FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1994
Commission file number 1-3970
HARSCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
23-1483991
(I.R.S. employer identification number)
Camp Hill, Pennsylvania
(Address of principal executive offices)
17001-8888
(Zip Code)
Registrant's telephone number, including area code 717-763-7064
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common stock, par value $1.25 per share
Name of each exchange on which registered
New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sub Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. (X)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES (X) NO ( )
The aggregate market value of the Company's voting stock held by non-
affiliates of the Company as of March 6, 1995 was $1,072,211,000.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Classes
Common stock, par value $1.25 per share
Preferred stock purchase rights
Outstanding at March 6, 1995
25,228,491
25,228,491
Documents Incorporated by Reference
Selected portions of the 1994 Annual Report to Shareholders are incorporated
by Reference in Parts I, II and IV of this Report.
Selected portions of the Notice of 1995 Meeting and Proxy Statement dated
March 22, 1995 are Incorporated by Reference in Part III of this Report.
The Exhibit index (Item No. 14) is located on pages 17 to 25.
HARSCO CORPORATION AND SUBSIDIARY COMPANIES
INFORMATION REQUIRED IN REPORT
PART I
Item 1. Business:
(a) Description of Business:
The operations of Harsco Corporation (Harsco or the Company) are broadly
diversified and include products serving thousands of customers engaged in
steel, industrial, commercial, construction and infrastructure applications.
The Company primarily serves its customers through its own salaried sales
forces and independent manufacturers' representatives, commission agents and
distributors. Harsco utilizes both Company-owned and leased sales offices and
warehouses. There were several changes in products and services, but not in
methods of distribution during the 1994 fiscal year.
Effective January 1, 1994, the industry groups of the Company were changed
from Industrial Services and Building Products; Engineered Products; and
Defense to three new operating Groups: Metal Reclamation and Mill Services;
Infrastructure, Construction and Transportation; and Process Industry
Products. The new Operating Groups were formed by the Company due to: (1)
the fact that the Company is no longer directly involved in the Defense
business because of the formation of United Defense, L.P., effective January
1, 1994, to which the Company contributed its military tracked vehicle
business and has an equity interest of 40% in the partnership, and the
completion of the five-ton truck contract with the U.S. Government and related
conversion to a school bus business in 1993; and (2) because of the 1993
acquisition of MultiServ International, N.V., which substantially increased
the Company's presence in metal reclamation and mill services. This
significant strategic refocusing of the Company necessitated the new Group
structure. Except for Defense, because it is no longer a Group, the Company
restated all the Operating Groups for the periods presented.
The Company's operations are conducted through 10 divisions, each of which has
its own executive, supervisory and operating personnel. Each division has
general responsibility for its own activities, including marketing. At the
Company's headquarters, an executive management group, most of whom have been
associated with the Company for many years, manages and provides leadership
for business activities. This management group is responsible for
establishing basic Company policy and strategic direction, especially in the
areas of long-range planning, capital expenditures and finance, and, in
addition, makes available to operating personnel technical assistance in a
number of specialized fields.
During 1994, the Company entered into four letters of intent to provide
specialized services for steel producers located in North and South America,
most of which are expected to start operations in 1995. Heckett MultiServ-
East started full operations during the third quarter in Russia at the largest
steel works in the world with the largest metal recovery plant it ever
installed and achieved profitability in the fourth quarter. Three new steel-
mill service contracts were signed with French steel producers, and agreements
for service contracting were also entered into in South Africa, Saudi Arabia
and Bahrain; these contracts are expected to be started in 1995.
In railway maintenance equipment, expenditures for research and development
for new and redesigned products were four times 1993's level, and work
progressed on several multi-year, multi-million dollar rail service contracts
for major North American railroads. In scaffolding, shoring and concrete
forming equipment, market share for infrastructure maintenance contracts for
petrochemical and process industry applications expanded, and a scaffolding
safety training school in New Orleans was opened to ensure worker compliance
with OSHA regulations.
Several new and redesigned products were brought to market in process
equipment. The Tulsa, Oklahoma, production facility for air-cooled heat
exchangers was expanded to accommodate ongoing record demand from the natural
gas industry worldwide. In February 1995, the Company acquired Fabsco, Inc.,
headquartered in Sapulpa, Oklahoma, a producer of heat exchange products which
generates annual sales of about $22 million to the process industry cooler
market. This transaction has provided added production capacity to meet the
heavy demand for these products, as well as immediate synergies when combined
with the Company's existing air-cooled heat exchanger business. The total
consideration was $14.6 million in cash and assumed liabilities. During the
fourth quarter of 1994, the United Kingdom-based industrial heating equipment
line was divested to a management group.
Plant capacity was expanded in Lockport, New York, for production of the new
innovative propane valve. International Standards Organization (ISO)
certification was awarded to two valve production facilities, as well as to
two pipe fittings locations and to the Alabama-based cryogenics manufacturing
plant.
The headquarters for gas containment products was relocated to Camp Hill,
Pennsylvania. Enhanced products included the CO2 Liquidator for beverage
carbonation applications in the fast food and restaurant industries. The new
line of NGVFUELTANKS, which are currently being installed for use in U.S.
Postal Service vehicles, continued to gain momentum. In the first half of
1994, the Company decided to exit the pre-stressed concrete forms line of
business and offered it for sale at the Plant City, Florida, location.
In November 1994, the Board of Directors authorized the Company to exit from
the school bus business. A provision for the net realizable value of school
bus assets was recorded in the fourth quarter. The school bus product line
started up in 1993, and three models of buses were manufactured. The
Company's original strategy of producing school buses and military trucks on
parallel assembly lines was frustrated by failure to obtain orders for several
thousand M939A2 five-ton trucks from certain Middle Eastern countries due to
international defense budget constraints. As a result, the Division would not
meet Harsco's strategic requirements of producing consistent, superior
financial results, and the Company is implementing its plan to close or sell
the business early in 1995.
Effective January 1, 1994, Harsco and FMC Corporation formed a joint venture,
United Defense, L.P., by combining the BMY-Combat Systems Division with FMC's
Defense Systems Group. Harsco obtained a 40% ownership in United Defense,
L.P., which achieved $1 billion in revenues in 1994. Harsco's share of pre-
tax income was $61.9 million.
In July 1994, United Defense earned sole source approval to lead an industry
team into the $1 billion, five-year demonstration/validation phase of the
Crusader Advance Field Artillery System (AFAS) development program. United
Defense sustained its leadership in other artillery products as well with the
delivery of the first M109A6 Paladin howitzer, produced by United Defense's
Paladin Production Division (PPD). Over the next four years, United Defense
will produce some 650 additional Paladin units for the U.S. Army under a $329
million, full-scale production contract.
Production of the new M88 Improved Recovery Vehicle (IRV) was launched with
the receipt of orders from both the U.S. Army and the Kingdom of Kuwait,
comprising 42 vehicles and totaling more than $90 million. A $280 million
contract for engineering and manufacturing development of a new A3
configuration Bradley Infantry Fighting Vehicle underscores that vehicle's
continued viability for many years. United Defense is also under contract to
upgrade some 250 earlier A0 models to the current A2 production configuration.
(b) Financial Information about Industry Groups:
Financial information concerning Industry Groups is included in Note 16 to the
consolidated financial statements of the 1994 Annual Report to Shareholders
under Exhibit 13.
(c) Narrative Description of Business:
(1) A narrative description of the businesses by Operating Group is as
follows:
Metal Reclamation and Mill Services
Under metal reclamation the Company provides specialized services to steel
producers and other nonferrous metallurgical industries worldwide which
includes metal reclamation, scrap handling, cleaning of slag pits, handling of
raw material and molten slag, filling and grading of specified areas and the
renting of various types of plant equipment. Highly specialized recovery and
cleaning equipment, installed and operated on the property of steel producers,
together with standard materials handling equipment, including drag lines,
cranes, bulldozers, tractors, hauling equipment, lifting magnets and buckets,
are employed to reclaim metal. The customer uses this metal in lieu of steel
scrap and makes periodic payments to the Company based upon the amounts of
metal reclaimed. The nonmetallic residual slag is graded into various sizes
at on-site Company-owned processing facilities and sold commercially. Graded
slag is used as an aggregate material in asphalt paving applications, railroad
ballast and building blocks. The Company also provides in-plant
transportation and other specialized services including slab management
systems, scrap management, iron making services, general plant services,
recycling technology, and non-ferrous metallurgical industry services.
This industry group includes the Eastern and Western Regions of the Heckett
MultiServ Division which operates in 29 countries.
In October, the Western Region signed a letter of intent with Ipsco Steel
Inc., to perform specialized services at a new greenfield steel production
facility located in Camanche, Iowa. The Western Region will provide slag
handling, metal reclamation and other services, in addition to installing a
complete scrap management system at this new mill. This ten-year agreement,
which has probable annual revenues exceeding $8.0 million, should be
operational during the first quarter of 1996.
Heckett MultiServ-West is scheduled to begin operations at the Hylsa, Flat
Products Division located in Monterrey, Mexico, during the first quarter of
1995. This 15-year agreement calls for scrap handling and metal reclamation
services and has estimated annual revenues of $6.0 million. Due to changed
operating conditions which were inconsistent with contract terms, the Western
Region ceased operations at another steel site in Mexico during December 1994.
In Venezuela, the Company recently entered into a letter of intent for scrap
processing services at a mini mill. This three-year agreement has an
anticipated start up in late 1995.
All other contracts up for renewal in 1994 were successfully renegotiated, and
the Western Region is currently renegotiating several contracts that expire in
1995. Heckett MultiServ has a contract renewal rate in excess of 90%.
In other new contracts, the Eastern Region received a seven-year contract for
slag hauling and metal recovery services at a stainless steel production
facility in France. The Company also entered into an eight-year agreement
with another French steel producer to install the world's most advanced
scarfing machine for high-temperature scarfing services. This operation is
scheduled to be underway late in 1995 and has estimated annual revenues
exceeding $2.0 million. The Eastern Region also was awarded a two-year
contract for scrap baling services at another steel site in France.
In South Africa, the Eastern Region entered into a ten-year contract at a new
steel mill to provide internal scrap collection, scrap cutting, melt shop and
pot carrier services and refractory crushing services, which should start up
during the first half of 1995. Heckett MultiServ-East also received a letter
of intent to perform dross processing services for a producer of aluminum,
located in Bahrain.
The Company ceased operations at two European steel sites in 1994, but these
closures are not expected to have a material adverse effect on future
performance.
For 1994, the percentage of consolidated net sales for metal reclamation and
mill services was 38%.
Infrastructure, Construction and Transportation
Major product classes in this Group are wheeled vehicles (military trucks and
school buses), railway maintenance equipment, industrial grating products, and
scaffolding, shoring and concrete forming equipment. This Group also provides
roofing granules and slag abrasives and miscellaneous products.
In 1994, the Company produced a limited quantity of five-ton trucks due to a
lack of additional orders from the U.S. Government and international
customers. The school bus business, started in 1993, had increased orders,
but sustained continuing operating losses and in November 1994, the Board of
Directors authorized the Company to exit the school bus business. The Company
recognized an asset impairment charge of $8.0 million for the write down of
the bus business assets in the fourth quarter.
The Company's product class of railway maintenance equipment includes track
machinery, which services private and government-owned railroads and urban
transit systems. This machinery is classified in the categories of sleeper
renewal, spike driving, Hy-Rail, rail grinding, tamping, ballast maintenance,
track renewal, track geometry, utility vehicle and rail and overload line
equipment. Increased capital investment in contract service equipment was
ongoing to accommodate the higher demand for service work from North American
railroads. The Company is working on several multi-year, multi-million dollar
service contracts, as outsourcing among major railroads continues.
Fairmont Tamper completed work on a Pony Track Renewal System for Japan
Railways East, under a contract valued at over $5 million, which was delivered
in January 1994, and will be used to upgrade railroad track in that country
over a course of 125 kilometers. At year-end, the backlog was ahead of that
at December 31, 1993.
Harsco manufactures a varied line of industrial grating products at numerous
plants in North America. The Company produces riveted, pressure-locked and
welded grating in steel and aluminum, used mainly in industrial flooring
applications for power, paper, chemical, refining and processing applications,
among others. The Company also produces varied products for bridge and
decking uses, as well as fiberglass grating used principally in the process
industries.
Several significant orders for bridge repair work were received, primarily in
states on the East and West Coasts, and work on a historic bridge in
Pittsburgh, Pennsylvania was completed. Also, orders were received from the
U.S. Navy for ship maintenance and for a communication tower and future
opportunities are anticipated in the maritime market. The Company introduced
a new welded fencing product and pursued several research and development
projects during 1994.
The Group's scaffolding, shoring and concrete forming operations include steel
and aluminum support systems that are leased or sold to customers through a
North American network of some 40 branch offices. Several large projects of
interest in 1994, include the new convention center in Charlotte, North
Carolina, restoration and repair of Seattle's Kingdome Arena, repair of the
four pinnacles at The National Cathedral in Washington D.C., and housing for
the 1996 Olympic Games in Atlanta. The Company also worked on the conversion
project of the ENSEARCH off-shore, semi-submersible oil rig and obtained a
multi-year contract to provide boiler maintenance work for the Eastern
Division of the Tennessee Valley Authority.
Slag abrasives and roofing granules are products from utility coal slag and
are processed at 15 locations in 12 states. Slag abrasives are used for
industrial surface preparation and cleaning of bridges, ship hulls and various
structures. Roofing granules are sold to roofing shingle manufacturers. Slag
abrasives was used for the refurbishment of the grandstands at the
Indianapolis Speedway, for the rehabilitation of aging steel structures that
elevate rail lines of the Chicago Transit System, and for the repair of
several major bridges in New York City. The Black Beauty product line was
marketed as a decorative aggregate to the pre-stressed concrete industry.
For 1994, percentages of consolidated net sales of certain product classes
were as follows: scaffolding, shoring and concrete forming equipment, 8%;
railway maintenance equipment, 8%; grating, 7%, wheeled vehicles, 3%; roofing
granules, slag abrasives and miscellaneous, 3%.
Process Industry Products
Major product classes in this Group are gas control and containment, pipe
fittings, process equipment. Other classes include composite products, metal
fabrication and wear products.
Gas containment products include propane tanks, cryogenic equipment, high
pressure cylinders, and composite products, while gas control products include
valves and regulators serving a variety of markets. At the California-based
facility where the Company is the world's leading producer of composite
cylinders, the new line of NGVFUELTANKS continued to gain market acceptance
with an additional order for over 1,200 cylinders for vehicle conversion.
