the appointment of a trustee or receiver, or other action in such
proceeding or result adverse to the Company or such Material Subsidiary, as
applicable, or the Company or any Material Subsidiary shall take any
corporate action to authorize any of the actions set forth above in this
subsection (f); or
(g) Any Person, or a group of Persons acting in concert, shall at any
time acquire, directly or indirectly, in excess of 51% of the securities
having ordinary voting power to elect members of the board of directors of
the Company; or
(h) The Company shall incur liability in excess of $50,000,000 in the
aggregate as a result of one or more of the following: (i) the occurrence
of any ERISA Event; (ii) the partial or complete withdrawal of the Company
or any of its ERISA Affiliates from a Multiemployer Plan; or (iii) the
reorganization or termination of a Multiemployer Plan; or
(i) One or more final judgments or orders for the payment of money,
in an aggregate amount exceeding $50,000,000 at any one time outstanding
(exclusive of judgment amounts fully covered by insurance, to the extent
the insurer has admitted liability in respect thereof), shall be rendered
against the Company or any Material Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order, or (ii) such judgments or orders shall not be discharged (or
provision shall not have been made for such discharge), a stay of execution
thereof shall not be obtained, or such judgments or orders shall not be
paid or bonded, within 60 days from the date of entry thereof, and the
Company or such Material Subsidiary, as the case may be, shall not, within
such 60-day period, appeal therefrom and cause the execution thereof to be
stayed pending such appeal;
then, and in any such event, the Administrative Agent shall at the request, or
may with the consent, of the Majority Banks, by notice to the Company, (i)
declare the obligation of each Bank to make Advances to any Borrower to be
terminated, whereupon the same shall forthwith terminate, and (ii) declare the
Notes, all interest thereon and all other amounts payable under this Agreement
to be forthwith due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Company; provided, however, that in the event of an actual or
-------- -------
deemed entry
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<PAGE>
of an order for relief with respect to the Company under the Federal Bankruptcy
Code, (A) the obligation of each Bank to make Advances to any Borrower shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Company.
ARTICLE VII
GUARANTEE
---------
SECTION 7.01. Unconditional Guarantee. For valuable consideration,
-----------------------
receipt whereof is hereby acknowledged, and to induce the Banks to make Advances
to each Borrowing Subsidiary, the Company unconditionally guarantees to the
Banks and the Administrative Agent that the principal of and interest on each
Advance and all other amounts payable by each Borrowing Subsidiary hereunder
shall be promptly paid in full when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms hereof and thereof, and,
in the case of any extension of time of payment, in whole or in part, that all
such amounts shall be promptly paid when due (whether at stated maturity, by
acceleration or otherwise) in accordance with the terms of such extension. In
addition, the Company unconditionally agrees that upon default in the payment
when due (whether at stated maturity, by acceleration or otherwise) of any of
such principal, interest or other amounts, the Company shall forthwith pay the
same. Without limiting the generality of the foregoing, the Company's liability
shall extend to all amounts that constitute part of the obligations of any
Borrowing Subsidiary guaranteed by the Company under this Article VII and would
-----------
be owed by any such Borrowing Subsidiary to any Bank or the Administrative Agent
under this Agreement or the Notes but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving such Borrowing Subsidiary.
SECTION 7.02. Validity. The obligations of the Company under this
--------
Article VII are independent of the obligations of the Borrowing Subsidiaries
- -----------
guaranteed hereunder, and a separate action or actions may be brought and
prosecuted against the Company to enforce its obligations under this Article
-------
VII, irrespective of whether any action is brought against any Borrowing
- ---
Subsidiary or whether any Borrowing Subsidiary is joined in any such action or
actions. The obligations of the Company under this Article VII shall be
-----------
unconditional irrespective of (i) the genuineness, validity, regularity or
enforceability of the obligations of the Borrowing Subsidiaries under this
Agreement, any Note or any Assumption Letter, (ii) any law, regulation or order
of any jurisdiction affecting any term of any obligation of any Borrowing
Subsidiary under this Agreement or the rights of any Bank or the Administrative
Agent with respect thereto, (iii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of any
Borrowing Subsidiary guaranteed by the Company under this Article VII, or any
-----------
other amendment or waiver of or any consent to departure from this Agreement or
the Notes, (iv) any change, restructuring or termination of the corporate
structure or existence of any Borrowing Subsidiary or any of its Subsidiaries,
or (v) to the fullest extent permitted by applicable law, any other circumstance
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor.
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<PAGE>
SECTION 7.03. Waivers. The Company expressly waives promptness,
-------
diligence, presentment, protest and any other notice with respect to the
obligations of the Company under this Article VII and any requirement that any
-----------
right or power be exhausted or any action be taken against any Borrowing
Subsidiary and all notices and demands whatsoever.
SECTION 7.04. Subrogation. The Company shall be subrogated to the rights
-----------
of the Banks or the Administrative Agent against any Borrowing Subsidiary
hereunder only after the Banks and the Administrative Agent shall have been paid
in full all such amounts, with interest thereon, for which such Borrowing
Subsidiary shall have become indebted hereunder.
SECTION 7.05. Acceleration. The Company agrees that, as between the
------------
Company on the one hand, and the Banks and the Administrative Agent, on the
other hand, the obligations of each Borrowing Subsidiary guaranteed under this
Article VII may be declared to be forthwith due and payable, or may be deemed
- -----------
automatically to have been accelerated, as provided in Section 6.01 hereof for
------------
purposes of this Article VII, notwithstanding any stay, injunction or other
-----------
prohibition (whether in a bankruptcy proceeding affecting such Borrowing
Subsidiary or otherwise) preventing such declaration as against such Borrowing
Subsidiary and that, in the event of such declaration or automatic acceleration,
such obligations (whether or not due and payable by such Borrowing Subsidiary)
shall forthwith become due and payable by the Company for purposes of this
Article VII.
- -----------
SECTION 7.06. Reinstatement. The Company's obligations under this
-------------
Article VII shall be reinstated if at any time any payment received by any Bank
- -----------
or the Administrative Agent from any Borrowing Subsidiary hereunder is required
to be repaid or returned by such Bank or the Administrative Agent, all as though
such payment had not been made.
SECTION 7.07. Continuing Guaranty; Assignments. This guarantee of the
--------------------------------
Company shall (a) remain in full force and effect until the later of (i) the
cash payment in full of the obligation of any Borrowing Subsidiary guaranteed by
the Company under this Article VII and (ii) the Termination Date (or, if the
-----------
Company has made the Term Loan Election, the Maturity Date), (b) be binding upon
the Company, its successors and assigns and (c) inure to the benefit of, and be
enforceable by, the Banks and the Administrative Agent and their successors,
transferees and assigns (provided that the applicable transfers and assignments
are made in accordance with the terms of this Agreement).
ARTICLE VIII
THE ADMINISTRATIVE AGENT
------------------------
SECTION 8.01. Reserved.
SECTION 8.02. Authorization and Action. Each Bank appoints and
------------------------
authorizes First Chicago to act as the Administrative Agent hereunder, and each
Bank irrevocably authorizes the Administrative Agent (for so long as the
Administrative Agent remains in such capacity under this Agreement) to act as
the contractual representative of such Bank with only the
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rights and duties expressly set forth herein. The Administrative Agent agrees to
act as such contractual representative upon the express conditions contained in
this Article VIII. Notwithstanding the use of the defined term "Administrative
Agent," it is expressly understood and agreed that the Administrative Agent
shall not have any fiduciary responsibilities to any Bank by reason of this
Agreement and that the Administrative Agent is merely acting as the
representative of the Banks with only those duties as are expressly set forth in
this Agreement. In its capacity as the Banks' contractual representative, the
Administrative Agent (i) does not assume any fiduciary duties to any of the
Banks, (ii) is a "representative" of the Lenders within the meaning of
Section 9-105 of the Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement. Each Bank agrees to assert no claim
against the Administrative Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Bank waives.
The Administrative Agent shall have and may exercise such powers under this
Agreement as are specifically delegated to the Administrative Agent by the terms
hereof, together with such powers as are reasonably incidental hereto. The
Administrative Agent shall have no implied duties to the Banks, or any
obligation to the Banks to take any action hereunder, except any action
specifically provided by this Agreement to be taken by the Administrative Agent.
As to any matters not expressly provided for by this Agreement (including,
without limitation, enforcement or collection of the Notes), the Administrative
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Majority
Banks, and such instructions shall be binding upon all Banks and all holders of
the Notes; provided, however, that the Administrative Agent shall not be to take
-------- -------
any action which exposes the Administrative Agent to personal liability or which
is contrary to this Agreement or applicable law. The Administrative Agent agrees
to give to each Bank prompt notice of each notice given to it by any Borrower
pursuant to the terms of this Agreement. The Administrative Agent may execute
any of its duties as Administrative Agent hereunder and under any other
instrument, document or agreement executed in connection herewith by or through
employees, agents, and attorney-in-fact and shall not be answerable to the
Banks, except as to money or securities received by it or its authorized agents,
for the default or misconduct of any such agents or attorneys-in-fact selected
by it with reasonable care. Without limiting the foregoing, the Administrative
Agent may appoint any Affiliate as its agent for all matters relating to
Advances made in Alternative Currencies. Each such agent shall be entitled to
all of the rights and benefits granted to the Administrative Agent hereunder,
and each Bank shall treat any notice given by any such agent as if it had been
given directly by the Administrative Agent.
SECTION 8.03. Administrative Agent's Reliance, Etc. Neither the
-------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Administrative Agent: (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Bank that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07;
------------
(ii) may consult with legal counsel (including counsel for any Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in
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<PAGE>
good faith by it in accordance with the advice of such counsel, accountants or
experts; (iii) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement; (iv)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of any Borrower or to inspect the property (including the books and
records) of any Borrower; (v) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
(vi) shall not have any duty to ascertain, inquire into or verify the financial
condition of the Company or any of its Subsidiaries; (vii) shall have no duty to
disclose to the Banks information that is not required to be furnished by the
Company to the Administrative Agent at such time, but is voluntarily furnished
by the Company to the Administrative Agent (either in its capacity as
Administrative Agent or in its individual capacity); and (viii) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram)
believed by it to be genuine and signed or sent by the proper party or parties.