The enhanced CO2 Liquidator, which stores carbon dioxide in liquid form and
dispenses it as gas to provide carbonation for soft drinks, gained momentum in
the fast-food restaurant industry. At the production facility in Husum,
Germany, the line of POLARSTREAM, an alternative, ozone-free refrigeration
system used for temperature-controlled transport of perishable food for
chemicals, was brought to market.
Under the valves and regulators product line, an innovative propane cylinder
valve for 20-pound cylinders on gas grills and a unique disposable valve for
refrigerant reclamation and recycling continue to gain in the market place.
The propane valve is the Barbecue Grill Standard in Canada because of its
improved safety and convenience.
A new scuba regulator, the Minimus(Registered Trademark), which is 35% smaller
than standard octopus units for handling ease and protection of sea life, was
brought to market. In research and development, the Company worked on new
refrigerant valves, a propane regulator and evolutionary modifications to the
new line of innovative propane valves and also strengthened its market
presence in medical valves.
Harsco's diverse product class of process equipment includes these product
lines: heat transfer equipment, mass transfer equipment, air-cooled heat
exchangers, process equipment, protective linings and wear products, including
bar, plate and fabrication, and manganese products.
Demand for the Thermific boiler was again at a record level, paced by
commercial, institutional building and retrofit market. The new line of BLEND
MASTER lab blender, brought to market early in the year, witnessed strong
demand. The redesigned P-K COMPACT water heater was introduced, as was Pre-
Krete 20, a tank lining for potable water with a 20-year guarantee against
internal corrosion. Several adaptations of the Thermific boiler were underway
during the year in various research and development programs.
The Company is a major supplier of pipe fittings for the plumbing, industrial,
hardware and energy industries and produces a variety of product lines,
including forged and stainless steel fittings, conduit fittings, nipples and
couplings. In its first full year, the line of swaged nipples and bull plugs,
manufactured in Houston for the oil and gas industries, turned in a strong
performance. Capitol Manufacturing received ISO 9002 approval for its
Connecticut facility and ISO 9003 certification for the Canadian location
during the year. Partnering agreements with several major distributors to be
the sole-source supplier were entered into in 1994.
For 1994, percentages of consolidated net sales of certain product classes
were as follows: gas control and containment, 15%; pipe fittings, 7%; process
equipment, 7%; and three others, including structural composites, specialty
metal fabrications and wear products, 4%.
(1) (i) The products and services of Harsco can be divided into a number
of classes. The product classes that contributed 10% or more as a percentage
of consolidated net sales in either of the last three fiscal years are as set
forth in the following table.
<TABLE>
<CAPTION>
1994 1993 1992
____ ____ ____
<S> <C> <C> <C>
Wheeled Vehicles 3% 8% 24%
Tracked Vehicles - 24 24
Gas Control and Containment 15 13 11
Metal Reclamation and Mill Services 38 19 10
</TABLE>
(1) (ii) New products and services are added from time to time; however,
currently none require the investment of a material amount of the Company's
assets.
(1) (iii) The manufacturing requirements of the Company's operations are
such that no unusual sources of supply for raw materials are required. The
raw materials used by the Company include steel and aluminum which usually are
readily available.
(1) (iv) While Harsco has a number of trademarks, patents and patent
applications, it does not consider that any material part of its business is
dependent upon them.
(1) (v) Harsco furnishes building products and materials and a wide
variety of specialized equipment for commercial, industrial, public works and
residential construction which are seasonal in nature. In 1994, construction
related operations accounted for 11% of total sales.
(1) (vi) The practices of the Company relating to working capital items
are not unusual compared with those practices of other manufacturers servicing
mainly industrial and commercial markets.
(1) (vii) No material part of the business of the Company is dependent
upon a single customer or a few customers, the loss of any one of which would
have a material adverse effect upon the Company.
Sales to U.S. Government agencies in 1994 amounted to less than 1% of
total sales. Sales to U.S. Government agencies in 1993 and 1992 amounted to
21%, and 35% of the total sales, respectively. The decrease is due to the
formation of United Defense L.P., effective January 1, 1994, to which the
Company contributed its military tracked vehicle business and the completion
of the five-ton truck contract with the U.S. Government.
(1) (viii) Backlog of orders stood at $163,761,000 and $146,751,000 as of
December 31, 1994 and 1993, respectively. It is expected that approximately
10% of the total backlog at December 31, 1994, will not be filled within 1995.
Excluded from the 1993 backlog is $397,939,000 contributed to United Defense,
L.P. There is no significant seasonal aspect to the Company's backlog.
(1) (ix) Under the terms and regulations applicable to government
contracts, the Government has the right to terminate its contracts with United
Defense L.P. (40% owned by Harsco) in accordance with procedures specified in
the regulations and, under certain circumstances, has the right to renegotiate
profits. In 1994 Harsco's share of the partnership accounted for 42% of the
Company's total pre-tax income.
(1) (x) The various fields in which Harsco operates are highly competitive
and the Company encounters active competition in all of its activities from
both larger and smaller companies who produce the same or similar products or
services or who produce different products appropriate for the same uses.
(1) (xi) The expense for internal product improvement and product
development activities was $5,463,000, $5,156,000 and $4,590,000 in 1994, 1993
and 1992, respectively. Customer-sponsored research and development
expenditures were $703,000, $23,008,000 and $17,889,000, in 1994, 1993 and
1992, respectively. The decrease in customer-sponsored research and
development expenditures is due to the formation of United Defense L.P.,
effective January 1, 1994, to which the Company contributed its military
tracked vehicle business, and the competition of the five-ton truck contract
with the U.S. Government.
(1) (xii) The Company has become subject, as have others, to more
stringent air and water quality control legislation. The Clean Air Act
Amendments of 1990 will impose greater costs on the Company and most other
domestic manufacturers in the future but the effect on the Company's business
is not yet determinable. In general, the Company has not experienced
substantial difficulty in complying with these environmental regulations in
the past and does not anticipate making any major capital expenditures for
environmental control facilities in 1994 or 1995. While the Company expects
that environmental regulations may expand, and its expenditures for air and
water quality control will continue, it cannot predict the effect on its
business of such expanded regulations. Additional information regarding
environmental consideration is incorporated by reference to Note 1 and Note 10
to the Consolidated Financial Statements under Exhibit No. 13.
(1) (xiii) As of December 31, 1994, the Company had approximately 13,000
employees.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales:
Financial information concerning foreign and domestic operations and export
sales is included in Note 16 to consolidated financial statements in selected
portions of the 1994 Annual Report to Shareholders under Exhibit 13.
Item 2. Properties:
Information as to the principal plants owned and operated by Harsco is
summarized in the following table:
<TABLE>
<CAPTION>
Floor Space
Location (Sq. Ft.) Principal Products
________ ___________ __________________
<S> <C> <C>
Infrastructure, Construction
and Transportation:
Fairmont, Minnesota 312,000 Railroad Equipment
West Columbia, South Carolina 224,000 Railroad Equipment
Nottingham, England 33,000 Railroad Equipment
Long Island City, New York 48,000 Grating
Nashville, Tennessee 212,000 Grating
Nashville, Tennessee 83,000 Grating
Charlotte, North Carolina 23,000 Grating
Madera, California 42,000 Grating
Leeds, Alabama 45,000 Grating
Carlisle, Ohio 26,000 Grating
Cheswick, Pennsylvania 54,000 Grating
Channelview, Texas 82,000 Grating
Queretaro, Qro, Mexico 63,000 Grating
Marion, Ohio 135,000 Construction Equipment
Moundsville, West Virginia 12,000 Roofing Granules/Abrasives
Drakesboro, Kentucky 19,000 Roofing Granules
Gary, Indiana 15,000 Roofing Granules/Abrasives
Marysville, Ohio 306,000 Military Vehicles & School Buses
Process Industry Products:
West Jefferson, Ohio 144,000 Pipe Fittings
Crowley, Louisiana 172,000 Pipe Fittings
Houston, Texas 26,000 Pipe Fittings
Chicago, Illinois 35,000 Pipe Fittings
Hamden, Connecticut 47,000 Pipe Fittings
Fitchburg, Massachusetts 30,000 Pipe Fittings
Clinton, Ontario, Canada 55,000 Pipe Fittings
East Stroudsburg, Pennsylvania 172,000 Process Equipment
Tulsa, Oklahoma 131,000 Heat Exchangers
Tulsa, Oklahoma 41,000 Fractionation Trays
Tulsa, Oklahoma 13,000 Fractionation Trays
Birmingham, Alabama 133,000 Wear Products
Bilston, England 37,000 Fractionation Trays
Lockport, New York 104,000 Valve Manufacturing
Plant City, Florida 182,000 Metal Fabrication
Jessup, Georgia 43,000 Propane Tanks
Bloomfield, Iowa 40,000 Propane Tanks
West Jordan, Utah 26,000 Propane Tanks
Pomona, California 75,000 Composite Pressure Vessels
Harrisburg, Pennsylvania 317,000 Cylinders
Theodore, Alabama 275,000 Cryogenic Storage Vessels
Husum, Germany 60,000 Cryogenic Storage Vessels
Shah Alam, Malaysia 20,000 Cryogenic Storage Vessels
</TABLE>
Harsco also operates the following plants which are leased:
<TABLE>
<CAPTION>
Expiration
Floor Space Principal Date of
Location (Sq. Ft.) Products Lease
________ ___________ _________ __________
<S> <C> <C> <C>
Infrastructure, Construction,
and Transportation:
Tulsa, Oklahoma 10,000 Grating 02/28/96
Brendale, Australia 110,000 Railroad Equipment 10/18/97
Process Industry Products:
Baltimore, Maryland 15,000 Pipe Fittings 12/31/95
Lansing, Ohio 67,000 Pipe Fittings 01/31/97
Decatur, Georgia 19,000 Pipe Fittings 06/30/95
Tulsa, Oklahoma 30,000 Heat Exchangers 02/28/96
Cleveland, Ohio 50,000 Brass Castings 09/30/95
</TABLE>
Harsco operates from a number of other plants, branches, warehouses and
offices in addition to the above. In particular, the Company has over 130
locations related to metal reclamation in twenty-nine countries, however since
these facilities are on the property of the steel mill being serviced they are
not listed. The Company considers all of its properties to be in satisfactory
condition.
Item 3. Legal Proceedings:
Information regarding legal proceedings is incorporated by reference to Note
10 to the Consolidated Financial Statements, under Exhibit 13.
Item 4. Submission of Matters to a
Vote of Security Holders:
There were no matters that were submitted during the fourth quarter of the
year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Stock
and Related Stockholder Matters:
Harsco common stock is traded on the New York, Pacific, Boston, and
Philadelphia Stock Exchanges under the symbol HSC. At the end of 1994, there
were 25,182,250 shares outstanding. In 1994, the stock traded in a range of
46 3/8-38 3/8 and closed at a year-end high of 40 7/8. For additional
information regarding Harsco common stock market price, dividends declared,
and numbers of shareholders see Part II, Item 6.
Item 6. Selected Financial Data:
Five-year selected financial data is included under Exhibit 13.
Item 7. Management's Discussion of Financial
Condition and Results of Operations:
Management's Discussion of Financial Condition and Results of Operations is
included in selected portions of the 1994 Annual Report to Shareholders under
Exhibit 13.
Item 8. Financial Statements and Supplementary Data:
The financial statements and supplementary data is included in selected
portions of the 1994 Annual Report to Shareholders under Exhibit 13.
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:
(a) Identification of Directors:
Information regarding the identification of directors and positions held is
incorporated by reference to the Proxy Statement dated March 22, 1995.
(b) Identification of Executive Officers:
Set forth below, as of March 22, 1995, are the executive officers (this
excludes certain corporate officers who are not deemed "executive officers"
within the meaning of applicable Securities and Exchange Commission
regulations) of the Company and certain information with respect to each of
them. The executive officers were elected to their respective offices on
April 26, 1994, or at various times during the year as noted. All terms
expire on April 30, 1995. There are no family relationships between any of the
officers.
<TABLE>
<CAPTION>
Name Age Principal Occupation or Employment
____ ___ __________________________________
<S> <C> <C>
Corporate Officers:
D. C. Hathaway 50 Chairman, President and Chief Executive Officer effective April 1, 1995, was President
and Chief Executive Officer from January 1, 1994 to April 1, 1994. Director since
1991. From May 1, 1991 to December 31, 1993, served as President and Chief Operating
Officer. From 1986 to 1991 served as Senior Vice President-Operations of the
Corporation. Served as Group Vice President from 1984 to 1986 and as President of the
Dartmouth Division of the Corporation from 1979 until October 1984.
W. D. Etzweiler 59 Senior Vice President and Chief Operating Officer of the Corporation effective January
25, 1994. From 1992 to January 24, 1994, served as Senior Vice President - Operations
of the Corporation. Served as President of the Corporation's Patterson-Kelley Division
from 1982 to 1991, Vice President Sales and Marketing of the Patterson-Kelley Division
from 1979 to 1982, Vice President of Marketing for the Patterson-Kelley Division from
1971 to 1979, and various manager positions with the Patterson-Kelley Division from
1966 to 1971.
B. W. Taussig 55 Senior Vice President and Chief Operating Officer of the Corporation effective January
25, 1994. From 1992 to January 24, 1994, served as Senior Vice President - Operations
of the Corporation. Served as President of the BMY Defense Group from July 1, 1991 to
year-end, as President of the BMY Combat Systems Division from 1989 to 1991, and as
Vice President Business Development of the BMY Combat Systems Division from July 1989
to November 1989. From 1984 to 1989, was Vice President and General Manager of the
Naval Systems Division of FMC Corporation, where he was responsible for a unit
manufacturing defense products with 3,100 employees and sales of approximately $350
million per year.
L. A. Campanaro 46 Senior Vice President and Chief Financial Officer of the Corporation effective December
1, 1992 and served as Vice President and Controller from April 1, 1992 to November 30,
1992. Served as Vice President of the BMY-Wheeled Vehicles Division from February 1,
1992 to March 31, 1992, and previously served as Vice President and Controller of the
BMY-Wheeled Vehicles Division from 1988 to 1992, Vice President Cryogenics of the Plant
City Steel Division from 1987 to 1988, Senior Vice President Taylor-Wharton Division
from 1985 to 1987, Vice President and Controller of Taylor-Wharton from 1982 to 1985,
and Director of Auditing of the Corporation from 1980 to 1982.
P. C. Coppock 44 Senior Vice President, Chief Administrative Officer, General Counsel and Secretary of
the Corporation effective January 1, 1994. Served as Vice President, General Counsel
and Secretary of the Corporation from May 1, 1991 to December 31, 1993. From 1989 to
1991 served as Secretary and Corporate Counsel and as Assistant Secretary and Corporate
Counsel from 1986 to 1989. Served in various Corporate Attorney positions for the
Corporation since 1981.
S. D. Fazzolari 42 Vice President and Controller of the Corporation effective January 25, 1994. Served as
Controller of the Corporation from January 26, 1993 to January 24, 1994. Previously
served as Director of Auditing from 1985 to January 25, 1993, and served in various
auditing positions from 1980 to 1985.
</TABLE>
Item 11. Executive Compensation:
Information regarding compensation of executive officers and directors is
incorporated by reference to the Sections entitled "Executive Compensation and
Other Information", and "Directors' Compensation" of the Proxy Statement dated
March 22, 1995.
Item 12. Security Ownership of Certain
Beneficial Owners and Management:
Information regarding security ownership of certain beneficial owners and
management is incorporated by reference to the section entitled "Share
Ownership of Management" of the Proxy Statement dated March 22, 1995.
Item 13. Certain Relationships and Related Transactions:
Information regarding certain relationships and related transactions is
incorporated by reference to the section entitled "Employment Agreements with
Officers of the Company" of the Proxy Statement dated March 22, 1995.
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K:
The following portions of the Company's 1994 Annual Report to Shareholders are
incorporated herein by reference under Exhibit 13: The consolidated financial
statements and notes thereto, the related report of Coopers & Lybrand L.L.P.,
independent accountants, Management's Discussion of Financial Condition and
Results of Operations, Selected Financial Data for the years 1990 through
1994, Market for Registrant's Common Stock and Related Security Holder
Matters, and the supplemental financial data, Two-Year Summary of Quarterly
Results.
<TABLE>
<CAPTION>
Exhibit Number
______________
<S> <C> <C> <C>
(a) 1. Consolidated Financial Statements of Harsco Corporation:
Consolidated Balance Sheets December 31, 1994 and 1993 13(a)
Consolidated Statements of Income for the years 1994, 1993 and 1992 13(a)
Consolidated Statements of Cash Flows for the years 1994, 1993 and 1992 13(a)
Consolidated Statements of Changes in Shareholders' Equity for the years 1994, 1993 and 1992 13(a)
Notes to Consolidated Financial Statements 13(a)
Report of Independent Accountants 13(a)
Management's Discussion of Financial Condition and Results of Operations 13(a)
Selected Financial Data for the Years 1990 through 1994 13(a)
Two-Year Summary of Quarterly Results 13(a)
(a) 2. Consolidated Financial Statement Schedules:
Report of Independent Accountants on Consolidated Financial Statement Schedule
II. Valuation and Qualifying Accounts and Reserves for the years 1994, 1993 and 1992
Schedules other than those listed above are omitted for the reason that they are either not applicable or not required
or because the information required is contained in the financial statements or notes thereto.
Condensed financial information of the registrant is omitted since there are no substantial amounts of "restricted net
assets" applicable to the Company's consolidated subsidiaries.
Financial statements of certain 50% or less owned unconsolidated companies are not submitted inasmuch as (1) the
registrant's investment in and advances to such companies do not exceed 20% of the total consolidated assets, (2) the
registrant's proportionate share of the total assets of such companies does not exceed 20% of the total consolidated
assets, (3) the registrant's equity in the income before income taxes of such companies does not exceed 20% of the total
consolidated income before income taxes.
</TABLE>
The financial statements of a 50% or less owned unconsolidated company are
submitted inasmuch as the registrant's equity in the income before income
taxes of such company does exceed 20% of the total consolidated income before
income taxes:
<TABLE>
<CAPTION>
Exhibit Number
______________
<S> <C> <C> <C>
(b) 1. Financial Statements of United Defense, L.P.:
Report of Independent Accountants 13(b)
Balance Sheet at December 31, 1994 13(b)
Statement of Income for the year ended December 31, 1994 13(b)
Statement of Partners' Capital for the year ended December 31, 1994 13(b)
Statement of Cash Flows for the year ended December 31, 1994 13(b)
Notes to Financial Statements 13(b)
</TABLE>
(a) 3. Listing of Exhibits Filed with Form 10-K:
<TABLE>
<CAPTION>
Exhibit
Number Data Required Location in 10-K
_______ _____________ ________________
<S> <C> <C>
2(a) Joint Venture with FMC Incorporated by reference to
Corporation Combining Harsco's Form 8-K dated February 14, 1994
BMY-Combat Systems Division
with FMC Defense Systems Group
- Participation Agreement Dated as of January 1, 1994
- Partnership Agreement Dated as of January 1, 1994
- Registration Rights Agreement Dated as of January 1, 1994
3(a) Articles of Incorporation as Exhibit volume, 1990 10-K
amended April 24, 1990
Certificate of Designation filed Exhibit volume, 1987 10-K
September 29, 1987
3(b) By-laws as amended April 25, 1990 Exhibit volume, 1990 10-K
4(a) Harsco Corporation Rights Incorporated by reference to Form
Agreement dated as of September 8-A, Exhibit 1, dated October 2, 1987
29, 1987 with Chase Manhattan
Bank, N.A.
4(b) Registration of Preferred Stock Incorporated by reference to Form
Purchase Rights 8-A dated October 2, 1987
4(c) Current Report on dividend Incorporated by reference to Form
distribution of Preferred 8-K dated October 13, 1987
Stock Purchase Rights
4(d) Debt Securities Registered under Incorporated by reference to Form S-3,
Rule 415 (8 3/4% Notes) File No. 33-21526 dated May 23, 1988
4(e) 8 3/4% 1991 Notes due May 15, Incorporated by reference to the
1996 described in Prospectus Prospectus Supplement dated
Supplement dated May 7, 1991 May 7, 1991 to Form S-3,
to Form S-3 Registration under Registration No. 33-21526 dated
Rule 415 dated May 23, 1988 May 23, 1988
4(f) Debt Securities Registered Incorporated by reference to Form
under Rule 415 (6% Notes) S-3, Registration No. 33-42389
dated August 23, 1991
4(g) 6% 1993 Notes due September 15, Incorporated by reference to the
2003 described in Prospectus Prospectus Supplement dated
Supplement dated September 8, September 8, 1993 to Form S-3,
1993 to Form S-3 Registration under Registration No. 33-42389 dated
Rule 415 dated August 23, 1991 August 23, 1991
4(h) Debt and Equity Securities Registered Incorporated by reference to Form S-3,
Registration No. 33-56885 dated
December 15, 1994, effective date
January 12, 1995
Material Contracts - Credit facility
10(a) $150 Million Amended and Restated Exhibit volume, 1994 10-K
Credit Agreement (364-Day Competitive
Advance and Revolving Credit Facility)
Dated as of August 31, 1993, as Amended
and Restated as of June 21, 1994, Among
Harsco Corporation, the Lenders Named
Herein and Chemical Bank, as Administrative Agent.
10(b) $150 Million Amended and Restated Exhibit volume, 1994 10-K
Credit Agreement (5-Year Competitive
Advance and Revolving Credit Facility)
Dated as of August 31, 1993, as Amended
and Restated as of June 21, 1994, Among
Harsco Corporation, the Lenders Named
Herein and Chemical Bank, as Administrative Agent.
10(c) Commercial Paper Dealer Agreement Exhibit volume, 1994 10-K
Dated October 11, 1994, Between J.P.
Morgan Securities, Inc. and Harsco
Corporation
10(d) Commercial Paper Dealer Agreement Exhibit volume, 1994 10-K
Dated October 11, 1994, Between
Lehman Brothers, Inc. and Harsco
Corporation
10(e) Issuing and Paying Agency Agreement, Exhibit volume, 1994 10-K
Dated October 12, 1994, Between
Morgan Guaranty Trust Company
of New York and Harsco Corporation
Material Contracts - Underwriting
10(f) Underwriting Agreement for Exhibit volume, 1987 10-K
Debt Securities dated
October 22, 1987
Material Contracts - Management Contracts and Compensatory Plans
10(g) Harsco Corporation Incentive Plan Exhibit volume, 1992 10-K
as amended March 18, 1992
10(h) Harsco Corporation Supplemental Exhibit volume, 1991 10-K
Retirement Benefit Program as amended
10(i) Trust Agreement between Harsco Exhibit volume, 1987 10-K
Corporation and Dauphin Deposit
Bank and Trust Company dated
July 1, 1987 relating to the
Supplemental Retirement Benefit Plan
10(j) Harsco Corporation Supplemental Exhibit volume, 1991 10-K
Executive Retirement Plan as amended
10(k) Trust Agreement between Harsco Exhibit volume, 1988 10-K
Corporation and Dauphin
Deposit Bank and Trust Company
dated November 22, 1988 relating
to the Supplemental Executive
Retirement Plan
10(l) 1986 Stock Option Plan as amended Exhibit volume, 1990 10-K
Employment Agreements -
10(m) D. C. Hathaway Exhibit volume, 1989 10-K
" Uniform agreement, the same as
shown for J. J. Burdge
" L. A. Campanaro " "
" P. C. Coppock " "
" W. D. Etzweiler " "
" B. W. Taussig " "
Retirement Agreements -
10(n) Special Supplemental Retirement
Benefit Agreement and
Amendment for J. J. Burdge Exhibit volume, 1988 10-K
10(o) Special Supplemental Retirement
Benefit Agreement for
D. C. Hathaway Exhibit Volume, 1988 10-K
" Retirement and Consulting Exhibit Volume, 1993 10-K
" Agreement for M. W. Gambill
" Special Supplemental Retirement Exhibit volume, 1993 10-K
" Benefit Agreement for B. W. Taussig
Director Indemnity Agreements -
10(p) J. J. Burdge Exhibit volume, 1989 10-K
Uniform agreement, same as
shown for J. J. Burdge
" F. E. Masland, III " "
" R. F. Nation " "
" D. C. Smith, Jr. " "
" A. J. Sordoni, III " "
" R. C. Wilburn " "
" R. L. Kirk " "
" N. H. Prater " "
" D. C. Hathaway " "
" J. I. Scheiner " "
" R. C. Smith " "
" J. E. Marley " "
10(q) Harsco Corporation Exhibit volume, 1990 10-K
Directors Retirement Plan
10(r) Harsco Corporation Deferred Exhibit volume, 1994 10-K
Compensation Plan for
Non-Employee Directors
11 Computation of Fully Diluted Exhibit volume, 1994 10-K
Net Income per Common Share
12 Computation of ratios of Exhibit volume, 1994 10-K
earnings to fixed charges
13(a) Annual report to shareholders Exhibit volume, 1994 10-K
13(b) Financial Statements of Exhibit volume, 1994 10-K
United Defense, L.P.
21 Subsidiaries of the registrant Exhibit volume, 1994 10-K
23 Consent of Independent Accountants Exhibit volume, 1994 10-K
27 Financial Data Schedule Exhibit volume, 1994 10-K
99 Additional exhibits
- Undertakings of Harsco Incorporated by reference to
relating to registration Exhibit 28, Form 10-K for the
statement on Form S-16 year ended December 31, 1982
(Reg. No. 2-58121)
- Undertakings of Harsco Incorporated by reference to
relating to registration Exhibit 28, Form 10-K for the
statement on Form S-8 year ended December 31, 1982
(Reg. No. 2-57876)
- Undertakings of Harsco Incorporated by reference to
relating to registration Form S-8, Registration No.
statement on Form S-8 33-14064, dated May 6, 1987
(Reg. No. 33-14064)
- Undertakings of Harsco Incorporated by reference to
relating to registration Form S-3, Registration No.
statement on Form S-3 2-97504 dated May 29, 1985
(Reg. No. 2-97504)
- Undertakings of Harsco Incorporated by reference to
relating to registration Form S-3, Registration No.
statement on Form S-3 33-21526 dated May 23, 1988
(Reg. No. 33-21526)
- Undertakings of Harsco Incorporated by reference to
relating to registration Form S-3, Registration No.
statement on Form S-3 33-42389, dated August 23, 1991
(Reg. No. 33-42389)
- Undertakings of Harsco Exhibit volume, 1990 10-K
with respect to indemnification
of directors, officers or
persons controlling Harsco
incorporated by reference
into registration statements
on Form S-8, Registration
File Numbers 2-57876,
33-5300, 33-14064 and 33-24854
- Undertakings of Harsco Incorporated by reference to
relating to registration Form S-3, Registration No.
statement on Form S-3 33-56885, dated December
(Reg. No. 33-56885) 15, 1994, effective January
12, 1995.
</TABLE>
Exhibits other than those listed above are omitted for the reason that they
are either not applicable or not material.
The foregoing Exhibits are available from the Secretary of the Company upon
receipt of a fee of $10 to cover the Company's reasonable cost of providing
copies of such Exhibits.
(b) The Company filed a Report on Form 8-K dated January 11, 1995, reporting
that on December 30, 1994, the Company and the United States Government agreed
to a settlement of the Company's claim that the Government had overcharged on
certain government furnished equipment.
Also, the Company filed a Report on Form 8-K dated January 16, 1995, to
announce the Company's plan to close its school bus manufacturing division in
Marysville, Ohio.
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.
HARSCO CORPORATION
Date March 16, 1995
By /S/ Leonard A. Campanaro
Leonard A. Campanaro
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/S/ Derek C. Hathaway Chairman, President & Chief March 17, 1995
(Derek C. Hathaway) Executive Officer
/S/ Leonard A. Campanaro Senior Vice President and March 24, 1995
(Leonard A. Campanaro) Chief Financial Officer
(Principal Financial Officer)
/S/ Salvatore D. Fazzolari Vice President and Controller March 24, 1995
(Salvatore D. Fazzolari) (Principal Accounting Officer)
/S/ Jeffrey J. Burdge Director March 17, 1995
(Jeffrey J. Burdge)
/S/ Robert L. Kirk Director March 17, 1995
(Robert L. Kirk)
/S/ James E. Marley Director March 17, 1995
(James E. Marley)
/S/ Frank E. Masland III Director March 17, 1995
(Frank E. Masland III)
/S/ Robert F. Nation Director March 17, 1995
(Robert F. Nation)
/S/ Nilon H. Prater Director March 17, 1995
(Nilon H. Prater)
/S/ James I. Scheiner Director March 17, 1995
(James I. Scheiner)
/S/ DeWitt C. Smith, Jr. Director March 17, 1995
(DeWitt C. Smith, Jr.)