The Administrative Agent shall be entitled to advice of counsel concerning the
contractual arrangement between the Administrative Agent and the Banks and all
matters pertaining to the Administrative Agent's duties hereunder.
SECTION 8.04. The Administrative Agent and Affiliates. With respect to
---------------------------------------
any financial institution which shall become the Administrative Agent hereunder,
and with respect to such financial institution's Commitment and the Advances
made by it, such financial institution shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though it
were not the Administrative Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include such financial institution in its
individual capacity, if applicable. Each such financial institution and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, any Borrower,
any of their respective Subsidiaries and any Person who may do business with or
own securities of any Borrower or any such Subsidiary, all as if such financial
institution were not the Administrative Agent and without any duty to account
therefor to the Banks.
SECTION 8.05. Bank Credit Decision; Notice of Default. Each Bank
---------------------------------------
acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Bank and based on the financial statements
referred to in Section 4.01 and such other documents and information as it has
------------
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement. The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default, or an event which would
constitute an Event of Default but for the requirement that notice be given or
time elapse or both, unless the Agent has received written notice from a Bank or
the Company referring to this Agreement describing such Event of Default, or
such event which would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, and stating that such notice is a
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"notice of default". In the event that the Administrative Agent receives such a
notice, the Administrative Agent shall give prompt notice thereof to the Banks.
SECTION 8.06. Indemnification. The Banks (other than the Designated
---------------
Bidders) agree to indemnify the Administrative Agent (to the extent not
reimbursed by the Borrowers), ratably according to the respective principal
amounts of the Notes held by each of them (or, if no Notes are outstanding at
the time or if any Notes are held by Persons that are not Banks, ratably
according to the respective amounts of their Commitments) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement;
provided that no Bank shall be liable for any portion of such liabilities,
- --------
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the Administrative Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Bank (other than the Designated Bidders) agrees to
reimburse the Administrative Agent promptly upon demand for its ratable share of
any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, to the extent that the Administrative Agent is not reimbursed
for such expenses by the Borrowers. The obligation of the Banks under this
Section 8.06 shall survive payment of the Obligations and the termination of
- ------------
this Agreement.
SECTION 8.07. Successor Administrative Agent. The Administrative Agent
------------------------------
may resign at any time by giving written notice thereof to the Banks and the
Company and may be removed at any time with or without cause by the Majority
Banks. Upon any such resignation or removal, the Majority Banks shall have the
right to appoint another Bank as successor Administrative Agent or, if
acceptable to the Company, any other commercial bank organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $500,000,000. If no successor Administrative
Agent shall have been so appointed by the Majority Banks, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent gives notice of resignation or the Majority Banks remove the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent, which shall be a commercial
bank organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $500,000,000 and
otherwise acceptable to the Company. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Article VIII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent.
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<PAGE>
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
----------------
of this Agreement or the Notes, nor any consent to any departure by any Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Banks, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
-------- -------
writing and signed by all the Banks (other than the Designated Bidders),
directly do any of the following: (i) waive any of the conditions specified in
Section 3.01 or 5.04, (ii) increase the Commitments of the Banks or subject the
- ------------ ----
Banks to any additional obligations, (iii) reduce the principal of, or the
stated rate at which interest accrues on, the Notes or reduce the stated rate at
which the Facility Fee and the Utilization Fee are calculated, (iv) postpone any
date fixed for any payment of principal of, or interest on, the Committed
Advances or any fees or other amounts payable hereunder, (v) change the
percentage of the Commitments, or of the aggregate unpaid principal amount of
the Notes, or the number of Banks which shall be required for the Banks or any
of them to take any action hereunder or (vi) amend this Section 9.01; provided,
------------ --------
further, that no amendment, waiver or consent shall, unless in writing and
- -------
signed by the Administrative Agent in addition to the Banks required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any Note.
SECTION 9.02. Notices, Etc. (a) All notices and other communications
-------------
provided for hereunder shall be in writing (including telegraphic or telecopy
communication) and mailed, telegraphed, telecopied or delivered,
(i) if to the Company, at its address at 77 West Wacker Drive,
Chicago, Illinois 60601 Attention: Treasurer, telecopy number (312) 326-
8557;
(ii) if to any Borrowing Subsidiary, at the address specified in the
Assumption Letter pursuant to which it became a Borrowing Subsidiary, with
a copy to the Company at the address specified herein; provided that any
--------
such notice may be given solely to the Company, at the option of the party
giving such notice;
(iii) if to any bank listed on the signature pages hereof, at its
Domestic Lending Office specified opposite its name on Schedule I hereto;
----------
(iv) if to any other Bank, at its Domestic Lending Office specified
in the Assignment and Acceptance or Designation Agreement pursuant to
which it became a Bank;
(v) if to the Administrative Agent, at the Domestic Lending Office
specified opposite its name on Schedule I hereto;
----------
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<PAGE>
or as to the Borrowers and the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties, and
as to each such other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent. All
such notices and communications shall, when sent by overnight courier, mailed or
telecopied, be effective when delivered to such courier, deposited in the mails,
or telecopied and confirmed by return telecopy, respectively, except that
notices and communications to the Administrative Agent pursuant to Articles II,
-----------
III and VIII shall not be effective until received by the Administrative Agent.
- --- ----
(b) If any notice required under this Agreement is permitted to be made,
and is made, by telephone, actions taken or omitted to be taken in reliance
thereon by the Administrative Agent or by any Bank shall be binding upon the
Company and each other Borrower notwithstanding any inconsistency between the
notice provided by telephone and any subsequent writing in confirmation thereof
provided to the Administrative Agent or such Bank; provided that any such action
--------
taken or omitted to be taken by the Administrative Agent or such Bank shall have
been in good faith and in accordance with the terms of this Agreement.
SECTION 9.03. No Waiver; Remedies. No failure on the part of any Bank or
-------------------
the Administrative Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Company agrees to pay on
------------------
demand all reasonable, documented out-of-pocket costs and expenses of the
Arranger and the Administrative Agent (including, without limitation, reasonable
fees and expenses of counsel), in connection with any amendments, modifications
or waivers of the provisions hereof, or in determining the rights and
obligations of the parties hereto under this Agreement and the Notes, or the
enforcement (whether through negotiations, legal proceedings or otherwise) of
this Agreement and the other documents to be delivered hereunder; provided that
--------
if, in the event of any enforcement undertaken by the Banks hereunder, it shall
be determined that sufficient conflicts exist such that a single law firm
engaged by the Administrative Agent or the Majority Banks is precluded by law or
by standards of conduct from representing the Banks as a group, and such
conflicts would exist with respect to any other law firm representing the Banks
as a group, the Company agrees to pay on demand all reasonable, documented out-
of-pocket costs and expenses of each Bank, if any (including, without
limitation, reasonable fees and expenses of counsel), in connection with such
enforcement undertaking.
(b) The Company agrees to pay to the Administrative Agent such fees as
shall have been agreed to by the Administrative Agent and the Company in a
separate agreement regarding the provision by the Administrative Agent of
services as Administrative Agent under this Agreement.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the
----------------
continuance of any Event of Default and (ii) the declaration that the Advances
are due and
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<PAGE>
payable pursuant to the provisions of Section 6.01, each Bank is authorized at
------------
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Bank to or for the credit or the account of any Borrower against any and
all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Notes held by such Bank, irrespective of whether or not such
Bank shall have made any demand under this Agreement or such Notes and although
such obligations may be unmatured. Each Bank shall promptly notify the Company
after any such set-off and application made by such Bank, provided that the
--------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which such Bank may have.
SECTION 9.06. Binding Effect. This Agreement (other than Sections 2.01
-------------- -------------
and 2.03, which shall only become effective upon satisfaction of the conditions
----
set forth in Section 3.01) shall become effective when it shall have been
------------
executed by the Company and the Administrative Agent and when the Administrative
Agent shall have been notified by each bank listed on the signature pages hereof
that it has executed this Agreement and thereafter shall be binding upon and
inure to the benefit of the Company, the Administrative Agent and each Bank and
their respective successors and assigns, except that neither the Company nor any
Borrowing Subsidiary shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Banks.
SECTION 9.07. Assignments, Designations and Participations. (a) Each
--------------------------------------------
Bank (other than the Designated Bidders) may, upon obtaining the prior written
consent of the Company and the Administrative Agent (which consents shall not be
unreasonably withheld or delayed), and each Bank (including, without limitation,
the Designated Bidders) shall, if demanded by the Company in accordance with
Section 2.05(b), assign to one or more Eligible Assignees all or a portion of
- ---------------
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Committed Advances owing to it and
the Committed Notes held by it); provided, however, that:
-------- -------
(i) each such assignment shall be of a constant, and not a varying,
percentage of all rights and obligations under this Agreement (other than
any right to make Uncommitted Advances, Uncommitted Advances owing to it
and Uncommitted Notes owing to it);
(ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Bank or an assignment of all
of a Bank's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event be less than
$20,000,000 (or an integral multiple of $1,000,000 in excess thereof);
(iii) each such assignment made as a result of a demand by the Company
pursuant to Section 2.05(b) and this Section 9.07(a) shall be arranged by
--------------- ---------------
the Company with the approval of the Administrative Agent, which approval
shall not be unreasonably withheld or delayed, and shall be
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<PAGE>
either an assignment of all of the rights and obligations of the assigning
Bank under this Agreement or an assignment of a portion of such rights and
obligations made concurrently with another such assignment or other such
assignments that, in the aggregate, cover all of the rights and obligations
of the assigning Bank under this Agreement;
(iv) no Bank shall be obligated to make any such assignment as a
result of a demand by the Company pursuant to this Section 9.07(a) unless
---------------
and until such Bank shall have received one or more payments from one or
more Eligible Assignees in an aggregate amount equal to the aggregate
outstanding principal amount of the Advances owing to such Bank, together
with accrued interest thereon to the date of payment of such principal
amount and from the Company or one or more Eligible Assignees in an
aggregate amount equal to all other amounts payable to such Bank under this
Agreement and the Notes (including, without limitation, any amounts owing
under Sections 2.12, 2.13 or 2.19); and
------------------- ----
(v) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with any Note subject to such
assignment and a processing and recordation fee of $3,500;
and provided, further, that the consent of the Company and the Administrative
-------- -------
Agent shall not be required with respect to an assignment to an Eligible
Assignee which is a Bank or an Affiliate thereof. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and (y) the Bank assignor thereunder shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Bank's rights and obligations under this Agreement, such Bank shall cease to be
a party hereto). Notwithstanding the foregoing, each Bank may, without the
Company's or the Administrative Agent's consent, assign all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and the Advances owing to it) to an affiliate of
such Bank or to another Bank.