/S/ Roy C. Smith Director March 17, 1995
(Roy C. Smith)
/S/ Andrew J. Sordoni III Director March 17, 1995
(Andrew J. Sordoni III)
/S/ Dr. Robert C. Wilburn Director March 17, 1995
(Dr. Robert C. Wilburn)
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Harsco Corporation
Our report on the consolidated financial statements of Harsco Corporation and
Subsidiary Companies (the "Company"), which includes (A) an emphasis of a
matter paragraph regarding the Company's involvement in disputes relating to
the "after-imposed" Federal Excise Tax and related claims and (B) explanatory
paragraphs regarding (i) the Company's involvement in various disputes
regarding Federal Excise Tax and other contract matters primarily relating to
the five-ton truck contract and claims relating to certain contracts and (ii)
changes in the Company's method of accounting for income taxes and
postretirement benefits other than pensions, has been incorporated by
reference in this Form 10-K from page 58 of the 1994 Annual Report to
Shareholders of Harsco Corporation. In connection with our audits of such
consolidated financial statements, we have also audited the related
consolidated financial statement schedule listed in the index (Item 14(a) 2.)
on page 18 of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
February 7, 1995, except as
to the first paragraph of Note
10, for which the date is
February 23, 1995
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
________ ________ ________ ________ ________
Additions Deductions
_________ ________________________________
Due to
Balance at Charged to Currency Balance at
Beginning Cost and Translation End of
Description of Period Expenses Adjustments Other <F1> Period
___________ __________ __________ ___________ __________ __________
<S> <C> <C> <C> <C> <C>
For the year 1994:
Deducted from Receivables:
Uncollectible accounts $ 13,479 $ 3,436 $ (93) $ (9,537) $ 7,285
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Deducted from Inventories:
Inventory valuations $ 9,213 $ 11,228 $ 54 $ (4,389) $ 16,106
________ ________ ________ ________ ________
________ ________ ________ ________ ________
For the year 1993:
Deducted from Receivables:
Uncollectible accounts $ 10,244 $ 2,761 $ 7 $ 467 $ 13,479
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Deducted from Inventories:
Inventory valuations $ 8,708 $ 6,682 $ (61) $ (6,116) $ 9,213
________ ________ ________ ________ ________
________ ________ ________ ________ ________
For the year 1992:
Deducted from Receivables:
Uncollectible accounts $ 13,489 $ 2,914 $ (171) $ (5,988) $ 10,244
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Deducted from Inventories:
Inventory valuations $ 12,844 $ (2,217) $ (146) $ (1,773) $ 8,708
________ ________ ________ ________ ________
________ ________ ________ ________ ________
<FN>
<F1> Amounts charged to valuation account during the year. During 1994, $2,372,000 in inventory reserves were transferred to
United Defense, L. P. in connection with the formation of the partnership.
</FN>
</TABLE>
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
(364-DAY COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY)
Dated As of August 24, 1993,
As Amended and Restated As of June 21, 1994
Among
HARSCO CORPORATION,
THE LENDERS NAMED HEREIN
and
CHEMICAL BANK,
as Administrative Agent
[CS&M Ref. No. 6700-229]
AMENDED AND RESTATED CREDIT AGREEMENT (364-DAY COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY) dated as of August 24, 1993, as amended and
restated as of June 21, 1994, among HARSCO CORPORATION, a Delaware corporation
(the "Company"); the lenders listed in Schedule 2.01 hereto (the "Lenders");
and CHEMICAL BANK, a New York banking corporation, as administrative agent (in
such capacity, the "Administrative Agent").
The Company and certain lenders (the "Original Lenders"), including certain of
the Lenders, are parties to the Predecessor Credit Agreement (as herein
defined) and (A) the Company wishes to substitute new Lenders for certain of
the Original Lenders and to add to the Original Lenders one or more Lenders
who were not Original Lenders, (B) the Lenders wish to appoint Chemical Bank
as their Administrative Agent and (C) the Company, the Lenders and Chemical
Bank wish to amend and restate the Predecessor Credit Agreement to read as set
forth herein and in the Facility B Credit Agreement (as herein defined).
In that connection, the Company has requested the Lenders to extend credit to
enable the Borrowers (as herein defined) to borrow on a standby revolving
credit basis on and after the date hereof and at any time and from time to
time prior to the Maturity Date (as herein defined) a principal amount not in
excess of $150,000,000 at any time outstanding. The Company has also
requested the Lenders to provide a procedure pursuant to which any Borrower
may invite the Lenders to bid on an uncommitted basis on short-term borrowings
by such Borrower. The proceeds of such borrowings, together with the proceeds
of borrowings under the Facility B Credit Agreement (as herein defined), are
to be used (a) to continue, convert or repay amounts outstanding, if any,
under the Predecessor Credit Agreement and (b) to provide working capital and
for other general corporate purposes, including providing backup liquidity for
the Company's commercial paper program. The Lenders are willing to extend
such credit to the Borrowers on the terms and subject to the conditions herein
set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Standby Loan or Swingline Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Administrative Fees" shall have the meaning assigned to such term in Section
2.06(b).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in
the form of Exhibit B hereto.
"Affiliate" shall mean, when used with respect to a specified person, another
person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time by
the Administrative Agent as its prime rate in effect at its principal office
in New York City; each change in the Prime Rate shall be effective on the date
such change is publicly announced as effective. "Federal Funds Effective
Rate" shall mean, for any day, 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 on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition until the circumstances
giving rise to such inability no longer exist.
"Applicable Margin" shall mean on any date, (A) with respect to ABR Loans, 0%
and (B) with respect to Eurodollar Loans, .295%.
"Applicable Percentage" shall mean, with respect to any Lender at any time,
the percentage of the Total Commitment represented by such Lender's Commitment
at such time.
"Approved Borrower" shall mean any wholly owned Subsidiary of the Company as
to which a Designation Letter shall have been delivered to the Administrative
Agent in accordance with Section 2.22 hereof and as to which a Termination
Letter shall not have been delivered to the Administrative Agent.
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent, in
the form of Exhibit C or such other form as shall be approved by the
Administrative Agent.
"Board" shall mean the Board of Governors of the Federal Reserve System of the
United States.
"Borrowers" shall mean the Company and each Approved Borrower.
"Borrowing" shall mean a group of Loans of a single Type made by the Lenders
(or (a) in the case of a Competitive Borrowing, by the Lender or Lenders whose
Competitive Bids have been accepted pursuant to Section 2.03 or (b) in the
case of a Swingline Borrowing, by the Swingline Lenders) on a single date and
as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which banks are open for
business in New York City; provided, however, that, when used in connection
with a Eurodollar Loan, the term "Business Day" shall also exclude any day on
which banks are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Lease Obligations" of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such person under GAAP and, for the
purposes of this Agreement, the amount of such obligations at any time shall
be the capitalized amount thereof at such time determined in accordance with
GAAP.
A "Change in Control" shall be deemed to have occurred if (a) any person or
group (within the meaning of Rule 13d-5 of the Securities and Exchange
Commission as in effect on the date hereof) shall own directly or indirectly,
beneficially or of record, shares representing more than 20% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of the Company; (b) a majority of the seats (other than vacant seats) on the
board of directors of the Company shall at any time have been occupied by
persons who were neither (i) nominated by the board of directors of the
Company, nor (ii) appointed by directors so nominated; or (c) any person or
group shall otherwise directly or indirectly Control the Company.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Committed Credit Exposure" shall mean, with respect to any Lender at any
time, the sum of (a) the aggregate amount of such Lender's Standby Loan
Exposure at such time, plus (b) the aggregate amount of such Lender's
Swingline Loan Exposure at such time.
"Commitment" shall mean, with respect to each Lender, the commitment of such
Lender hereunder as set forth in Schedule 2.01 hereto, as such Lender's
Commitment may be permanently terminated or reduced from time to time pursuant
to Section 2.11.
"Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan
pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a notification made by a
Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a Lender
pursuant to Section 2.03(b), (i) in the case of a Eurodollar Loan, the
Competitive Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate
of interest offered by the Lender making such Competitive Bid.
"Competitive Bid Request" shall mean a request made pursuant to Section 2.03
in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a borrowing consisting of a Competitive
Loan or concurrent Competitive Loans from the Lender or Lenders whose
Competitive Bids for such Borrowing have been accepted by a Borrower under the
bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a loan from a Lender to a Borrower pursuant to
the bidding procedure described in Section 2.03. Each Competitive Loan shall
be a Eurodollar Competitive Loan or a Fixed Rate Loan.
"Competitive Margin" shall mean, as to any Eurodollar Competitive Loan, the
margin (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) to be added to or subtracted from the LIBO
Rate in order to determine the interest rate applicable to such Loan, as
specified in the Competitive Bid relating to such Loan.
"Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings correlative thereto.
"Default" shall mean any event or condition which upon notice, lapse of time
or both would constitute an Event of Default.
"Dollars" or "$" shall mean lawful money of the United States of America.
"Domestic Subsidiaries" shall mean any Subsidiary organized or incorporated
under the laws of one of the States of the United States of America, the laws
of the District of Columbia or the Federal laws of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group which the Company is a member and
which is treated as a single employer under Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans.
"Eurodollar Competitive Borrowing" shall mean a Competitive Borrowing
comprised of Eurodollar Competitive Loans.
"Eurodollar Competitive Loan" shall mean any Competitive Loan bearing interest
at a rate determined by reference to the LIBO Rate in accordance with the
provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Competitive Loan or Eurodollar
Standby Loan.
"Eurodollar Standby Borrowing" shall mean a Standby Borrowing comprised of
Eurodollar Standby Loans.
"Eurodollar Standby Loan" shall mean any Standby Loan bearing interest at a
rate determined by reference to the LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Facility B Credit Agreement" shall mean the $150,000,000 Amended and Restated
Credit Agreement (Five-Year Competitive Advance and Revolving Credit Facility)
dated as of August 24, 1993, as amended and restated as of the date hereof
among the Company, the lenders named therein and Chemical Bank, as
administrative agent for the lenders.
"Facility Fee" shall have the meaning assigned to such term in Section
2.06(a).
"Facility Fee Percentage" shall mean .08%.
"Fees" shall mean the Administrative Fees, the Facility Fee and the
Utilization Fee.
"Financial Officer" of any corporation shall mean the Chief Financial Officer,
principal accounting officer, Treasurer or Controller of such corporation.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan 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 Lender making such Loan in its
Competitive Bid.
"GAAP" shall mean United States generally accepted accounting principles,
applied on a basis consistent with the financial statements referred to in
Section 3.02.
"Governmental Authority" shall mean any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of
such person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that
the term Guarantee shall not include endorsements for collection or deposit,
in either case in the ordinary course of business.
"Guarantor" shall mean the Company in its capacity as the guarantor under
Section 9.01.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or
services, (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such person, whether or
not the obligations secured thereby have been assumed, (g) all Guarantees by
such person of Indebtedness of others, (h) all Capital Lease Obligations of
such person, (i) all obligations of such person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest
or exchange rate hedging arrangements and (j) all obligations of such person
as an account party in respect of letters of credit and bankers' acceptances;
provided, however, that Indebtedness shall not include trade accounts payable
in the ordinary course of business. The Indebtedness of any person shall
include the Indebtedness of any partnership in which such person is a general
partner.
"Initial Funding Date" shall mean the date of the first Borrowing hereunder.
"Interest Payment Date" shall mean, with respect to any Loan, the last day of
each Interest Period applicable thereto and, in the case of a Eurodollar Loan
with an Interest Period of more than three months' duration or a Fixed Rate
Loan with an Interest Period of more than 90 days' duration, each day that
would have been an Interest Payment Date for such Loan had successive Interest
Periods of three months' duration or 90 days duration, as the case may be,
been applicable to such Loan and, in addition, the date of any refinancing of
such Loan with a Loan of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the
last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
applicable Borrower may elect, (b) as to any ABR Borrowing or Swingline
Borrowing, the period commencing on the date of such Borrowing and ending on
the earlier of (i) the next succeeding day which shall be the last day of any
March, June, September or December and (ii) the Maturity Date and (c) as to
any Fixed Rate Borrowing, the period commencing on the date of such Borrowing
and ending on the date specified in the Competitive Bids in which the offer to
make the Fixed Rate Loans comprising such Borrowing were extended, which shall
not be earlier than seven days after the date of such Borrowing or later than
360 days after the date of such Borrowing; provided, however, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the
case of Eurodollar Loans only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day. Interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such Interest
Period.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, (i) the interest rate per annum for deposits for a maturity
most nearly comparable to such Interest Period in Dollars which appears on
page 3750 of the Dow Jones Telerate Screen as of 11:00 a.m., London time, on
the date that is two Business Days prior to the first day of such Interest
Period or, if such a rate does not appear on page 3750 of the Dow Jones
Telerate Screen, (ii) an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the rate at which Dollar deposits
approximately equal in principal amount to the Loan of the Administrative
Agent, in its capacity as a Lender (or, if the Administrative Agent is not a
Lender in respect of such Borrowing, then the Loan of the Lender in respect of
such Borrowing with the greatest Loan Amount), included in such Eurodollar
Borrowing and for a maturity comparable to such Interest Period are offered to
the principal London office of the Administrative Agent in immediately
available funds in the London interbank market at approximately 11:00 a.m.,
London time, on the relevant date of determination.
"Lien" shall mean with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement relating to such asset and (c) in
the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Loan" shall mean any Competitive Loan, Standby Loan or Swingline Loan.
"Loan Documents" shall mean this Agreement and the Fee Letter dated May 2,
1994 among the Administrative Agent, Chemical Securities Inc. and the Company.
"Margin Stock" shall have the meaning given such term under Regulation U.
"Material Adverse Change" or "Material Adverse Effect" shall mean (a) a
materially adverse change in, or a materially adverse effect on, the business,
assets, operations, prospects or condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or (b) a material impairment of
the ability of the Company or any Approved Borrower to perform any of its
respective obligations under any Loan Document to which it is or becomes a
party.
"Maturity Date" shall mean June 20, 1995.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than
one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Code Section 414) 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.
"Net Income" shall mean, for any period for the Company and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP), net income for such period.