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company or any
Borrowing Subsidiary or the performance or observance by the Company or any
Borrowing
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<PAGE>
Subsidiary of any of their respective obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01 and such other documents
------------
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Bank or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as contractual representative on its
behalf and to exercise such powers and discretion under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Bank.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee, and
consented to by the Company, together with any Note or Notes subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit A hereto, (i)
---------
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Company.
Within ten Business Days after its receipt of such notice, the Company shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note a new Note to the order of such Eligible Assignee in an amount equal to the
Commitment assumed by it (in the case of a Committed Note) or the Uncommitted
Advance or part thereof purchased by it (in the case of an Uncommitted Note)
pursuant to such Assignment and Acceptance and, if the assigning Bank has
retained a Commitment or a part of such Uncommitted Advance hereunder, a new
Note to the order of the assigning Bank in an amount equal to the Commitment or
of such Uncommitted Advance retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit D-1 or Exhibit D-2 hereto (as the case may be).
----------- -----------
(d) Each Bank (other than the Designated Bidders) may, upon obtaining the
prior written consent of the Company and the Administrative Agent (which
consents shall not be unreasonably withheld or delayed), designate one or more
banks or other entities to have a right to make Uncommitted Advances as a Bank
pursuant to Section 2.03; provided, however, that (i) no such Bank shall be
------------ -------- -------
entitled to make more than one such designation, (ii) each such Bank making such
a designation shall retain the right to make Uncommitted Advances as a Bank
pursuant to Section 2.03, (iii) each such designation shall be to a Designated
------------
Bidder and (iv) the parties to each such designation shall execute and deliver a
Designation Agreement to the Administrative Agent, for its acceptance and
recording in the Register, together with the consent thereto executed by the
Company. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Designation Agreement, the designee
thereunder shall be a party hereto with a right to make
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<PAGE>
Uncommitted Advances as a Bank pursuant to Section 2.03 and the obligations
------------
related thereto.
(e) By executing and delivering a Designation Agreement, the Bank making
the designation thereunder and its designee thereunder confirm and agree with
each other and the other parties hereto as follows: (i) such Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Company or any Borrowing Subsidiary or the performance or observance by the
Company or any Borrowing Subsidiary of any of their respective obligations under
this Agreement or any other instrument or document furnished pursuant hereto;
(iii) such designee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.01 and
------------
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Designation Agreement; (iv)
such designee will, independently and without reliance upon the Administrative
Agent, such designating Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
designee confirms that it is a Designated Bidder; (vi) such designee appoints
and authorizes the Administrative Agent to take such action as contractual
representative on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such designee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Bank.
(f) Upon its receipt of a Designation Agreement executed by a designating
Bank and a designee representing that it is a Designated Bidder, and consented
to by the Company, the Administrative Agent shall, if such Designation Agreement
has been completed and is substantially in the form of Exhibit C hereto, (i)
---------
accept such Designation Agreement, (ii) record the information contained therein
in the Register and (iii) give prompt notice thereof to the Company.
(g) The Administrative Agent shall maintain at its address referred to in
Section 9.02 a copy of each Assignment and Acceptance and each Designation
- ------------
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Banks and, with respect to Banks other than
Designated Bidders, the Commitment of, and principal amount of the Advances
owing to, each Bank from time to time (the "Register"). The entries in the
--------
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Company, the Administrative Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Company or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Bank (other than a Designated Bidder) may sell participations to
one or more banks or other entities in or to all or a portion of its rights and
obligations under this
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<PAGE>
Agreement (including, without limitation, all or a portion of its Commitment,
the Advances owing to it and the Note or Notes held by it); provided, however,
-------- -------
that (i) such Bank's obligations under this Agreement (including, without
limitation, its Commitment hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the holder of any such Note
for all purposes of this Agreement, (iv) the Company, the Administrative Agent
and the other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement and (v)
no participant under any such participation shall have any right to approve any
amendment or waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Company or any Borrowing Subsidiary therefrom,
except to the extent that such amendment, waiver or consent would reduce the
principal of the Notes or the stated rate at which interest, the Facility Fee or
the Utilization Fee is calculated, in each case to the extent subject to such
participation, or postpone any date fixed for any payment of principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation.
(i) Any Bank may, in connection with any assignment, designation or
participation or proposed assignment, designation or participation pursuant to
this Section 9.07, disclose to the assignee, designee or participant or proposed
------------
assignee, designee or participant, any information relating to the Company or
any other Borrower furnished to such Bank by or on behalf of the Company or such
other Borrower; provided that, prior to any such disclosure of non-public
--------
information, such Bank shall have obtained the Company's consent and the
assignee or participant or proposed assignee or participant shall agree in a
manner satisfactory to the Company to preserve the confidentiality of any
confidential information relating to the Company received by it from such Bank.
(j) Notwithstanding any other provision set forth in this Agreement, any
Bank may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note or Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
SECTION 9.08. Governing Law. This Agreement and the Notes shall be
-------------
governed by, and construed in accordance with, the laws of the State of
Illinois.
SECTION 9.09. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 9.10. Confidentiality. Each Bank agrees that it will use
---------------
reasonable efforts to keep confidential any information from time to time
supplied to it by the Company which the Company designates in writing at the
time of its delivery to the Bank is to be treated confidentially; provided,
--------
however, that nothing herein shall affect the disclosure of any such information
- -------
to: (i) the extent required by statute, rule, regulation or judicial process;
(ii) counsel for any Bank or to their respective accountants; (iii) bank
examiners and auditors; (iv) any Affiliate of such Bank; (v) any other Bank, or,
subject to Section 9.07(c),
---------------
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<PAGE>
any transferee or prospective transferee of any Advance, any Note or any
Commitment; or (vi) any other Person in connection with any litigation to which
any one or more of the Banks is a party; provided further, however, that each
-------- ------- -------
Bank agrees that it will use reasonable efforts to promptly notify the Company
of any request for information under this clause (vi) or with respect to any
request for information not enumerated in this Section 9.10, if not otherwise
------------
prohibited from doing so.
SECTION 9.11. Non-Reliance by the Banks. Each Bank by its signature to
-------------------------
this Agreement represents and warrants that (i) it has not relied in the
extension of the credit contemplated by this Agreement, nor will it rely in the
maintenance thereof, upon any assets of the Company or its Subsidiaries
consisting of Margin Stock as collateral and (ii) after reviewing the financial
statements of the Company and its Consolidated Subsidiaries referred to in
Section 4.01(e), such Bank has concluded therefrom that the consolidated cash
- ---------------
flow of the Company and its Consolidated Subsidiaries is sufficient to support
the credit extended to the Company pursuant to this Agreement.
SECTION 9.12. No Indirect Security. Notwithstanding any Section or
--------------------
provision of this Agreement to the contrary, nothing in this Agreement shall (i)
restrict or limit the right or ability of the Company or any of its Subsidiaries
to pledge, mortgage, sell, assign, or otherwise encumber or dispose of any
Margin Stock, or (ii) create an Event of Default arising out of or relating to
any such pledge, mortgage, sale, assignment or other encumbrance or disposition.
SECTION 9.13. Indemnification. The Company agrees to indemnify and hold
---------------
harmless the Administrative Agent, each Bank, and their respective officers,
directors, employees and agents (any one of the foregoing being an "Indemnified
Party" and any two or more of the foregoing being "Indemnified Parties") from
and against, and pay the Indemnified Parties the amount of, any and all claims,
damages, liabilities, and reasonable, documented out-of-pocket costs and
expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against an Indemnified
Party relating in whole or in part to this Agreement, the Notes, any documents
delivered in connection herewith and the transactions contemplated hereby, and
in connection with or arising out of or by reason of, or in connection with the
preparation of a defense of, any investigation, litigation or proceeding brought
by a Person other than the Indemnified Parties or the Company and its
Subsidiaries, arising out of, related to or in connection with (i) this
Agreement, the Notes, any of the transactions contemplated herein or the use or
proposed use of the proceeds of any Advances, (ii) any acquisition or proposed
acquisition by the Company or any of its Subsidiaries of all or any portion of
the stock or all or substantially all of the assets of any Person, or (iii) the
actual or alleged presence of Hazardous Materials on any property of the Company
or any of its Subsidiaries or any Environmental Action relating to any of them,
in each case whether or not such investigation, litigation or proceeding is
brought by the Company, any other Borrower, their respective shareholders or
creditors, an Indemnified Party or any other Person, and whether or not an
Indemnified Party is otherwise a party thereto, provided, however, that this
-------- -------
indemnification shall not apply to any claim, damage, liability, cost or expense
that is found in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from an Indemnified Party's gross negligence or
willful misconduct. The covenants of the Company contained in this Section 9.13
------------
and in Sections 9.04, 2.11, 2.12 and 2.19 shall
------------- ---- ---- ----
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<PAGE>
survive the repayment of all amounts due and payable under this Agreement and
the termination of this Agreement.