"Net Worth" shall mean, as at any date, the sum for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) of the following:
(a) the amount of common stock; plus
(b) the amount of any preferred stock that does not have any requirement for
the Company to purchase, redeem, retire or otherwise acquire the same; plus
(c) the amount of additional paid-in capital and retained earnings (or, in the
case of an additional paid-in capital or retained earnings deficit, minus the
amount of such deficit); plus
(d) cumulative translation adjustments (or, in the case of negative
adjustments, minus the amount of such adjustments); plus
(e) cumulative pension liability adjustments (or, in the case of negative
adjustments, minus the amount of such adjustments); minus
(f) the cost of treasury stock.
"Other Taxes" shall have the meaning assigned to such term in Section 2.19(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code which is maintained for current or former employees, or any
beneficiary thereof, of the Company or any ERISA Affiliate.
"Predecessor Credit Agreement" shall mean the Amended and Restated Credit
Agreement dated as of August 24, 1993, amended and restated as of October 20,
1993, among the Company, the lenders named therein and Chase Manhattan Bank
(National Association), as agent.
"Register" shall have the meaning given such term in Section 10.04(d).
"Regulation D" shall mean Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Reportable Event" shall mean any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having Commitments
representing a majority of the Total Commitment or, for purposes of
acceleration pursuant to clause (ii) of Article VII, Lenders holding Loans
representing a majority of the aggregate principal amount of the Loans
outstanding.
"Responsible Officer" of any corporation shall mean any executive officer or
Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"S&P" shall mean Standard and Poor's Corporation.
"Standby Borrowing" shall mean a borrowing consisting of simultaneous Standby
Loans from each of the Lenders.
"Standby Borrowing Request" shall mean a request made pursuant to Section 2.04
in the form of Exhibit A-5.
"Standby Loan" shall mean a revolving loan made by a Lender pursuant to
Section 2.04. Each Standby Loan shall be a Eurodollar Standby Loan or an ABR
Loan.
"Standby Loan Exposure" shall mean, with respect to any Lender at any time,
the aggregate principal amount at such time of all outstanding Standby Loans
made by such Lender.
"subsidiary" shall mean, with respect to any person (herein referred to as the
"parent"), any corporation, partnership, association or other business entity
(a) of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or more than
50% of the general partnership interests are, at the time any determination is
being made, owned, Controlled or held, or (b) which is, at the time any
determination is made, otherwise Controlled by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.
"Subsidiary" shall mean any subsidiary of the Company.
"Swingline Borrowing" shall mean a borrowing consisting of simultaneous
Swingline Loans from each of the Swingline Lenders.
"Swingline Commitment" shall mean, with respect to any Lender, the commitment
of such Lender to make Swingline Loans hereunder as set forth in Schedule
2.21, as such Lender's Swingline Commitment may be permanently terminated or
reduced from time to time pursuant to Section 2.21(d).
"Swingline Commitment Percentage" shall mean, with respect to any Swingline
Lender at any time, the percentage that the Swingline Commitment of such
Swingline Lender represents of the Total Swingline Commitment at such time.
"Swingline Lender" shall mean any Lender with a Swingline Commitment.
"Swingline Loan" shall mean any loan made by a Lender pursuant to Section
2.21. Each Swingline Loan shall be an ABR Loan.
"Swingline Loan Exposure" shall mean, at any time, the aggregate principal
amount at such time of all Swingline Loans. The Swingline Loan Exposure of
any Lender at any time shall mean its Applicable Percentage of the aggregate
Swingline Loan Exposure at such time.
"Taxes" shall have the meaning assigned to such term in Section 2.19(a).
"Total Capital" shall mean, at any time, Net Worth plus Total Debt.
"Total Commitment" shall mean, at any time, the aggregate amount of the
Commitments, as in effect at such time.
"Total Debt" shall mean, at any time, the aggregate outstanding principal
amount of all Indebtedness of the Company and its Subsidiaries at such time
(other than Indebtedness described in clause (i) or (j) of the definition of
the term "Indebtedness") determined on a consolidated basis (without
duplication) in accordance with GAAP; provided that the term "Total Debt"
shall include any preferred stock that provides for the mandatory purchase,
retirement, redemption or other acquisition of the same by the Company or any
Subsidiary (other than preferred stock held by the Company or any Subsidiary).
"Total Swingline Commitment" shall mean, at any time, the aggregate amount of
the Swingline Commitments, as in effect at such time.
"Transferee" shall have the meaning assigned to such term in Section 2.19(a).
"Type", when used in respect of any Loan or Borrowing, shall refer to the rate
by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined. For purposes hereof, "rate" shall include the LIBO
Rate, the Alternate Base Rate and the Fixed Rate.
"Utilization Fee" shall have the meaning assigned to such term in Section
2.06(c).
"Utilization Fee Percentage" shall mean .075%.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as
otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided, however, that if the Company notifies the Administrative Agent
that the Company wishes to amend any covenant in Article VI or any related
definition to eliminate the effect of any change in GAAP occurring after the
date of this Agreement on the operation of such covenant (or if the
Administrative Agent notifies the Company that the Required Lenders wish to
amend Article VI or any related definition for such purpose), then the
Company's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended
in a manner satisfactory to the Company and the Required Lenders. The phrase
"the date of this Agreement" or "the date hereof", or words to similar effect,
when used herein, shall mean June 21, 1994.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, to make Standby Loans to the Borrowers, at any time
and from time to time on and after the date hereof and until the earlier of
the Maturity Date and the termination of the Commitment of such Lender, in an
aggregate principal amount at any time outstanding that will not result in
such Lender's Committed Credit Exposure exceeding such Lender's Commitment,
subject, however, to the conditions that (i) at no time shall (A) the sum of
(I) the aggregate Standby Loan Exposure of all the Lenders, plus (II) the
outstanding aggregate principal amount of all Competitive Loans made by all
Lenders, plus (III) the amount of the Swingline Loan Exposure, exceed (B) the
Total Commitment and (ii) at all times the outstanding aggregate principal
amount of all Standby Loans made by each Lender shall equal such Lender's
Applicable Percentage of the outstanding aggregate principal amount of all
Standby Loans made pursuant to Section 2.04. Each Lender's Commitment is set
forth opposite its name in Schedule 2.01. Such Commitments may be terminated
or reduced from time to time pursuant to Section 2.11. Within the foregoing
limits, the Borrowers may borrow, pay or prepay and reborrow hereunder, on and
after the date hereof and prior to the Maturity Date, subject to the terms,
conditions and limitations set forth herein.
SECTION 2.02. Loans. (a) Each Standby Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their applicable Commitments; provided, however, that the failure of any
Lender to make any Standby Loan shall not in itself relieve any other Lender
of its obligation to lend hereunder (it being understood, however, that no
Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). Each Competitive Loan shall
be made in accordance with the procedures set forth in Section 2.03. The
Competitive Loans and Standby Loans comprising any Borrowing shall be in (i)
an aggregate principal amount which is not less than $10,000,000 and an
integral multiple of $1,000,000 or (ii) an aggregate principal amount equal to
the remaining balance of the available applicable Commitments.
(b) Each Competitive Borrowing shall be comprised entirely of Eurodollar
Competitive Loans or Fixed Rate Loans, and each Standby Borrowing shall be
comprised entirely of Eurodollar Standby Loans or ABR Loans, as the Borrowers
may request pursuant to Section 2.03 or 2.04, as applicable. Each Lender may
at its option make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the applicable
Borrower to repay such Loan in accordance with the terms of this Agreement.
Borrowings of more than one Type may be outstanding at the same time;
provided, however, that none of the Borrowers shall be entitled to request any
Borrowing which, if made, would result in an aggregate of more than ten
separate Standby Loans of any Lender being outstanding hereunder at any one
time. For purposes of the foregoing, Borrowings having different Interest
Periods, regardless of whether they commence on the same date, shall be
considered separate Borrowings.
(c) Subject to Section 2.05, each Lender shall make each Loan to be made by
it hereunder on the proposed date thereof by wire transfer to such account as
the Administrative Agent may designate in federal funds not later than 11:00
a.m., New York City time, and the Administrative Agent shall by 12:00 (noon),
New York City time, credit the amounts so received to an account designated by
the applicable Borrower in the applicable Borrowing Request, which account
must be a U.S. account or, if a Borrowing shall not occur on such date because
any condition precedent herein specified shall not have been met, return the
amounts so received to the respective Lenders. Competitive Loans shall be
made by the Lender or Lenders whose Competitive Bids therefor are accepted
pursuant to Section 2.03 in the amounts so accepted and Standby Loans shall be
made by the Lenders pro rata in accordance with Section 2.16. Unless the
Administrative Agent shall have received notice from a Lender prior to the
date of any Borrowing that such Lender will not make available to the
Administrative Agent such Lender's portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with this paragraph (c) and the Administrative Agent may, in
reliance upon such assumption, make available to the applicable Borrower on
such date a corresponding amount. If the Administrative Agent shall have so
made funds available then to the extent that such Lender shall not have made
such portion available to the Administrative Agent, such Lender and the
applicable 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 the applicable
Borrower until the date such amount is repaid to the Administrative Agent at
(i) in the case of the Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Lender, the
Federal Funds Effective Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount shall constitute
such Lender's Loan as part of such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, none of the
Borrowers shall be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
SECTION 2.03. Competitive Bid Procedure. (a) In order to request
Competitive Bids, a Borrower shall hand deliver or telecopy to the
Administrative Agent a duly completed Competitive Bid Request in the form of
Exhibit A-1 hereto, to be received by the Administrative Agent (i) in the case
of a Eurodollar Competitive Borrowing, not later than 11:00 a.m., New York
City time, four Business Days before a proposed Competitive Borrowing and (ii)
in the case of a Fixed Rate Borrowing, not later than 11:00 a.m., New York
City time, one Business Day before a proposed Competitive Borrowing. No ABR
Loan shall be requested in, or made pursuant to, a Competitive Bid Request. A
Competitive Bid Request that does not conform substantially to the format of
Exhibit A-1 may be rejected in the Administrative Agent's sole discretion, and
the Administrative Agent shall promptly notify the applicable Borrower of
such rejection by telecopier. Such request shall in each case refer to this
Agreement and specify (A) whether the Borrowing then being requested is to be
a Eurodollar Borrowing or a Fixed Rate Borrowing, (B) the date of such
Borrowing (which shall be a Business Day) and the aggregate principal amount
thereof and (C) the Interest Period with respect thereto (which may not end
after the Maturity Date). Promptly after its receipt of a Competitive Bid
Request that is not rejected as aforesaid, the Administrative Agent shall
invite by telecopier (in the form set forth in Exhibit A-2 hereto) the Lenders
to bid, on the terms and conditions of this Agreement, to make Competitive
Loans pursuant to the Competitive Bid Request.
(b) Each Lender may, in its sole discretion, make one or more Competitive
Bids to a Borrower responsive to a Competitive Bid Request. Each Competitive
Bid by a Lender must be received by the Administrative Agent via telecopier,
in the form of Exhibit A-3 hereto, (i) in the case of a Eurodollar Competitive
Borrowing, not later than 11:00 a.m., New York City time, three Business Days
before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate
Borrowing, not later than 11:00 a.m., New York City time, on the day of a
proposed Competitive Borrowing. Multiple bids will be accepted by the
Administrative Agent. Competitive Bids that do not conform substantially to
the format of Exhibit A-3 may be rejected by the Administrative Agent after
conferring with, and upon the instruction of, the applicable Borrower, and the
Administrative Agent shall notify the Lender making such nonconforming bid of
such rejection as soon as practicable. Each Competitive Bid shall refer to
this Agreement and specify (A) the principal amount (which (x) shall be in a
minimum principal amount of $5,000,000 and in an integral multiple of
$1,000,000, and (y) may equal the entire principal amount of the Competitive
Borrowing requested by the Borrower) of the Competitive Loan or Loans that the
Lender is willing to make to the applicable Borrower, (B) the Competitive Bid
Rate or Rates at which the Lender is prepared to make the Competitive Loan or
Loans and (C) the Interest Period and the last day thereof. If any Lender
shall elect not to make a Competitive Bid, such Lender shall so notify the
Administrative Agent by telecopier (I) in the case of Eurodollar Competitive
Loans, not later than 11:00 a.m., New York City time, three Business Days
before a proposed Competitive Borrowing, and (II) in the case of Fixed Rate
Loans, not later than 11:00 a.m., New York City time, on the day of a proposed
Competitive Borrowing; provided, however, that failure by any Lender to give
such notice shall not cause such Lender to be obligated to make any
Competitive Loan as part of such Competitive Borrowing. A Competitive Bid
submitted by a Lender pursuant to this paragraph (b) shall be irrevocable.
(c) The Administrative Agent shall promptly notify the applicable Borrower by
telecopier of all the Competitive Bids made, the Competitive Bid Rate and the
principal amount of each Competitive Loan in respect of which a Competitive
Bid was made and the identity of the Lender that made each bid. The
Administrative Agent shall send a copy of all Competitive Bids to the
applicable Borrower for its records as soon as practicable after completion of
the bidding process set forth in this Section 2.03.
(d) The applicable Borrower may in its sole and absolute discretion, subject
only to the provisions of this paragraph (d), accept or reject any Competitive
Bid referred to in paragraph (c) above. The Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopier in the form of a
Competitive Bid Accept/Reject Letter, whether and to what extent it has
decided to accept or reject any of or all the bids referred to in paragraph
(c) above, (x) in the case of a Eurodollar Competitive Borrowing, not later
than 11:30 a.m., New York City time, three Business Days before a proposed
Competitive Borrowing, and (y) in the case of a Fixed Rate Borrowing, not
later than 11:30 a.m., New York City time, on the day of a proposed
Competitive Borrowing; provided, however, that (i) the failure by the
applicable Borrower to give such notice shall be deemed to be a rejection of
all the bids referred to in paragraph (c) above, (ii) such Borrower shall not
accept a bid made at a particular Competitive Bid Rate if the Borrower has
decided to reject a bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by such Borrower shall not
exceed the principal amount specified in the Competitive Bid Request, (iv) if
such Borrower shall accept a bid or bids made at a particular Competitive Bid
Rate but the amount of such bid or bids shall cause the total amount of bids
to be accepted by the Borrower to exceed the amount specified in the
Competitive Bid Request, then such Borrower shall accept a portion of such bid
or bids in an amount equal to the amount specified in the Competitive Bid
Request less the amount of all other Competitive Bids accepted with respect to
such Competitive Bid Request, which acceptance, in the case of multiple bids
at such Competitive Bid Rate, shall be made pro rata in accordance with the
amount of each such bid at such Competitive Bid Rate, and (v) except pursuant
to clause (iv) above, no bid shall be accepted for a Competitive Loan unless
such Competitive Loan is in (x) a minimum principal amount of $5,000,000 and
an integral multiple of $1,000,000 or (y) an aggregate principal amount equal
to the remaining balance of the available applicable Commitments; provided
further, however, that if a Competitive Loan must be in an amount less than
$5,000,000 because of the provisions of clause (iv) above, such Competitive
Loan may be for a minimum of $1,000,000 or any integral multiple thereof, and
in calculating the pro rata allocation of acceptances of portions of multiple
bids at a particular Competitive Bid Rate pursuant to clause (iv) the amounts
shall be rounded to integral multiples of $1,000,000 in a manner which shall
be in the discretion of the applicable Borrower. A notice given by the
applicable Borrower pursuant to this paragraph (d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (and if so, in what
amount and at what Competitive Bid Rate) by telecopy sent by the
Administrative Agent, and each successful bidder will thereupon become bound,
subject to the other applicable conditions hereof, to make the Competitive
Loan in respect of which its bid has been accepted.