SECTION 9.14. Partial Invalidity. Wherever possible, each provision
------------------
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
SECTION 9.15. WAIVER OF JURY TRIAL. Each of the parties hereto
--------------------
irrevocably waives any right to have a jury participate in resolving any
dispute, whether sounding in contract, tort or otherwise, arising out of,
connected with, related to or incidental to the relationship established among
them in connection with this Agreement or the transactions contemplated hereby
or the actions of the Company, any Borrowing Subsidiary, the Administrative
Agent or any Bank in the negotiation, administration, performance or enforcement
thereof. Each of the parties hereto agrees that any such claim, demand, action
or cause of action shall be decided by bench trial without a jury and that any
party hereto may file an original counterpart or a copy of this Agreement with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
SECTION 9.16. Jurisdiction, Etc. (a) Each of the parties hereto
------------------
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any Illinois state court or federal court of the
United States of America sitting in Chicago, Illinois, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in any such Illinois state court or, to the extent permitted by law, in such
federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement or the Notes
in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any
Illinois state or federal court. Each of the parties hereto irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
SECTION 9.17. Termination of Existing Credit Agreement. The Company and
----------------------------------------
each of the Banks hereunder that is a party to the 1994 Credit Agreement
consents to the termination of the "Commitments" thereunder, effective on the
Effective Date, notwithstanding the notice requirements for such termination set
forth in Section 2.05 of the
-66-
<PAGE>
1994 Credit Agreement. Because such Banks hereunder constitute the "Majority
Banks" (as defined in the 1994 Credit Agreement) under the 1994 Credit
Agreement, the 1994 Credit Agreement shall terminate and all amounts payable
thereunder shall be due and payable on the Effective Date.
SECTION 9.18. Nonliability of Banks. The relationship between the
---------------------
Borrowers on the one hand and the Banks and the Administrative Agent on the
other hand shall be solely that of borrower and lender. Neither the
Administrative Agent, the Arranger nor any Bank shall have any fiduciary
responsibilities to the Borrower. Neither the Administrative Agent, the
Arranger nor any Bank undertakes any responsibility to the Borrowers to review
or inform the Borrowers of any matter in connection with any phase of the
Borrowers' business or operations. Neither the Administrative Agent, the
Arranger nor any Bank shall have any liability with respect to, and the
Borrowers waive, release and agree not to sue for, any special, indirect or
consequential damages suffered by the Borrowers in connection with, arising out
of, or in any way related to this Agreement or the transactions contemplated
thereby.
Remainder of page intentionally left blank
-67-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
R.R. DONNELLEY & SONS COMPANY
By:__________________________________
Title: Assistant Treasurer - Global Corporate Finance
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent and as a Bank
By:__________________________________
Title:
-68-
<PAGE>
BANK OF MONTREAL, as a Bank
By:__________________________________
Title:
-69-
<PAGE>
FIRST UNION NATIONAL BANK, as a Bank
By:__________________________________
Title:
-70-
<PAGE>
NATIONSBANK, N.A., as a Bank
By:__________________________________
Title:
-71-
<PAGE>
CITIBANK N.A., as a Bank
By:__________________________________
Title:
-72-
<PAGE>
THE NORTHERN TRUST COMPANY, as a Bank
By:__________________________________
Title:
-73-
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
CHICAGO BRANCH, as a Bank
By:__________________________________
Title:
-74-
<PAGE>
WACHOVIA BANK, N.A., as a Bank
By:__________________________________
Title:
-75-
<PAGE>
SEAWAY NATIONAL BANK OF CHICAGO, as a Bank
By:__________________________________
Title:
-76-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Domestic Eurocurrency
Name of Bank Commitment Lending Office Lending Office
- -------------- ---------- -------------- --------------
<S> <C> <C> <C>
The First National Bank $ 39,500,000 One First National Plaza
of Chicago Chicago, Illinois 60670
Attention: Deborah Stevens
Suite 088
Phone: 312-732-2532
FAX: 312-732-5161
Bank of Montreal $ 32,000,000 111 West Monroe Street
Chicago, Illinois 60690
Attention:
Phone:
FAX:
First Union National Bank $ 32,000,000
Attention: Peter Steffan
Phone: 704-383-9214
Fax: 704-398-7236
NationsBank, N.A. $ 25,000,000
Attention: Jack Williams
Phone: 704-398-3234
Fax: 704-398-0960
</TABLE>
<PAGE>
Citibank, N.A.
$25,000,000 500 West Madison
35th Floor
Chicago, Illinois 60661
Attention: Carrie Stead
Phone: 312-627-3983
FAX: 312-627-3990
The Northern Trust
Company $25,000,000 50 South LaSalle Street
Chicago, Illinois 60075
Attention: Mark Taylor
11th Floor
Phone: 312-557-1626
FAX: 312-630-5055
The Industrial Bank of
Japan, Limited, Chicago $10,000,000 227 West Monroe Street
Branch Suite 2600
Chicago, Illinois 60606
Attention: Mark Motuelle
Phone: 312-855-8494
FAX: 312-855-8200
-2-
<PAGE>
Wachovia Bank, N.A.
$10,000,000 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Todd Eagle
Phone:
FAX: 404-332-6898
Business and Credit Office:
70 West Madison
Suite 2440
Chicago, Illinois 60602
Attention:
James F. Kinoshita
Phone: 312-795-4331
FAX: 312-853-0693
Seaway National Bank of
Chicago $ 1,500,000 645 East 87th Street
Chicago, Illinois 60619
Attention: Karl Swanson
Phone: 773-602-4101
FAX: 773-487-1850
-3-
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the 364-Day Credit Agreement dated as of December 11,
1998 (as amended or modified from time to time, the "364-Day Credit Agreement")
------------------------
among R.R. Donnelley & Sons Company, a Delaware corporation (the "Company"), the
-------
Banks (as defined in the 364-Day Credit Agreement) parties thereto and The First
National Bank of Chicago, as Administrative Agent for the Banks (the
"Administrative Agent"). Terms defined in the 364-Day Credit Agreement are used
--------------------
herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as
follows:
1. The Assignor sells and assigns to the Assignee, and the Assignee
purchases and assumes from the Assignor, an interest in and to the Assignor's
rights and obligations under the 364-Day Credit Agreement as of the date hereof
(other than in respect of Uncommitted Advances and Uncommitted Notes) equal to
the percentage interest specified on Schedule 1 hereto of all outstanding rights
and obligations under the 364-Day Credit Agreement (other than in respect of
Uncommitted Advances and Uncommitted Notes). After giving effect to such sale
and assignment, the Assignee's Commitment and the amount of the Committed
Advances owing to the Assignee will be as set forth on Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the 364-Day Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the 364-Day Credit Agreement or any other instrument or
document furnished pursuant thereto; (iii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Company or any Borrowing Subsidiary or the performance or observance by the
Company or any Borrowing Subsidiary of any of their respective obligations under
the 364-Day Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iv) attaches the Committed Note held by the Assignor and
requests that the Administrative Agent exchange such Committed Note for a new
Committed Note payable to the order of the Assignee in an amount equal to the
Commitment assumed by the Assignee pursuant hereto or new Committed Notes
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto and the Assignor in an amount equal to
the Commitment retained by the Assignor under the 364-Day Credit Agreement,
respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of the 364-Day
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
------------
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees
<PAGE>
that it will, independently and without reliance upon the Administrative Agent,
the Assignor or any other Bank and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the 364-Day Credit Agreement; (iii) confirms
that it is an Eligible Assignee; (iv) appoints and authorizes the Administrative
Agent to take such action as contractual representative on its behalf and to
exercise such powers and discretion under the 364-Day Credit Agreement as are
delegated to the Administrative Agent by the terms thereof; (v) agrees that it
will perform in accordance with their terms all of the obligations that by the
terms of the 364-Day Credit Agreement are required to be performed by it as a
Bank; and (vi) attaches any U.S. Internal Revenue Service forms required under
Section 2.19 of the 364-Day Credit Agreement.
- ------------
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Company for acceptance and then to the Administrative Agent for
acceptance and recording. The effective date for this Assignment and Acceptance
(the "Effective Date") shall be the date of acceptance hereof by the
--------------
Administrative Agent, unless otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the 364-Day Credit
Agreement and, to the extent provided in this Assignment and Acceptance, have
the rights and obligations of a Bank thereunder and (ii) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the 364-Day Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the 364-Day Credit Agreement and the Notes in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest and facility fees with respect thereto) to the Assignee. The Assignor
and Assignee shall make all appropriate adjustments in payments under the 364-
Day Credit Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
-3-
<PAGE>
SCHEDULE I
to
Assignment and Acceptance
dated _______________
Percentage interest assigned: ___%
Assignee's Commitment: $_____________
Aggregate outstanding principal
amount of Committed Advances
assigned: $_____________
Principal amount of Committed Note
payable to Assignee: $_____________
Principal amount of Committed Note
payable to Assignor: $_____________
Effective Date: _____________, ____
[NAME OF ASSIGNOR],
as Assignor
By:___________________
Title:
Dated:
[NAME OF ASSIGNEE], as
Assignee
By:___________________
Title:
Dated:
Applicable Lending Offices:
Domestic: [address]
Eurocurrency: [address]
Uncommitted
Advances: [address]
Accepted and approved,
-4-
<PAGE>
______________,_____
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By:_____________________
Title:
Accepted and approved,
______________, ____
R.R. DONNELLEY & SONS
COMPANY
By:_____________________
Title:
-5-
<PAGE>
EXHIBIT B
[Form of Assumption Letter]
_____________________, ____
To the Banks parties to the
364-Day Credit Agreement referred
to below
Ladies and Gentlemen:
Reference is made to the 364-Day Credit Agreement dated as of December 11,
1998 among R.R. Donnelley & Sons Company, the Banks named therein and The First
National Bank of Chicago, as Administrative Agent for such Banks (as amended and
in effect from time to time, the "364-Day Credit Agreement"). Terms defined in
the 364-Day Credit Agreement and capitalized herein are used herein as defined
therein.
The undersigned, ___________ (the "Subsidiary"), a _________________
corporation, proposes to become a "Borrowing Subsidiary" under the 364-Day
Credit Agreement, and accordingly agrees that from the date hereof it shall
become a "Borrowing Subsidiary" under the 364-Day Credit Agreement and agrees
that from the date hereof and until the payment in full of the principal of and
interest on all Advances made to it under the 364-Day Credit Agreement and
performance of all of its other obligations thereunder, and termination
hereunder of its status as a "Borrowing Subsidiary" as provided below, it shall
perform, comply with and be bound by each of the provisions of the 364-Day
Credit Agreement which are stated to apply to the "Company", a "Borrowing
Subsidiary" or a "Borrower". Without limiting the generality of the foregoing,
that Subsidiary represents and warrants that: (i) each of the representations
and warranties set forth in Sections 4(a), (b), (c) and (d) of the 364-Day
------------- --- --- ---
Credit Agreement is hereby made by such Subsidiary on and as of the date hereof
as if made on and as of the date hereof and as if such Subsidiary is the
"Company", this Assumption Letter is the "Agreement" referenced therein and each
Note issued by such Borrowing Subsidiary is the "Note" referenced therein, and
(ii) it has heretofore received a true and correct copy of the 364-Day Credit
Agreement (including any modifications thereof or supplements or waivers
thereto) as in effect on the date hereof.
So long as the principal of and interest on all Advances made to the
Subsidiary under the 364-Day Credit Agreement shall have been paid in full and
all other obligations of the Subsidiary shall have been fully performed, the
Subsidiary may by not less than five Business Days' prior notice to the Banks
terminate its status as a "Borrowing Subsidiary."
<PAGE>
The Subsidiary irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any Illinois state court or
federal court of the United States of America sitting in Chicago, Illinois, and
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Assumption Letter, the 364-Day Credit Agreement or the
Notes, or for recognition or enforcement of any judgment, and the Subsidiary
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such Illinois state
court or, to the extent permitted by law, in such federal court. The Subsidiary
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Assumption Letter shall
affect any right that any Bank or the Administrative Agent may otherwise have to
bring any action or proceeding relating to this Assumption Letter, the 364-Day
Credit Agreement or the Notes in the courts of any jurisdiction.
The Subsidiary irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Assumption Letter, the 364-Day Credit Agreement or
the Notes in any Illinois state or federal court. The Subsidiary irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
This Assumption Letter shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
IN WITNESS WHEREOF, the Subsidiary has duly executed and delivered this
Assumption Letter as of the date and year first above written.
[NAME OF BORROWING SUBSIDIARY]
By _______________________________
Title:
Address for Notices under
the 364-Day Credit Agreement:
Consented to:
R.R. DONNELLEY & SONS
COMPANY
By:_______________________
Title:
-2-
<PAGE>
EXHIBIT C
FORM OF DESIGNATION AGREEMENT
Dated _______________, ____
Reference is made to the 364-Day Credit Agreement dated as of December 11,
1998 (as amended or modified from time to time, the "364-Day Credit Agreement")
------------------------
among R.R. Donnelley & Sons Company, a Delaware corporation (the "Company"), the
-------
Banks (as defined in the 364-Day Credit Agreement) parties thereto and The First
National Bank of Chicago, as Administrative Agent for the Banks (the
"Administrative Agent"). Terms defined in the 364-Day Credit Agreement are used
--------------------
herein with the same meaning.
__________________ (the "Designor") and _________________ (the "Designee")
-------- --------
agree as follows:
1. The Designor designates the Designee, and the Designee accepts such
designation, to have a right to make Competitive Bid Advances pursuant to
Section 2.03 of the 364-Day Credit Agreement.
- ------------
2. The Designor makes no representation or warranty and assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the 364-Day Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of, the
364-Day Credit Agreement or any other instrument or document furnished pursuant
thereto; and (ii) the financial condition of the Company or any Borrowing
Subsidiary or the performance or observance by the Company or any Borrowing
Subsidiary of any of their respective obligations under the 364-Day Credit
Agreement or any other instrument or document furnished pursuant thereto.
3. The Designee (i) confirms that it has received a copy of the 364-Day
Credit Agreement, together with copies of the financial statements referred to
in Section 4.01 thereof and such other documents and information as it has
------------
deemed appropriate to make its own credit analysis and decision to enter into
this Designation Agreement; (ii) agrees that it will, independently and without
reliance upon the Administrative Agent, the Designor or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the 364-Day Credit Agreement; (iii) confirms that it is a Designated Bidder;
(iv) appoints and authorizes the Administrative Agent to take such action as
contractual representative on its behalf and to exercise such powers and
discretion under the 364-Day Credit Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; and (v) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the 364-Day Credit Agreement are required to be performed by it as a Bank.
<PAGE>
4. Following the execution of this Designation Agreement by the Designor
and its Designee, it will be delivered to the Company for acceptance and then to
the Administrative Agent for acceptance and recording. The effective date for
this Designation Agreement (the "Effective Date") shall be the date of
--------------
acceptance hereof by the Administrative Agent, unless otherwise specified on the
signature page hereto.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, the Designee shall be a party to the 364-Day Credit
Agreement with a right to make Competitive Bid Advances as a Bank pursuant to
Section 2.03 of the 364-Day Credit Agreement and the rights and obligations of a
- ------------
Bank related thereto.
6. This Designation Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
7. This Designation Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Designation Agreement by telecopier
shall be effective as delivery of a manually executed counterpart of this
Designation Agreement.
IN WITNESS WHEREOF, the Designor and Designee have caused this Designation
Agreement to be executed by their officers thereunto duly authorized as of the
date specified thereon.
Effective Date: ____________________, ____
[NAME OF DESIGNOR],
as Designor
By:_______________________________
Title:
[NAME OF DESIGNEE],
as Designee
By:_______________________________
Title:
Applicable Lending Office (and
address for notices):
-2-
<PAGE>
Accepted and approved,
_____________, ____
THE FIRST NATIONAL BANK
OF CHICAGO
as Administrative Agent
By:_____________________
Title:
Accepted and approved,
______________, ____
R.R. DONNELLEY & SONS
COMPANY
By:_____________________
Title:
-3-
<PAGE>
EXHIBIT D-1
FORM OF COMMITTED NOTE
Dated: _______________, ____
FOR VALUE RECEIVED, the undersigned, [R.R. DONNELLEY & SONS COMPANY, a
Delaware corporation] [NAME OF APPLICABLE BORROWING SUBSIDIARY, a
__________________ corporation] (the "Company"), PROMISES TO PAY to the order of
-------
________________________ (the "Bank") for the account of its Applicable Lending
----
Office on the Termination Date (or, if the Company has made the Term Loan
Election, the Maturity Date) (each as defined in the 364-Day Credit Agreement
referred to below) the aggregate principal amount of the Committed Advances made
by the Bank to the Company pursuant to the 364-Day Credit Agreement dated as of
December 11, 1998 among [the Company] [R.R. Donnelley & Sons Company], the Bank
and certain other banks parties thereto, and The First National Bank of Chicago,
as Administrative Agent for the Bank and such other banks (as amended or
modified from time to time, the "364-Day Credit Agreement"); the terms defined
------------------------
therein being used herein as therein defined) outstanding on the Termination
Date (or, if the Company has made the Term Loan Election, the Maturity Date).
The Company promises to pay interest on the unpaid principal amount of each
Committed Advance made to it from the date of such Committed Advance until such
principal amount is paid in full, at such interest rates, and payable at such
times, as are specified in the 364-Day Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to The First National Bank of Chicago, as Administrative
Agent, at the address specified pursuant to Article II of the 364-Day Credit
Agreement, in same day funds. Each Committed Advance owing to the Bank by the
Company pursuant to the 364-Day Credit Agreement, and all payments made on
account of principal thereof, shall be recorded by the Bank and, prior to any
transfer hereof, endorsed on the grid attached hereto which is part of this
Promissory Note.
This Promissory Note is one of the Committed Notes referred to in, and is
entitled to the benefits of, the 364-Day Credit Agreement. The 364-Day Credit
Agreement, among other things, (i) provides for the making of Committed Advances
by the Bank to the Company from time to time, the indebtedness of the Company
resulting from each such Committed Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
[R.R. DONNELLEY & SONS COMPANY]
[NAME OF APPLICABLE BORROWING
SUBSIDIARY]
<PAGE>
By:____________________________
Title:
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
================================================================================
AMOUNT OF UNPAID
AMOUNT OF PRINCIPAL PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
-3-
<PAGE>
EXHIBIT D-2
FORM OF UNCOMMITTED NOTE
U.S. $_______________ Dated:_______________, ____
FOR VALUE RECEIVED, the undersigned, [R.R. DONNELLEY & SONS COMPANY, a
Delaware corporation] [NAME OF APPLICABLE BORROWING SUBSIDIARY, a
__________________ corporation] (the "Company"), PROMISES TO PAY to the order of
-------
________________________ (the "Bank") for the account of its Applicable Lending
----
Office (as defined in the 364-Day Credit Agreement dated as of December 11, 1998
among [the Company] [R.R. Donnelley & Sons Company], the Bank and certain other
banks parties thereto, and The First National Bank of Chicago, as Administrative
Agent for the Bank and such other banks (as amended or modified from time to
time, the "364-Day Credit Agreement"; the terms defined therein being used
------------------------
herein as therein defined) on _______________, 19__, the principal amount of
U.S.$______________.
The Company promises to pay interest on the unpaid principal amount hereof
from the date hereof until such principal amount is paid in full, at the
interest rate and payable on the interest payment date or dates provided below:
Interest Rate: ____% per annum (calculated on the basis of a year of
_____ days for the actual number of days elapsed).
Interest Payment Date(s):
Both principal and interest are payable in lawful money of the United
States of America to The First National Bank of Chicago, for the account of the
Bank, at the address specified pursuant to Article II of the 364-Day Credit
Agreement, in same day funds.
This Promissory Note is one of the Uncommitted Notes referred to in, and is
entitled to the benefits of, the 364-Day Credit Agreement. The 364-Day Credit
Agreement, among other things, contains provisions for acceleration of the
maturity hereupon upon the happening of certain stated events.
The Company waives presentment, demand, protest and notice of any kind. No
failure to exercise, and no delay in exercising, any rights hereunder on the
part of the holder hereof shall operate as a waiver of such rights.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
[R.R. DONNELLEY & SONS COMPANY]
[NAME OF APPLICABLE BORROWING
SUBSIDIARY]
By:____________________________
Title:
<PAGE>
EXHIBIT E-1
NOTICE OF COMMITTED BORROWING
[Administrative Agent's
name and address]
[Date]
Ladies and Gentlemen:
The undersigned, ________________, refers to the 364-Day Credit Agreement
dated as of December 11, 1998 (as amended, modified or supplemented from time to
time, the "364-Day Credit Agreement", the terms defined therein being used
herein as therein defined), among [the undersigned,] [R.R. Donnelley & Sons
Company (the "Company"], certain Banks parties thereto and The First National
Bank of Chicago, as Administrative Agent for such Banks, and notifies you,
pursuant to Section 2.02 of the 364-Day Credit Agreement, that the undersigned
------------
requests a Committed Borrowing under the 364-Day Credit Agreement, and in that
connection sets forth below the information relating to such Committed Borrowing
(the "Proposed Committed Borrowing") as required by Section 2.02(a) of the 364-
---------------
Day Credit Agreement:
(i) The Business Day of the Proposed Committed Borrowing is
__________, ____.
(ii) The Type of Committed Advances comprising the Proposed Committed
Borrowing is [Base Rate Advances] [Eurocurrency Rate Advances].