(f) A Competitive Bid Request shall not be made within five Business Days
after the date of any previous Competitive Bid Request.
(g) If the Administrative Agent shall elect to submit a Competitive Bid in
its capacity as a Lender, it shall submit such bid directly to the applicable
Borrower one quarter of an hour earlier than the latest time at which the
other Lenders are required to submit their bids to the Administrative Agent
pursuant to paragraph (b) above.
(h) All notices required by this Section 2.03 shall be given in accordance
with Section 10.01.
SECTION 2.04. Standby Borrowing Procedure. In order to request a Standby
Borrowing, a Borrower shall hand deliver or telecopy to the Administrative
Agent a duly completed Standby Borrowing Request in the form of Exhibit A-5
hereto, to be received by the Administrative Agent (a) in the case of a
Eurodollar Standby Borrowing, not later than 11:00 a.m., New York City time,
three Business Days before a proposed borrowing and (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before a proposed borrowing; provided, however, that Borrowing Requests with
respect to Borrowings to be made on the Closing Date may, at the discretion of
the Administrative Agent, be delivered later than the times specified above.
No Fixed Rate Loan shall be requested or made pursuant to a Standby Borrowing
Request. Such notice shall be irrevocable and shall in each case specify (i)
whether the Borrowing then being requested is to be a Eurodollar Borrowing or
an ABR Borrowing; (ii) the date of such Borrowing (which shall be a Business
Day) and the aggregate principal amount of the Borrowing and (iii) if such
Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto. If no election as to the Type of Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. If no Interest Period with
respect to any Eurodollar Borrowing is specified, then the applicable Borrower
shall be deemed to have selected an Interest Period of one month's duration.
If the applicable Borrower shall not have given notice in accordance with this
Section 2.04 of its election to refinance a Standby Borrowing prior to the end
of the Interest Period in effect for such Borrowing, then such Borrower shall
(unless such Borrowing is repaid at the end of such Interest Period) be deemed
to have given notice of an election to refinance such Borrowing with an ABR
Borrowing. The Administrative Agent shall promptly advise the Lenders of any
notice given pursuant to this Section 2.04 (and the contents thereof), of each
Lender's portion of the requested Borrowing.
SECTION 2.05. Refinancings. A Borrower may refinance all or any part of any
Competitive Borrowing or Standby Borrowing with a Competitive Borrowing or a
Standby Borrowing of the same or a different Type made pursuant to Section
2.03 or Section 2.04, subject to the conditions and limitations set forth
herein and elsewhere in this Agreement, including refinancings of Competitive
Borrowings with Standby Borrowings and Standby Borrowings with Competitive
Borrowings. Any Borrowing or part thereof so refinanced shall be deemed to be
repaid in accordance with Section 2.07 with the proceeds of a new Borrowing
hereunder and the proceeds of the new Borrowing, to the extent they do not
exceed the principal amount of the Borrowing being refinanced, shall not be
paid by the Lenders to the Administrative Agent or by the Administrative Agent
to the applicable Borrower pursuant to Section 2.02(c); provided, however,
that (i) if the principal amount extended by a Lender in a refinancing is
greater than the principal amount extended by such Lender in the Borrowing
being refinanced, then such Lender shall pay such difference to the
Administrative Agent for distribution to the Lenders described in (ii) below,
(ii) if the principal amount extended by a Lender in the Borrowing being
refinanced is greater than the principal amount being extended by such Lender
in the refinancing, the Administrative Agent shall return the difference to
such Lender out of amounts received pursuant to (i) above, and (iii) to the
extent any Lender fails to pay the Administrative Agent amounts due from it
pursuant to (i) above, any Loan or portion thereof being refinanced with such
amounts shall not be deemed repaid in accordance with Section 2.07 and shall
be payable by the applicable Borrower.
SECTION 2.06. Fees. (a) The Company agrees to pay to each Lender, through
the Administrative Agent, on each March 31, June 30, September 30 and December
31 and on the Maturity Date, a facility fee (a "Facility Fee") equal to the
Facility Fee Percentage of the daily average amount of the Commitment of such
Lender, whether used or unused (and whether or not the conditions set forth in
Section 4.01 shall have been satisfied), on or prior to the Maturity Date,
during the preceding quarter (or shorter period commencing with the date
hereof or ending with the Maturity Date or any date on which the Commitment of
such Lender shall be terminated and all outstanding Loans of such Lender
repaid). All Facility Fees shall be computed on the basis of the actual
number of days elapsed in a year of 365 days. The Facility Fee due to each
Lender shall commence to accrue on the date of this Agreement and shall cease
to accrue on the earlier of the Maturity Date and the date on which the
Commitment of such Lender shall have been terminated and the Loans of such
Lender shall have been repaid.
(b) The Company agrees to pay the Administrative Agent, for its own account,
the fees set forth in the letter agreements dated May 2, 1994 among the
Administrative Agent, Chemical Securities Inc. and the Company (the
"Administrative Fees") at the times and in the amounts set forth therein.
(c) The Company agrees to pay to each Lender, through the Administrative
Agent, on each March 31, June 30, September 30 and December 31 and on each
date on which the Commitment of such Lender shall be terminated or reduced as
provided herein, a utilization fee (a "Utilization Fee") equal to the
Utilization Fee Percentage of the sum of (i) the Committed Credit Exposure
plus (ii) the outstanding principal amount of the Competitive Loans of such
Lender for each day on which the sum of (A) the outstanding aggregate
principal amount of Loans plus (B) the outstanding aggregate principal amount
(or Assigned Dollar Value (as defined in the Facility B Credit Agreement), in
the case of loans denominated in an Alternative Currency (as defined in the
Facility B Credit Agreement)) of loans under the Facility B Credit Agreement
exceeds 50% of the sum of (A) the Total Commitment plus (B) the aggregate
amount of the commitments of the lenders under the Facility B Credit
Agreement. All Utilization Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days.
(d) All Fees shall be paid on the dates due, in immediately available funds,
to the Administrative Agent for distribution, if and as appropriate, among the
Lenders. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.07. Repayment of Loans. (a) Each Borrower agrees to pay the
outstanding principal balance of each Loan on the last day of the Interest
Period applicable to such Loan and on the Maturity Date. Each Loan shall bear
interest from the date of the Borrowing of which such Loan is a part on the
outstanding principal balance thereof as set forth in Section 2.08.
(b) Each Lender shall, and is hereby authorized by the Borrowers to,
maintain, in accordance with its usual practice, records evidencing the
indebtedness of each Borrower to such Lender hereunder from time to time,
including the date, amount and Type of and the Interest Period applicable to
each Loan made by such Lender from time to time and the amounts of principal
and interest paid to such Lender from time to time in respect of each such
Loan.
(c) The entries made in the records maintained pursuant to paragraph (b) of
this Section 2.07 and in the Register maintained by the Administrative Agent
pursuant to Section 10.04(d) shall be prima facie evidence of the existence
and amounts of the obligations of each Borrower to which such entries relate;
provided, however, that the failure of any Lender or the Administrative Agent
to maintain or to make any entry in such records or the Register, as
applicable, or any error therein shall not in any manner affect the obligation
of any Borrower to repay any Loans in accordance with the terms of this
Agreement.
SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section
2.09, the Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days, at a rate per annum equal to (i) in the case of each Eurodollar Standby
Loan, the LIBO Rate for the Interest Period in effect for the Borrowing of
which such Loan is part plus the Applicable Margin from time to time in effect
and (ii) in the case of each Eurodollar Competitive Loan, the LIBO Rate for
the Interest Period in effect for the Borrowing of which such Loan is a part
plus the Competitive Margin offered by the Lender making such Loan and
accepted by the Borrower pursuant to Section 2.03.
(b) Subject to the provisions of Section 2.09, the Loans comprising each ABR
Borrowing (including each Swingline Borrowing) shall bear interest (computed
on the basis of the actual number of days elapsed over a year of 365 or 366
days, as appropriate, when determined by reference to the Prime Rate and over
a year of 360 days at all other times) at a rate per annum equal to the
Alternate Base Rate.
(c) Subject to the provisions of Section 2.09, each Fixed Rate Loan shall
bear interest at a rate per annum (computed on the basis of the actual number
of days elapsed over a year of 360 days) equal to the fixed rate of interest
offered by the Lender making such Loan and accepted by the Borrower pursuant
to Section 2.03.
(d) Interest on each Loan shall be payable in arrears on each Interest
Payment Date applicable to such Loan except as otherwise provided in this
Agreement. The applicable LIBO Rate or Alternate Base Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.09. Default Interest. If any Borrower shall default in the payment
of the principal of or interest on any Loan or any other amount becoming due
hereunder, whether by scheduled maturity, notice of prepayment, acceleration
or otherwise, such Borrower shall on demand from time to time from the
Administrative Agent pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after
as well as before judgment) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Alternate
Base Rate plus 2% per annum (or, in the case of the principal of any Loan, if
higher, the rate of interest otherwise applicable, or most recently
applicable, to such Loan hereunder plus 2% per annum).
SECTION 2.10. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that Dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do
not exist for ascertaining the LIBO Rate, the Administrative Agent shall, as
soon as practicable thereafter, give written or telecopy notice of such
determination to the applicable Borrower and the Lenders. In the event of any
such determination, until the Administrative Agent shall have advised the
applicable Borrower and the Lenders that the circumstances giving rise to such
notice no longer exist, (i) any request by a Borrower for a Eurodollar
Competitive Borrowing pursuant to Section 2.03 shall be of no force or effect
and shall be denied by the Administrative Agent and (ii) any request by a
Borrower for a Eurodollar Standby Borrowing shall be deemed to be a request
for an ABR Borrowing. Each determination by the Administrative Agent
hereunder shall be conclusive absent manifest error.
SECTION 2.11. Termination and Reduction of Commitments. (a) The Commitments
shall be automatically terminated at the Administrative Agent's close of
business in New York City on the Maturity Date.
(b) Upon at least two Business Days' prior irrevocable written or telecopy
notice to the Administrative Agent, the Company (on behalf of all the
Borrowers) may at any time in whole permanently terminate, or from time to
time in part permanently reduce, the Total Commitment; provided, however, that
(i) each partial reduction of the Total Commitment shall be in an integral
multiple of $1,000,000 and in a minimum principal amount of $5,000,000 and
(ii) no such termination or reduction shall be made which would reduce the
Total Commitment to an amount less than the aggregate outstanding principal
amount of the Competitive Loans and Standby Loans.
(c) Each reduction in the Total Commitment hereunder shall be made ratably
among the Lenders in accordance with their respective Commitments. The
Company shall pay to the Administrative Agent for the account of the Lenders,
on the date of each termination or reduction, the Facility Fees on the amount
of the Commitments so terminated or reduced accrued to but not including the
date of such termination or reduction.
SECTION 2.12. Prepayment. (a) Each Borrower shall have the right at any
time and from time to time to prepay any Standby Borrowing, in whole or in
part, upon giving written or telecopy notice (or telephone notice promptly
confirmed by written or telecopy notice) to the Administrative Agent: (i) in
the case of Eurodollar Loans before 11:00 a.m., New York City time, three
Business Days prior to prepayment and (ii) in the case of ABR Loans, before
11:00 a.m., New York City time, one Business Day prior to prepayment;
provided, however, that each partial prepayment shall be in an amount which is
an integral multiple of $1,000,000 and not less than $5,000,000. The
Borrowers shall not have the right to prepay any Competitive Borrowing.
(b) On the date of any termination or reduction of the Commitments pursuant
to Section 2.11, the Company shall (or shall cause each responsible Borrower
to) pay or prepay so much of the Swingline Borrowings and Standby Borrowings,
in accordance with the following sentence, as shall be necessary in order that
the aggregate outstanding principal amount of all Loans will not exceed the
Total Commitment after giving effect to such termination or reduction.
Mandatory prepayments under this paragraph (b) shall be applied (i) first, to
prepay outstanding Swingline Borrowings and (ii) second, to prepay outstanding
Standby Borrowings.
(c) Each notice of prepayment under this Section 2.12 shall specify the
prepayment date and the principal amount of each Borrowing (or portion
thereof) to be prepaid, shall be irrevocable and shall commit the applicable
Borrower to prepay such Borrowing (or portion thereof) by the amount stated
therein on the date stated therein. All prepayments under this Section 2.12
shall be subject to Section 2.15 but otherwise without premium or penalty.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender (or any
lending office of any Lender) of the principal of or interest on any
Eurodollar Loan or Fixed Rate Loan made by such Lender or any Fees or other
amounts payable hereunder (other than changes in respect of taxes imposed on
the overall net income of such Lender by the jurisdiction in which such Lender
has its principal office or by any political subdivision or taxing authority
therein), or shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of or credit extended by such Lender (or any lending office of such
Lender), or shall impose on such Lender or the London interbank market any
other condition affecting this Agreement or any Eurodollar Loan or Fixed Rate
Loan made by such Lender, and the result of any of the foregoing shall be to
increase the cost to such Lender of making or maintaining any Eurodollar Loan
or Fixed Rate Loan or to reduce the amount of any sum received or receivable
by such Lender hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender to be material, then the Company shall (or shall
cause the Borrowers to) pay to such Lender upon demand such additional amount
or amounts as will compensate such Lender for such additional costs incurred
or reduction suffered. Notwithstanding the foregoing, no Lender shall be
entitled to request compensation under this paragraph with respect to any
Competitive Loan if it shall have been aware of the change giving rise to such
request at the time of submission of the Competitive Bid pursuant to which
such Competitive Loan shall have been made.