(iii) The currency for the Proposed Committed Borrowing is [Dollars]
[type of Alternative Currency].
(iv) The aggregate amount of the Proposed Committed Borrowing is
$__________.
(v) The Interest Period for each Eurocurrency Rate Advance made as
part of the Proposed Committed Borrowing is ______ month[s].
The undersigned certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Committed Borrowing:
(a) the representations and warranties contained in subsections (a),
(b), (c), (d), (f)(ii) and (h) through (p) of Section 4.01 of the 364-Day
------------
Credit Agreement are correct, before and after giving effect to the
Proposed Committed Borrowing and to the application of the proceeds
therefrom, as though made on and as of such date;
<PAGE>
(b) no event has occurred and is continuing, or would result from the
Proposed Committed Borrowing or from the application of the proceeds
therefrom, that constitutes an Event of Default or that would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both; and
(c) the aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to the
Proposed Committed Borrowing and the application of the proceeds thereof)
of [the undersigned] [the Company] and its Subsidiaries does not exceed the
maximum amount thereof presently authorized by [the undersigned's] [the
Company's] Board of Directors.
Very truly yours,
[NAME OF BORROWER]
By: __________________________
Title:
-2-
<PAGE>
EXHIBIT E-2
NOTICE OF UNCOMMITTED BORROWING
_________________________
_________________________
_________________________
[Date]
Attention: ____________________
Ladies and Gentlemen:
The undersigned, _____________, refers to the 364-Day Credit Agreement,
dated as of December 11, 1998 ( as amended, modified or supplemented from time
to time, the "364-Day Credit Agreement", the terms defined therein being used
herein as therein defined), among [the undersigned] [R.R. Donnelley & Sons
Company (the "Company")], certain Banks parties thereto and The First National
Bank of Chicago, as Administrative Agent for such Banks, and notifies you
pursuant to Section 2.03 of the 364-Day Credit Agreement that the undersigned
------------
requests an Uncommitted Borrowing under the 364-Day Credit Agreement, and in
that connection sets forth the terms on which such Uncommitted Borrowing (the
"Proposed Uncommitted Borrowing") is requested to be made:
(A) Date: ___________________
(B) Amount: $___________________
(C) Type of Quote Requested:/1/
Uncommitted Borrowing Margin ___ Fixed Rate ___
(D) Maturity Date: ___________________
Prepayment terms: May [not] be prepaid,
[with] [without] penalty
Prepayment penalty:/2/ ___________________
(E) Interest Payment Date(s): ___________________
(F) Borrower: ___________________
- ----------------------
/1/Select one.
/2/Include if applicable.
<PAGE>
(G) Other terms:
The undersigned certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Uncommitted Borrowing:
(a) the representations and warranties contained in subsections (a),
(b), (c), (d), (f)(ii) and (h) through (p) of Section 4.01 are correct,
before and after giving effect to the Proposed Uncommitted Borrowing and to
the application of the proceeds therefrom, as though made on and as of such
date;
(b) no event has occurred and is continuing, or would result from the
Proposed Uncommitted Borrowing or from the application of the proceeds
therefrom, that constitutes an Event of Default or that would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both;
(c) the aggregate principal amount (or, in the case of securities
issued at a discount from the principal amount at maturity, the accreted
amount) of indebtedness for borrowed money (after giving effect to the
Proposed Uncommitted Borrowing and to the application of proceeds
therefrom) of [the undersigned] [the Company] and its Subsidiaries does not
exceed the maximum amount thereof presently authorized by the Board of
Directors of [the undersigned] [the Company];
The undersigned confirms that the Proposed Uncommitted Borrowing is to be
made available to it in accordance with Section 2.03(a)(iv) of the 364-Day
-------------------
Credit Agreement.
[NAME OF BORROWER]
By: __________________________
Title:
-2-
<PAGE>
EXHIBIT F
FORM OF NOTICE OF CONVERSION OR CONTINUATION
TO: The First National Bank of Chicago, as Administrative Agent (the
"Administrative Agent") under that certain 364-Day Credit Agreement
dated as of December 11, 1998 (the "364-Day Credit Agreement") by and
among R.R. Donnelley & Sons Company (the "Company"), the
Administrative Agent and the Banks parties thereto.
Pursuant to the terms and conditions of the 364-Day Credit Agreement, this
Notice of Conversion or Continuation ("Notice") represents the election of the
Company to [insert one of the following]:
/1/convert $__________ in aggregate principal amount of Base Rate Advances to
Eurocurrency Rate Advances on __________, _____. The initial Interest Period
for such Eurocurrency Rate Advances is requested to be a __________ (_____)
month period. [and]/2/
/3/convert $__________ in aggregate principal amount of Eurocurrency Rate
Advances with a current Interest Period ending _____________ to Base Rate
Advances on __________, _____.
/4/continue as Eurocurrency Rate Advances $__________ in aggregate principal
amount of presently outstanding Eurocurrency Rate Advances with a current
Interest Period ending __________, for a _____ month period commencing on
__________, _____.
Unless otherwise defined herein, terms defined in the 364-Day Credit
Agreement shall have the same meanings in this Notice.
Dated: __________, ____.
[NAME OF BORROWER]
By____________________________
Title:________________________
_____________________
/1/ Use if converting Base Rate Advances to Eurocurrency Rate Advances.
/2/ Use if converting only a portion of Eurocurrency Rate Advances and
continuing the balance as Eurocurrency Rate Advances.
/3/ Use if converting Eurocurrency Rate Advances to Base Rate Advances.
/4/ Use if continuing Eurocurrency Rate Advances.
<PAGE>
EXHIBIT G
Opinion of Counsel to the Company
December 11, 1998
To each of the Banks parties to
the "364-Day Credit Agreement" (as defined below),
and to The First National Bank
of Chicago, as Administrative Agent
Re: R.R. Donnelley & Sons Company
-----------------------------
Ladies and Gentlemen:
We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company"), in connection with the 364-Day Credit Agreement of
even date herewith (the "364-Day Credit Agreement") among the Company, the
financial institutions parties thereto (the "Banks") and The First National Bank
of Chicago, as Administrative Agent, and the transactions contemplated thereby.
This opinion is furnished to you at the request of the Company pursuant to
Section 3.01(a)(v) of the 364-Day Credit Agreement. Capitalized terms used
herein and not otherwise defined are used as defined in the 364-Day Credit
Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the 364-Day Credit
Agreement and the promissory notes delivered on the date hereof to the Banks
signatory to the 364-Day Credit Agreement (the "Notes").
In rendering the opinions set forth herein, we have also examined originals
or copies, certified to our satisfaction, of such (i) certificates of public
officials, (ii) certificates of officers and representatives of the Company, and
(iii) other documents and records, and we have made such inquiries of officers
and representatives of the Company, as we have deemed relevant or necessary as
the basis for such opinions. We have relied as to factual matters upon, and
assumed the accuracy of, such certificates, the representations and warranties
of the Company made in the 364-Day Credit Agreement, and other statements,
documents and records supplied to us by the Company, and we have assumed the
genuineness of all signatures (other than signatures of officers of the Company)
and the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies.
In rendering the opinions set forth herein, we have assumed that:
<PAGE>
The First National Bank of Chicago, et al.
December [11], 1998
Page 2
(i) all the parties to the 364-Day Credit Agreement, other than the
Company, are duly organized, validly existing, and in good standing under the
laws of their respective jurisdictions of organization and have the requisite
corporate power to enter into the 364-Day Credit Agreement; and
(ii) the execution and delivery of the 364-Day Credit Agreement have been
duly authorized by all necessary corporate action and proceedings on the part of
all parties thereto other than the Company; the 364-Day Credit Agreement has
been duly executed and delivered by all parties thereto and constitutes the
valid and binding obligation of all parties thereto other than the Company,
enforceable against such parties in accordance with its terms.
Based upon the foregoing and subject to the qualifications stated herein,
we are of the opinion that, as of the date hereof:
1. The Company has been duly organized and is validly existing and in good
standing under the laws of the State of Delaware. The Company has the requisite
corporate power and authority to conduct its business as currently conducted.
2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the 364-Day Credit Agreement and the
Notes. Such execution, delivery and performance:
(a) have been duly authorized by all necessary and proper corporate action
of the Company,
(b) do not violate any provision of the certificate of incorporation or
by-laws of the Company or require any approval of the Company's
stockholders,
(c) do not violate the General Corporation Law of the State of Delaware,
any law or regulation of the State of Illinois (including, without
limitation, any usury laws) or of the United States of America applicable
to the Company,
(d) do not contravene that certain Indenture dated as of November 1,1990,
between the Company and Citibank, N.A., as Trustee, or, to our knowledge,
any other material agreement or instrument binding on the Company.
3. The 364-Day Credit Agreement constitutes, and from and after the
initial Committed Borrowing the Committed Notes will constitute, the valid and
binding obligations of the Com pany, enforceable in accordance with their
respective terms.
-2-
<PAGE>
The First National Bank of Chicago, et al.
December [11], 1998
Page 3
4. No approval, consent or authorization of, or filing or registration
with, any govern mental department, agency or instrumentality is necessary for
the Company's execution or delivery of the 364-Day Credit Agreement or the
Notes, or for the Company's performance of any of the terms thereof.
Our opinions above are subject to the following qualifications:
(a) Our opinions relating to validity, binding effect and enforceability
in Paragraph 3 above are subject to limitations imposed by any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws affecting creditors' rights generally. In addition, our opinions
relating to enforceability in paragraph 3 above are subject to (i) the effect of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law) and (ii) limitations imposed by public policy under certain
circumstances on the enforceability of provisions indemnifying a party against
liability for its own wrongful or negligent acts. In applying principles of
equity referred to in clause (i) above, a court, among other things, might not
allow a creditor to accelerate maturity of a debt upon the occurrence of a
default deemed immaterial. Such principles applied by a court might include a
requirement that a creditor act reasonably and in good faith.
(b) Certain remedial and waiver provisions of the 364-Day Credit Agreement
may be unenforceable in whole or in part, but the inclusion of such provisions
does not affect the validity of the 364-Day Credit Agreement; however, the
unenforceability of such provisions may result in delays in the enforcement of
the Administrative Agent's and the Banks' rights and remedies under the 364-Day
Credit Agreement (and we express no opinion as to the economic consequences, if
any, of such delays).
(c) We express no opinion as to the effect of the compliance or
noncompliance of the Administrative Agent or any of the Banks with any state or
federal laws or regulations applicable to the Administrative Agent or any of the
Banks because of the Administrative Agent's or any of the Banks' legal or
regulatory status, the nature of the business of the Administrative Agent or any
of the Banks or the qualification of any such party to conduct business in any
jurisdiction.
The foregoing opinions are limited to the laws of the United States, the
State of Illinois and the General Corporation Law of the State of Delaware, and
we express no opinion with respect to the laws of any other state or
jurisdiction.
Whenever in this opinion reference is made to our knowledge, such reference
is to the conscious awareness of Dennis V. Osimitz, Jeffrey S. Rothstein and
Tracey A. Nicastro of information regarding factual matters. With respect to
such matters, such persons have not, with your express permission and consent,
undertaken any investigation or inquiry either of other
-3-
<PAGE>
The First National Bank of Chicago, et al.
December [11], 1998
Page 4
lawyers, files maintained by the firm, or officers or employees of the Company
or any of its Subsidiaries. The reference to "conscious awareness" as used in
this paragraph has the meaning given that phrase in the Third-Party Legal
-----------------
Opinion Report, Including the Legal Opinion Accord, of the Section of Business
- ------------------------------------------------------------------------------
Law, American Bar Association, 47 Bus. Law. 167, 192 (1991).
- -----------------------------
The opinions expressed herein are being delivered to you as of the date
hereof and are solely for your benefit in connection with the transactions
contemplated in the 364-Day Credit Agreement and may not be relied on in any
manner or for any purpose by any other person, nor any copies published,
communicated or otherwise made available in whole or in part to any other person
or entity without our express prior written consent, except that you may furnish
copies thereof to each party that becomes a Bank after the date hereof pursuant
to the 364-Day Credit Agreement, and such parties may rely on this opinion as if
it had been originally addressed to them.
We do not express any opinion, either implicitly or otherwise, on any issue
not expressly addressed in numbered Paragraphs 1 through 4. The opinions
expressed above are based solely on facts, laws and regulations existing and in
effect on the date hereof, and we assume no obligation to revise or supplement
this opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or otherwise,
notwithstanding that such changes may affect the legal analysis or conclusions
contained in this opinion.
Very truly yours,
-4-
<PAGE>
CERTIFICATE
I, ___________________, am the _____________ ___________________ of R.R.
Donnelley & Sons Company, a Delaware corporation (the "Company"). The Company
is entering into a 364-Day Credit Agreement dated as of December 11, 1998, with
the banks party thereto ("Banks") and The First National Bank of Chicago, as
Administrative Agent ("Administrative Agent") for such Banks (the "364-Day
Credit Agreement").
The 364-Day Credit Agreement requires that Sidley & Austin issue a legal
opinion to the Administrative Agent and the Banks. In connection with such
legal opinion, the Company certifies to Sidley & Austin that:
1. Not more than twenty-five percent (25%) of the value of the assets
subject to any "arrangement" (as such term is used in Section 221.2(g)(1) of
Regulation U of the Board of Governors of the Federal Reserve System) under the
364-Day Credit Agreement is represented by "margin stock" (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System).
2. The Company has not granted to the Administrative Agent or the Banks
any direct security for the Company's obligations to the Administrative Agent
and the Banks under the 364-Day Credit Agreement.
R.R. DONNELLEY & SONS COMPANY
By:_______________________
Title:
Dated: December 11, 1998
<PAGE>
EXHIBIT H
Opinion of Counsel to a Borrowing Subsidiary
[Date]
To each of the Banks parties to
the "364-Day Credit Agreement" (as defined below),
and to The First National Bank
of Chicago, as Administrative Agent
Re: [Borrowing Subsidiary]
----------------------
Ladies and Gentlemen:
We have acted as counsel to R.R. Donnelley & Sons Company, a Delaware
corporation (the "Company") and __________________, a ___________ corporation
and Subsidiary of the Company (the "Borrowing Subsidiary"), in connection with
the 364-Day Credit Agreement dated as of December 11, 1998 (as the same has been
or may be amended, modified or supplemented, the "364-Day Credit Agreement")
among the Company, the financial institutions parties thereto (the "Banks") and
The First National Bank of Chicago, as Administrative Agent, and the
transactions contemplated thereby.
This opinion is furnished to you at the request of the Company pursuant to
Section 3.02(d) of the 364-Day Credit Agreement. Capitalized terms used herein
and not otherwise defined are used as defined in the 364-Day Credit Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the 364-Day Credit
Agreement, the Assumption Letter of even date herewith executed by the Borrowing
Subsidiary and delivered to the Banks (the "Assumption Letter") and the
promissory notes executed by the Borrowing Subsidiary on the date hereof and
delivered to the Banks (the "Notes").
In rendering the opinions set forth herein, we have also examined originals
or copies, certified to our satisfaction, of such (i) certificates of public
officials, (ii) certificates of officers and representatives of the Company and
the Borrowing Subsidiary (including the certificate attached hereto (the
"Certificate")), and (iii) other documents and records, and we have made such
inquiries of officers and representatives of the Company and the Borrowing
Subsidiary, as we have deemed relevant or necessary as the basis for such
opinions. We have relied as to factual matters upon, and assumed the accuracy
of, such certificates, the representations and warranties of the Company and the
Borrowing Subsidiary made (or deemed made) in the 364-Day Credit Agreement and
the Assumption Letter, and other statements, documents and records
<PAGE>
supplied to us by the Company and the Borrowing Subsidiary, and we have assumed
the genuineness of all signatures (other than signatures of officers of the
Borrowing Subsidiary) and the authenticity of all documents submitted to us as
originals and the conformity to original documents of all documents submitted to
us as certified or photostatic copies.
In rendering the opinions set forth herein, we have assumed that:
(i) all the parties to the 364-Day Credit Agreement and the Assumption
Letter, other than the Borrowing Subsidiary, are duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization and have the requisite corporate power to enter into the 364-Day
Credit Agreement and the Assumption Letter; and
(ii) the execution and delivery of the 364-Day Credit Agreement have been
duly authorized by all necessary corporate action and proceedings on the part of
all parties thereto; the 364-Day Credit Agreement has been duly executed and
delivered by all parties thereto and constitutes the valid and binding
obligation of all parties thereto, other than the Borrowing Subsidiary,
enforceable against such parties in accordance with its terms.
Based upon the foregoing and subject to the qualifications stated herein,
we are of the opinion that, as of the date hereof:
1. The Borrowing Subsidiary has been duly organized and is validly
existing and in good standing under the laws of _____________. The Borrowing
Subsidiary has the requisite corporate power and authority to conduct its
business as currently conducted.
2. The Borrowing Subsidiary has the requisite corporate power and
authority to execute, deliver and perform its obligations under the Assumption
Letter, the 364-Day Credit Agreement and the Notes. Such execution, delivery
and performance:
(a) have been duly authorized by all necessary and proper corporate action
of the Borrowing Subsidiary,
(b) do not violate any provision of the certificate of incorporation or by-
laws of the Borrowing Subsidiary or require any approval of the Borrowing
Subsidiary's stockholders,
(c) will not violate any law or regulation of ____________, the State of
Illinois (including, without limitation, any usury laws) or of the United
States of America applicable to the Borrowing Subsidiary/1/, and
(d) do not contravene any agreement set forth on the Certificate, or, to
our knowledge, any other material agreement or instrument binding on the
Borrowing Subsidiary.
_____________________
/1/ To be revised if the Borrowing Subsidiary is not a domestic corporation.
<PAGE>
3. The Assumption Letter constitutes, and from and after the initial
Committed Borrowing to the Borrowing Subsidiary, the Notes will constitute, the
valid and binding obligations of the Borrowing Subsidiary, enforceable in
accordance with their respective terms.
4. No approval, consent or authorization of, or filing or registration
with, any governmental department, agency or instrumentality is necessary for
the Borrowing Subsidiary's execution or delivery of the Assumption Letter or the
Notes, or for the Borrowing Subsidiary's performance of any of the terms
thereof.
Our opinions above are subject to the following qualifications:
(a) Our opinions relating to validity, binding effect and enforceability
in Paragraph 3 above are subject to limitations imposed by any applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar laws affecting creditors' rights generally. In addition, our opinions
relating to enforceability in paragraph 3 above are subject to (i) the effect of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law) and (ii) limitations imposed by public policy under certain
circumstances on the enforceability of provisions indemnifying a party against
liability for its own wrongful or negligent acts. In applying principles of
equity referred to in clause (i) above, a court, among other things, might not
allow a creditor to accelerate maturity of a debt upon the occurrence of a
default deemed immaterial. Such principles applied by a court might include a
requirement that a creditor act reasonably and in good faith.
(b) Certain remedial and waiver provisions of the 364-Day Credit Agreement
applicable to the Borrowing Subsidiary pursuant to the Assumption Letter may be
unenforceable in whole or in part, but the inclusion of such provisions does not
affect the validity of the Assumption Letter; however, the unenforceability of
such provisions may result in delays in the enforcement of the Administrative
Agent's and the Banks' rights and remedies under the Assumption Letter (and we
express no opinion as to the economic consequences, if any, of such delays).
(c) We express no opinion as to the effect of the compliance or
noncompliance of the Administrative Agent or any of the Banks with any state or
federal laws or regulations applicable to the Administrative Agent or any of the
Banks because of the Administrative Agent's or any of the Banks' legal or
regulatory status, the nature of the business of the Administrative Agent or any
of the Banks or the qualification of any such party to conduct business in any
jurisdiction.