(b) If any Lender shall have determined that any change after the date hereof
in the applicability of any law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption
after the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Lender (or any lending office
of such Lender) or any Lender's holding company with any request or directive
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 Lender's capital or on the
capital of such Lender's holding company, if any, as a consequence of this
Agreement or the Loans made by such Lender pursuant hereto to a level below
that which such Lender or such Lender's holding company could have achieved
but for such applicability, adoption, change or compliance (taking into
consideration such Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from time to time the Company shall (or shall cause the
responsible Borrower to) pay to such Lender such additional amount or amounts
as will compensate such Lender or such Lender's holding company for any such
reduction suffered. It is acknowledged that the Facility Fee provided for in
this Agreement has been determined on the understanding that the Lenders will
not be required to maintain capital against their Commitments under currently
applicable laws, regulations and regulatory guidelines. In the event the
Lenders shall be advised by regulatory authorities or shall otherwise
determine on the basis of pronouncements of regulatory authorities that such
understanding is incorrect, it is agreed that the Lenders will be entitled to
make claims under this paragraph based upon prevailing market requirements on
the date hereof for commitments under comparable credit facilities against
which capital is required to be maintained.
(c) A certificate of a Lender setting forth such amount or amounts as shall
be necessary to compensate such Lender as specified in paragraph (a) or (b)
above, as the case may be, shall be delivered to the Company and shall be
conclusive absent manifest error. The Company shall (or shall cause the
responsible Borrower to) pay each Lender the amount shown as due on any such
certificate delivered by it within 10 days after the receipt of the same.
(d) Except as provided below in this paragraph (d), failure on the part of
any Lender to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect
to any period shall not constitute a waiver of such Lender's right to demand
compensation with respect to such period or any other period. The protection
of this Section shall be available to each Lender regardless of any possible
contention of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition which shall have occurred or been
imposed. No Lender shall be entitled to compensation under this Section 2.13
for any costs incurred or reductions suffered with respect to any date unless
it shall have notified the Company that it will demand compensation for such
costs or reductions not more than 60 days after the later of (i) such date and
(ii) the date on which it shall have, or should have, become aware of such
costs or reductions.
SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision
herein, if, after the date hereof, (i) any change in any law or regulation or
in the interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations
as contemplated hereby with respect to any Eurodollar Loan or (ii) there shall
have occurred any change in national or international financial, political or
economic conditions which would make it impracticable for any Lender to make
Loans to any Borrower, then, by written notice to the Company and to the
Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter (for the duration of
such unlawfulness or impracticability) be made by such Lender hereunder,
whereupon such Lender shall not submit a Competitive Bid in response to a
request for Eurodollar Competitive Loans and any request by a Borrower for a
Eurodollar Standby Borrowing shall, as to such Lender only, be deemed a
request for an ABR Loan, unless such declaration shall be subsequently
withdrawn (or, if a Loan to the requesting Borrower cannot be made for the
reasons specified above, such request shall be deemed to have been withdrawn);
and
(ii) require that all outstanding Eurodollar Loans made by it be converted to
ABR Loans, in which event all such Eurodollar Loans shall be automatically
converted to ABR Loans as of the effective date of such notice as provided in
paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay
the ABR Loans made by such Lender in lieu of, or resulting from the conversion
of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Company by any Lender
shall be effective as to each Eurodollar Loan, if lawful, on the last day of
the Interest Period currently applicable to such Eurodollar Loan; in all other
cases such notice shall be effective on the date of receipt by the Company.
SECTION 2.15. Indemnity. Each Borrower shall indemnify each Lender against
any loss or expense which such Lender may sustain or incur as a consequence of
(a) any failure by such Borrower to fulfill on the date of any borrowing
hereunder the applicable conditions set forth in Article IV, (b) any failure
by such Borrower to borrow or to refinance or continue any Loan hereunder
after irrevocable notice of such borrowing, refinancing or continuation has
been given pursuant to Section 2.03 or 2.04, (c) any payment, prepayment,
conversion or transfer of a Eurodollar Loan or Fixed Rate Loan required by any
other provision of this Agreement or otherwise made or deemed made on a date
other than the last day of the Interest Period applicable thereto, (d) any
default in payment or prepayment of the principal amount of any Loan or any
part thereof or interest accrued thereon, as and when due and payable (at the
due date thereof, whether by scheduled maturity, acceleration, irrevocable
notice of prepayment or otherwise) or (e) the occurrence of any other Event of
Default, including, in each such case, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain such Loan
or any part thereof as a Eurodollar Loan or Fixed Rate Loan. Such loss or
reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by such Lender, of (i) its cost of obtaining the funds
for the Loan being paid, prepaid, converted, transferred or not borrowed
(assumed to be the LIBO Rate or, in the case of a Fixed Rate Loan, the fixed
rate of interest applicable thereto) for the period from the date of such
payment, prepayment, conversion, transfer or failure to borrow to the last day
of the Interest Period for such Loan (or, in the case of a failure to borrow,
the Interest Period for such Loan which would have commenced on the date of
such failure) over (ii) the amount of interest (as reasonably determined by
such Lender) that would be realized by such Lender in reemploying the funds so
paid, prepaid, converted, transferred or not borrowed for such period or
Interest Period, as the case may be. A certificate of any Lender setting
forth any amount or amounts which such Lender is entitled to receive pursuant
to this Section shall be delivered to the Company and shall be conclusive
absent manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.14,
each Standby Borrowing, each payment or prepayment of principal of any Standby
Borrowing, each payment of interest on the Standby Loans, each payment of the
Facility Fees and Utilization Fees, each reduction of the Commitments and each
refinancing of any Borrowing with a Standby Borrowing of any Type, shall be
allocated pro rata among the Lenders in accordance with their respective
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Standby
Loans). Each payment of principal of any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata among the Lenders
participating in such Borrowing in accordance with the respective amounts of
accrued and unpaid interest on their outstanding Competitive Loans comprising
such Borrowing. For purposes of determining (i) the aggregate available
Commitments of the Lenders at any time and (ii) the available Commitment of
each Lender, each outstanding Competitive Borrowing shall be deemed to have
utilized the Commitments of the Lenders (including those Lenders which shall
not have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing to the next higher or lower whole Dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim
against any Borrower, or pursuant to a secured claim under Section 506 of
Title 11 of the United States Code or other security or interest arising from,
or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any
Standby Loan or Standby Loans as a result of which the unpaid principal
portion of its Standby Loans shall be proportionately less than the unpaid
principal portion of the Standby Loans of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and
shall promptly pay to such other Lender the purchase price for, a
participation in the Standby Loans of such other Lender, so that the aggregate
unpaid principal amount of the Standby Loans and participations in the Standby
Loans held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all Standby Loans then outstanding as the principal
amount of its Standby Loans prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Standby Loans
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that, if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.17 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in a Standby Loan deemed to have been so purchased may
exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by such Borrower to such Lender by reason
thereof as fully as if such Lender had made a Standby Loan directly to such
Borrower in the amount of such participation.
SECTION 2.18. Payments. (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any Fees or other amounts)
hereunder and under each other Loan Document not later than 12:00 noon, New
York City time, on the date when due in immediately available funds. Each
such payment (other than principal of and interest on Swingline Loans, which
shall be paid directly to the applicable Swingline Lender except as otherwise
provided in Section 2.21(c)) shall be made to the Administrative Agent at its
offices at 270 Park Avenue, New York, New York.
(b) Whenever any payment (including principal of or interest on any Borrowing
or any Fees or other amounts) hereunder or under any other Loan Document shall
become due, or otherwise would occur, on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by each Borrower hereunder
shall be made, in accordance with Section 2.18, free and clear of and without
deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) income taxes imposed on the net income of the Administrative
Agent or any Lender (or any transferee or assignee thereof, including a
participation holder (any such individual or entity, a "Transferee")) and (ii)
franchise taxes imposed on the net income of the Administrative Agent or any
Lender (or Transferee), in each case by the jurisdiction under the laws of
which the Administrative Agent or such Lender (or Transferee) is organized,
domiciled, resident or doing business or any political subdivision thereof
(all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities, collectively or individually, "Taxes"). If any
Borrower shall be required to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender (or any Transferee) or the Administrative
Agent, (i) the sum payable shall be increased by the amount (an "additional
amount") necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.19) such
Lender (or Transferee) or the Administrative Agent (as the case may be) shall
receive an amount equal to the sum it would have received had no such
deductions been made, (ii) each Borrower shall make such deductions and (iii)
each Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, each Borrower agrees to bear and to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document ("Other Taxes").
(c) The Borrowers will indemnify each Lender (or Transferee) and the
Administrative Agent for the full amount of Taxes and Other Taxes paid by such
Lender (or Transferee) or the Administrative Agent, as the case may be, and
any liability (including penalties, interest and expenses (including
reasonable attorney's fees and expenses)) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability prepared by a Lender, or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Lender (or Transferee) or the Administrative
Agent, as the case may be, makes written demand therefor.
(d) If a Lender (or Transferee) or the Administrative Agent shall become
aware that it is entitled to claim a refund from a Governmental Authority in
respect of Taxes or Other Taxes as to which it has been indemnified by a
Borrower, or with respect to which any Borrower has paid additional amounts,
pursuant to this Section 2.19, it shall promptly notify the Company of the
availability of such refund claim and shall, within 30 days after receipt of a
request by the Company, make a claim to such Governmental Authority for such
refund at the Company's expense. If a Lender (or Transferee) or the
Administrative Agent receives a refund (including pursuant to a claim for
refund made pursuant to the preceding sentence) in respect of any Taxes or
Other Taxes as to which it has been indemnified by a Borrower or with respect
to which any Borrower has paid additional amounts pursuant to this Section
2.19, it shall within 30 days from the date of such receipt pay over such
refund to the Company (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.19 with respect
to the Taxes or Other Taxes giving rise to such refund), net of all out-of-
pocket expenses of such Lender (or Transferee) or the Administrative Agent and
without interest (other than interest paid by the relevant Governmental
Authority with respect to such refund); provided, however, that the Company,
upon the request of such Lender (or Transferee) or the Administrative Agent,
agrees to (or to cause the responsible Borrower to) repay the amount paid over
to the Company (plus penalties, interest or other charges) to such Lender (or
Transferee) or the Administrative Agent in the event such Lender (or
Transferee) or the Administrative Agent is required to repay such refund to
such Governmental Authority.
(e) As soon as practicable after the date of any payment of Taxes or Other
Taxes by any Borrower to the relevant Governmental Authority, the Company will
deliver to the Administrative Agent, at its address referred to in Section
10.01, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.19 shall
survive the payment in full of the principal of and interest on all Loans made
hereunder.
(g) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District
of Columbia (a "Non-U.S. Lender") shall deliver to the Company and the
Administrative Agent two copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S.
Lender delivers a Form W-8, a certificate representing that such Non-U.S.
Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-
percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code)
of the Company and is not a controlled foreign corporation related to the
Company (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or reduced rate of, U.S. Federal withholding tax on payments
by the Borrowers under this Agreement and the other Loan Documents. Such
forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of a Transferee that is a
participation holder, on or before the date such participation holder becomes
a Transferee hereunder) and on or before the date, if any, such Non-U.S.
Lender changes its applicable lending office by designating a different
lending office (a "New Lending Office"). In addition, each Non-U.S. Lender
shall deliver such forms promptly upon the obsolescence or invalidity of any
form previously delivered by such Non-U.S. Lender. Notwithstanding any other
provision of this Section 2.19(g), a Non-U.S. Lender shall not be required to
deliver any form pursuant to this Section 2.19(g) that such Non-U.S. Lender is
not legally able to deliver.
(h) None of the Borrowers shall be required to indemnify any Non-U.S. Lender,
or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Lender became
a party to this Agreement (or, in the case of a Transferee that is a
participation holder, on the date such participation holder became a
Transferee hereunder) or, with respect to payments to a New Lending Office,
the date such Non-U.S. Lender designated such New Lending Office with respect
to a Loan; provided, however, that this clause (i) shall not apply to any
Transferee or New Lending Office that becomes a Transferee or New Lending
Office as a result of an assignment, participation, transfer or designation
made at the request of the Company; and provided further, however, that this
clause (i) shall not apply to the extent the indemnity payment or additional
amounts any Transferee, or Lender (or Transferee) through a New Lending
Office, would be entitled to receive (without regard to this clause (i)) do
not exceed the indemnity payment or additional amounts that the person making
the assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (g) above.
(i) Any Lender (or Transferee) claiming any indemnity payment or additional
amounts payable pursuant to this Section 2.19 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document reasonably requested in writing by the Company or to change the
jurisdiction of its applicable lending office if the making of such a filing
or change would avoid the need for or reduce the amount of any such indemnity
payment or additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender (or Transferee), be otherwise
disadvantageous to such Lender (or Transferee).
(j) Nothing contained in this Section 2.19 shall require any Lender (or
Transferee) or the Administrative Agent to make available any of its tax
returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.20. Assignment of Commitments and Swingline Commitments Under
Certain Circumstances. (a) Any Lender (or Transferee) claiming any
additional amounts payable pursuant to Section 2.13 or Section 2.19 shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document requested by the Company or to change the
jurisdiction of its applicable lending office if the making of such a filing
or change would avoid the need for or reduce the amount of any such additional
amounts which may thereafter accrue and would not, in the judgment of such
Lender, be otherwise disadvantageous to such Lender (or Transferee).
(b) In the event that any Lender shall have delivered a notice or certificate
pursuant to Section 2.13 or 2.14, or the Borrowers shall be required to make
additional payments to any Lender under Section 2.19, the Company shall have
the right, at its own expense, upon notice to such Lender and the
Administrative Agent, to require such Lender to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in
Section 10.04) all its interests, rights and obligations under this Agreement
to another financial institution acceptable to the Administrative Agent which
shall assume such obligations; provided that (i) no such assignment shall
conflict with any law, rule or regulation or order of any Governmental
Authority and (ii) the Company or the assignee, as the case may be, shall pay
to the affected Lender in immediately available funds on the date of such
assignment the principal of and interest accrued to the date of payment on the
Loans made by it hereunder and all other amounts accrued for its account or
owed to it hereunder.