The foregoing opinions are limited to the laws of the United States, the
State of Illinois and the corporate law of [jurisdiction where the Borrowing
Subsidiary is incorporated] and we express no opinion with respect to the laws
of any other state or jurisdiction.
[Whenever in this opinion reference is made to our knowledge, such
reference is to the conscious awareness of [insert appropriate names] of
information regarding factual matters. With respect to such matters, such
persons have not, with your express permission and consent, undertaken any
investigation or inquiry either of other lawyers, files maintained by the firm,
or officers or employees of the Company or any of its Subsidiaries (including
without limitation the
<PAGE>
Page 4
Borrowing Subsidiary). The reference to "conscious awareness" as used in this
paragraph has the meaning given that phrase in the Third-Party Legal Opinion
Report, Including the Legal Opinion Accord, of the Section of Business Law,
American Bar Association, 47 Bus. Law. 167, 192 (1991).]
The opinions expressed herein are being delivered to you as of the date
hereof and are solely for your benefit in connection with the transactions
contemplated in the 364-Day Credit Agreement and may not be relied on in any
manner or for any purpose by any other person, nor any copies published,
communicated or otherwise made available in whole or in part to any other person
or entity without our express prior written consent, except that you may furnish
copies thereof to each party that becomes a Bank after the date hereof pursuant
to the 364-Day Credit Agreement, and such parties may rely on this opinion as if
it had been originally addressed to them.
We do not express any opinion, either implicitly or otherwise, on any issue
not expressly addressed in numbered Paragraphs 1 through 4. The opinions
expressed above are based solely on facts, laws and regulations existing and in
effect on the date hereof, and we assume no obligation to revise or supplement
this opinion should such facts change or should such laws or regulations be
changed by legislative or regulatory action, judicial decision or otherwise,
notwithstanding that such changes may affect the legal analysis or conclusions
contained in this opinion.
Very truly yours,
-4-
<PAGE>
CERTIFICATE
I, ___________________, am the _____________ ___________________ of [Borrow
ing Subsidiary], a __________ corporation (the "Borrowing Subsidiary"). The
Borrowing Subsidiary is entering into an Assumption Letter dated as of
_____________, 19__, pursuant to which it will become a party to the 364-Day
Credit Agreement dated as of December 11, 1998 among R.R. Donnelley & Sons
Company (the "Company"), the banks party thereto ("Banks") and The First
National Bank of Chicago, as Administrative Agent ("Administrative Agent") for
such Banks (the "364-Day Credit Agreement").
The 364-Day Credit Agreement requires that [name of law firm] issue a legal
opinion to the Administrative Agent and the Banks. In connection with such legal
opinion, the Company certifies to [name of law firm] that:
1. Not more than twenty-five percent (25%) of the value of the assets
subject to any "arrangement" (as such term is used in Section 221.2(g)(1) of
Regulation U of the Board of Governors of the Federal Reserve System) under the
364-Day Credit Agreement is represented by "margin stock" (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve
System).
2. The Borrowing Subsidiary has not granted to the Administrative Agent or
the Banks any direct security for the Company's or the Borrowing Subsidiary's
obligations to the Administrative Agent and the Banks under the 364-Day Credit
Agreement.
3. There is no material agreement or instrument binding on the Borrowing
Subsidiary that governs or evidences indebtedness for borrowed money or would
affect the Borrowing Subsidiary's ability to perform its obligations under the
Assumption Letter, the 364-Day Credit Agreement or the Notes, except:
a. _______________________
b. _______________________
c. _______________________
[BORROWING SUBSIDIARY]
By:_______________________
Title:
Dated: _____________________
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Earnings
Earnings before Income Taxes 509,305 190,171 (110,480)
Interest Expense 78,166 90,765 95,482
Interest factor in operating leases (1) 13,999 10,421 7,825
Amortization capitalized interest 7,535 7,969 7,354
----------------------------
Earnings available for fixed charges 609,005 299,236 181
Fixed Charges
interest expense 78,166 90,765 95,482
capitalized interest 4,996 9,959 11,716
----------------------------
interest incurred 83,162 100,724 107,198
interest factor in operating leases (1) 13,999 10,421 7,825
----------------------------
Total fixed charges 97,161 111,145 115,023
Ratio of earnings to fixed charges 6.27 2.69 0.00
</TABLE>
(1) Management estimates one-third of current year operating lease payments to
be the interest factor in such rentals.
<PAGE>
Form 10-K
Year Ended 12/31/98
EXHIBIT 21
SUBSIDIARIES OF R. R. DONNELLEY & SONS COMPANY
(As of March 29, 1999)
Subsidiaries of R. R. Donnelley & Sons Company Place of Incorporation
- ---------------------------------------------- ----------------------
Allentown S. H. Leasing Company Delaware
C & E Transport, Inc. Delaware
Caslon Incorporated Delaware
Chemical Equipment S. H. Leasing Company Delaware
Corporate Software and Technologies Holdings, Inc. Delaware
Donnelley Carribean Graphics, Inc. Delaware
Donnelley Holdings, Limited Delaware
Donnelley International, Inc. Delaware
Donnelley Satellite Services, Limited Delaware
Donnelley Satellite Graphics, Limited Delaware
FFH Corporation Delaware
HCI Holdings, Inc. Delaware
Haddon Craftsmen, Inc. Delaware
Kittyhawk S. H. Leasing Company Delaware
Mobium Corporation Delaware
Pan Associates L. P. Delaware
R. R. Donnelley Far East Limited Delaware
R. R. Donnelley Mendota, Inc. Delaware
R. R. Donnelley Printing Company Delaware
R. R. Donnelley Printing Company, L. P. Delaware
R. R. Donnelley (Chile) Holdings, Inc. Delaware
R. R. Donnelley (Europe) Limited Delaware
R. R. Donnelley (Santiago) Holdings, Inc. Delaware
Siegwerk Sales & Services L. P. Delaware
Stream International Inc. Delaware
Wyoming Avenue Holdings, Inc. Delaware
77 Capital Partners II, L. P. Delaware
Lakeside Printing Company Illinois
European-American Ink Sales Corporation Iowa
M/B Companies, Inc. Iowa
Housenet, Inc. Maryland
R. R. Donnelley Receivables, Inc. Nevada
R. R. Donnelley Seymour, Inc. New Jersey
R. R. Donnelley Norwest Inc. Oregon
Heritage Preservation Corporation South Carolina
<PAGE>
Page 2
Form 10-K
Year Ended 12/31/98
EXHIBIT 21
Subsidiaries of R. R. Donnelley & Sons Company Place of Incorporation
- ---------------------------------------------- ----------------------
R. R. Donnelley Sales Corporation Barbados
Cromoscan S. A. Argentina
Distribuidora de Revistas Bertran, S. A. C. Argentina
R. R. Donnelley (Barbados) Limited Barbados
Editora Cochrane Brasil Limitada Brasil
R. R. Donnelley (Canada) Limited Canada (Ontario)
Editorial Lord Cochrane, S. A. Chile
R. R. Donnelley (Chile) Holdings Inc. y Compania Chile
R. R. Donnelley (Santiago) Holdings Inc. y Compania Chile
Taller Uno S. A. Chile
Distribuidora Alfa S. A. Chile
Atlantida Cochrane S. A. Chile
Barnicos Graficos Limitada Chile
Distribuidora San Joaquin S. A. Chile
Estudio y Laboratorio Fotografico Taller Uno S. A. Chile
Sociedad Producta de Directorio S. A. Chile
Shenzhen Donnelley Bright Sun Printing Co. Republic of China
Donnelley Information Systems Limited India
R. R. Donnelley (India) Pvt Ltd India
R. R. Donnelley Printing (France) SARL France
R. R. Donnelley Deutschland GmbH Germany (Frankfort)
R. R. Donnelley Financial (Hong Kong) Limited Hong Kong
R. R. Donnelley (Mauritius) Holdings Ltd Mauritius
Editorial Eclipse, S. A. de C. V. Mexico
Laboratorio Lito Color S. A. de C. V. Mexico
R. R. Donnelley (Mexico) S. A. de C. V. Mexico
Impresora Donneco Internacional, S. A. de C. V. Mexico
R. R. Donnelley Nederland B. V. The Netherlands
DPA Printing Company, sp. zo. o Poland
R. R. Donnelley U. K. Marketing Services Ltd. United Kingdom
R. R. Donnelley (U. K.) Limited United Kingdom
Ben Johnson & Co., Ltd. United Kingdom
Ben Johnson (Dunstable) Limited United Kingdom
R. R. Donnelley Limited United Kingdom
<PAGE>
EXHIBIT 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated January 28, 1999, included in this Annual Report
of R.R. Donnelley & Sons Company on Form 10-K for the year ended December 31,
1998, into the Company's previously filed Registration Statements on Form S-8
(File Nos. 33-19803, 33-43632, 33-49431, 33-49809, 33-52805, and 33-61387), Form
S-3 (33-57807 and 333-44303) and previously filed post-effective amendments
thereto.
/s/ Arthur Andersen LLP
Chicago, IL
March 31, 1999
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 66,226
<SECURITIES> 0
<RECEIVABLES> 857,373
<ALLOWANCES> 14,279
<INVENTORY> 182,931
<CURRENT-ASSETS> 1,144,993
<PP&E> 4,368,754
<DEPRECIATION> 2,667,827
<TOTAL-ASSETS> 3,787,819
<CURRENT-LIABILITIES> 898,300
<BONDS> 998,978
0
0
<COMMON> 308,462
<OTHER-SE> 992,416
<TOTAL-LIABILITY-AND-EQUITY> 3,787,819
<SALES> 5,018,436
<TOTAL-REVENUES> 5,018,436
<CGS> 3,960,239
<TOTAL-COSTS> 4,610,085
<OTHER-EXPENSES> (10,217)
<LOSS-PROVISION> (168,903)
<INTEREST-EXPENSE> 78,166
<INCOME-PRETAX> 509,305
<INCOME-TAX> 214,725
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294,580
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.08
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