SECTION 2.21. Swingline Loans. (a) On the terms, subject to the conditions
and relying upon the representations and warranties herein set forth, each
Swingline Lender agrees, severally and not jointly, at any time and from time
to time on and after the date hereof and until the earlier of the Business Day
immediately preceding the Maturity Date and the termination of the Swingline
Commitment of such Swingline Lender, to make Swingline Loans to the Borrowers
in an aggregate principal amount at any time outstanding not to exceed the
lesser of (i) such Swingline Lender's Swingline Commitment Percentage of the
difference between (A) the Total Swingline Commitment and (B) the Swingline
Loan Exposure, and (ii) the difference between (A) the aggregate Commitment of
such Swingline Lender and (B) the outstanding aggregate principal amount of
all Loans made by such Swingline Lender. Each Swingline Loan shall be made as
part of a Borrowing consisting of Swingline Loans made by the Swingline
Lenders ratably in accordance with their respective Swingline Commitment
Percentages (it being understood that no Swingline Lender shall be responsible
for the failure of any other Swingline Lender to make any Swingline Loan
required to be made by such other Swingline Lender). The Swingline Loans
comprising any Swingline Borrowing shall be in an aggregate principal amount
that is an integral multiple of $1,000,000 and not less than $5,000,000 (or an
aggregate principal amount equal to the remaining balance of the available
Swingline Commitments). Each Swingline Lender shall make its portion of each
Swingline Borrowing available to the applicable Borrower by means of a credit
to the general deposit account of such Borrower with the Administrative Agent
by 3:00 p.m. on the date such Swingline Borrowing is requested to be made
pursuant to paragraph (b) below. Within the limits set forth in the first
sentence of this paragraph, the Borrowers may borrow, pay or prepay and
reborrow Swingline Loans on or after the Initial Funding Date and prior to the
Maturity Date on the terms and subject to the conditions and limitations set
forth herein. The Swingline Commitments shall automatically and permanently
terminate on the Maturity Date.
(b) The applicable Borrower shall give the Administrative Agent telephonic,
written or telecopy notice (in the case of telephonic notice, such notice
shall be promptly confirmed by telecopy) no later than 11:00 a.m., New York
City time, on the day of a proposed Swingline Borrowing. Such notice shall be
delivered on a Business Day, shall be irrevocable and shall refer to this
Agreement and shall specify the requested date (which shall be a Business Day)
and amount of such Swingline Borrowing. The Administrative Agent shall
promptly advise the Swingline Lenders of any notice received from the Borrower
pursuant to this paragraph (b).
(c) If any Borrower does not fully repay a Swingline Borrowing on or prior to
the last day of the Interest Period with respect thereto, the Administrative
Agent shall promptly notify each Lender thereof (by telecopy or by telephone,
confirmed in writing) and of its Applicable Percentage of such Swingline
Borrowing. Upon such notice but without any further action, each Swingline
Lender hereby agrees to grant to each Lender, and each Lender hereby agrees to
acquire from each Swingline Lender, a participation in the Swingline Loan made
by such Swingline Lender as part of such Swingline Borrowing equal to such
Lender's Applicable Percentage of the principal amount of such Swingline Loan.
In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay to the Administrative Agent, for the account of the applicable
Swingline Lender, such Lender's Applicable Percentage of each Swingline
Borrowing (including the interest accrued thereon) that is not repaid on the
last day of the Interest Period with respect thereto. Each such payment
shall, for all purposes hereof, be deemed to be an ABR Standby Loan. Each
Lender acknowledges and agrees that its obligation to acquire participations
in Swingline Loans pursuant to this paragraph is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including the
occurrence and continuance of a Default or an Event of Default or the failure
of any condition precedent set forth in Article IV, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligation under this paragraph
by wire transfer of immediately available funds, in the same manner as
provided in Section 2.02(c) with respect to Loans made by such Lender, and the
Administrative Agent shall promptly pay to the Swingline Lenders their
respective shares of the amounts so received by it from the Lenders. The
Administrative Agent shall notify the applicable Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the applicable Swingline Lender. Any amounts
received by a Swingline Lender from a Borrower (or other party on behalf of a
Borrower) in respect of a Swingline Loan after receipt by such Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the applicable Swingline Lender, as their interests may appear.
Notwithstanding anything herein to the contrary, the purchase of
participations in a Swingline Borrowing pursuant to this paragraph shall not
relieve the Borrower of its obligation in respect of the payment thereof so
long as ABR Loans that resulted from any such default shall remain outstanding
or any accrued interest thereon shall remain unpaid.
(d) Upon written or telecopy notice to the Swingline Lenders and to the
Administrative Agent, the Company (on behalf of any Borrower or Borrowers) may
at any time permanently terminate, or from time to time in part permanently
reduce, the Swingline Commitment of the Swingline Lenders. Each reduction of
the Swingline Commitments shall be allocated pro rata among the Swingline
Lenders in accordance with their respective Swingline Commitment Percentages.
On the date of any termination or reduction of the Swingline Commitments
pursuant to this paragraph (d), the Borrower shall pay or prepay so much of
the Swingline Borrowings as shall be necessary in order that (i) the aggregate
outstanding principal amount of Swingline Loans will not exceed (ii) the Total
Swingline Commitment after giving effect to such termination of reduction.
(e) Any Borrower may prepay any Swingline Borrowing in whole or in part at
any time without premium or penalty; provided that such Borrower shall have
given the Administrative Agent written or telecopy notice (or telephone notice
promptly confirmed in writing or by telecopy) of such prepayment not later
than 11:00 a.m., New York City time, on the Business Day designated by such
Borrower for such prepayment; and provided further that each partial payment
shall be in an amount that is not less than $5,000,000 and in an integral
multiple of $1,000,000. Each notice of prepayment under this paragraph (e)
shall specify the prepayment date and the principal amount of each Swingline
Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall
commit such Borrower to prepay such Swingline Borrowing (or portion thereof)
by the amount stated therein on the date stated therein. Each payment of
principal of or interest on or any other amount in respect of Swingline Loans
shall be allocated, as between the Swingline Lenders, pro rata in accordance
with their respective Swingline Commitment Percentages.
SECTION 2.22. Borrowings by Approved Borrowers. The Company may, at any time
or from time to time, designate one or more wholly owned Subsidiaries as
Borrowers hereunder by furnishing to the Administrative Agent a letter (a
"Designation Letter") substantially in the form of Exhibit E-1 hereto, duly
completed and executed by the Company and such Subsidiary, whereupon each
Subsidiary so designated shall become an Approved Borrower. There may be no
more than ten Approved Borrowers at any one time. So long as all principal
and interest on all Loans of any Approved Borrower have been paid in full, the
Company may terminate an Approved Borrower's status as an Approved Borrower by
furnishing to the Administrative Agent a letter (a "Termination Letter"),
substantially in the form of Exhibit E-2 hereto, duly completed and executed
by the Company and such Approved Borrower. Any Termination Letter furnished
in accordance with this Section 2.22 shall be effective upon receipt by the
Administrative Agent. Notwithstanding the foregoing, the delivery of a
Termination Letter with respect to any Approved Borrower shall not affect any
obligation of such Approved Borrower theretofore incurred. Each Subsidiary
set forth in Schedule 2.22 shall be deemed an Approved Borrower until delivery
of a Termination Letter with respect to such Subsidiary.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Part A. Representations and Warranties of the Company. The Company
represents and warrants to each of the Lenders that:
SECTION 3.01. Corporate Existence. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
SECTION 3.02. Financial Condition. The Company has heretofore furnished to
each of the Lenders a consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1993, and the related consolidated statements
of income, cash flows and changes in shareholders' equity of the Company and
its Subsidiaries for the fiscal year ended on such date, with the opinion
thereon of Coopers & Lybrand, and the unaudited consolidated balance sheet of
the Company and its Subsidiaries as at March 31, 1994, and the related
consolidated statements of income and cash flows of the Company and its
Subsidiaries for the three-month period ended on such date. All such
financial statements present fairly, in all material respects, the
consolidated financial condition of the Company and its Subsidiaries as at
such dates and the consolidated results of their operations for the fiscal
year and three-month period ended on such dates (subject, in the case of the
financial statements as at March 31, 1994, to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis. None of the Company nor any of
its Subsidiaries has on the date hereof any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments, except as referred to
or reflected or provided for in the balance sheets as at such dates (or the
notes thereto in the case of such year end financial statements). Since
December 31, 1993, there has been no Material Adverse Change from that set
forth in the financial statements as at such date (or the notes thereto).
SECTION 3.03. Litigation. Except as disclosed in Schedule 3.03 hereto, there
are no legal or arbitral proceedings, or any proceedings by or before any
Governmental Authority, now pending or (to the knowledge of the Company)
threatened against the Company or any of its Subsidiaries that, if adversely
determined could (either individually or in the aggregate) have a Material
Adverse Effect.
SECTION 3.04. No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result
in a breach of, or require any consent under, the charter or by-laws of the
Company, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or Governmental Authority, or any agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their assets or properties is bound or to which
any of them is subject, or constitute a default under any such agreement or
instrument.
SECTION 3.05. Action. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance by the Company
of this Agreement has been duly authorized by all necessary corporate action
on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and
delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
SECTION 3.06. Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority, or any securities
exchange, are necessary for the execution, delivery or performance by the
Company of this Agreement or for the legality, validity or enforceability
hereof.
SECTION 3.07. Use of Credit. None of the Company nor any of its Subsidiaries
in engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
the Loans hereunder will be used to buy or carry any Margin Stock.
SECTION 3.08. ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or state law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 5.06
hereof.
SECTION 3.09. Taxes. As of the date hereof, the Company and its Domestic
Subsidiaries are members of an affiliated group of corporations filing
consolidated returns for Federal income tax purposes, of which the Company is
the "common parent" (within the meaning of Section 1504 of the Code) of such
group. The Company and its Subsidiaries have filed all Federal income tax
returns and all other material tax returns that are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company or any of its Subsidiaries. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Company, adequate. The Company has not given or been requested to give a
waiver of the statute of limitations relating to the payment of Federal,
states local and foreign taxes or other impositions.
SECTION 3.10. Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
SECTION 3.11. Public Utility Holding Company Act. Neither the Company nor
any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 3.12. Material Agreements and Liens. (a) Part A of Schedule 3.12
hereto is a complete and correct list, as of the date hereof, of each credit
agreement, loan agreement, indenture, guarantee, letter of credit or other
arrangement providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or
guarantee by, the Company or any of its Subsidiaries the aggregate principal
or face amount of which equals or exceeds (or may equal or exceed) $5,000,000,
and the aggregate principal or face amount outstanding or that may become
outstanding under each such arrangement is correctly described in Part A of
such Schedule 3.12.
(b) Part B of Schedule 3.12 hereto is a complete and correct list, as of the
date hereof, of each Lien securing Indebtedness of any person the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$5,000,000 and covering any property of the Company or any of its
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured)
by each such Lien and the property covered by each such Lien is correctly
described in Part B of such Schedule 3.12.
SECTION 3.13. Environmental Matters. Each of the Company and its
Subsidiaries has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to
carry on its business as now being or as proposed to be conducted, except to
the extent failure to have any such permit, license or authorization would not
(either individually or in the aggregate) have a Material Adverse Effect.
Each of such permits, licenses and authorizations is in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms
and conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except to
the extent failure to comply therewith would not (either individually or in
the aggregate) have a Material Adverse Effect. There have been no
environmental investigations, studies, audits, tests, reviews or other
analyses conducted by or that are in the possession of the Company or any of
its subsidiaries in relation to any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries that have not
been made available to the Lenders.
SECTION 3.14. Subsidiaries, etc. Set forth in Schedule 3.14 hereto is a
complete and correct list, as of the date hereof, of all of the Subsidiaries
of the Company, together with, for each such Subsidiary, (i) the jurisdiction
of organization of such Subsidiary, (ii) each person holding ownership
interests in such Subsidiary and (iii) the nature of the ownership interests
held by each such person and the percentage of ownership of such Subsidiary
represented by such ownership interests.
SECTION 3.15. True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement or included herein or
delivered pursuant hereto, when taken as a whole, do not contain any untrue
statement of material fact or omit to state any material fact necessary to
make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished after
the date hereof by the Company and its Subsidiaries to the Administrative
Agent and the Lenders in connection with this Agreement and the transactions
contemplated hereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on the
date as of which such information is stated or certified. There is no fact
known to the Company that could have a Material Adverse Effect that has not
been disclosed herein or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby.
Part B. Representations and Warranties of the Approved Borrowers. Each
Approved Borrower represents and warrants to each of the Lenders that:
SECTION 3.16. Corporate Existence of Approved Borrower. It and each of its
Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents
and approvals necessary to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business and
is in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
SECTION 3.17. No Breach. None of the execution and delivery of its
Designation Letter and this Agreement, the consummation of the transactions
therein and herein contemplated and compliance with the terms and provisions
thereof and hereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws or other organizational documents of
such Approved Borrower, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency,
or any agreement or instrument to which such Approved Borrower or any of its
Subsidiaries is a party or by which any of them or their assets or properties
is bound or to which any of them is subject, or constitute a default under any
such agreement or instrument.
SECTION 3.18. Action. Such Approved Borrower has all necessary corporate or
other power and authority to execute, deliver and perform its obligations
under its Designation Letter and this Agreement, to perform its obligations
hereunder and thereunder; the execution and delivery by such Approved Borrower
of its Designation Letter and the performance by such Approved Borrower hereof
and thereof have been duly authorized by all necessary corporate or other
action on its part (including, without limitation, any required shareholder
approvals); and its Designation Letter when executed and delivered by such
Approved Borrower, will constitute, the legal, valid and binding obligation of
such Approved Borrower, enforceable against such Approved Borrower in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 3.19. Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental Authority are necessary for
the execution, delivery or performance by such Approved Borrower of its
Designation Letter or this Agreement or for the validity or enforceability
thereof.
SECTION 3.20. Taxes on Payments of Approved Borrowers. Except as disclosed
to the Lenders in writing prior to the delivery of such Approved Borrower's
Designation Letter, there is no income, stamp or other tax of any country, or
of any taxing authority thereof or therein, imposed by or in the nature of
withholding or otherwise, which is imposed on any payment to be made by such
Approved Borrower pursuant hereto, or is imposed on or by virtue of the
execution, delivery or enforcement of its Designation Letter or this
Agreement.
ARTICLE IV. CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. All Borrowings. On the date of each Borrowing, including each
Borrowing in which Loans are refinanced with new Loans as contemplated by
Section 2.05:
(a) The Administrative Agent shall have received a notice of such Borrowing
as required by Section 2.03, Section 2.04 or Section 2.21(b), as applicable.
(b) The representations and warranties set forth in Article III hereof shall
be true and correct in all material respects on and as of the date of such
Borrowing with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an
earlier date; provided, however, that no representation as to either (i) the
absence of any Material Adverse Change in the financial condition of the
Company, as provided in the last two sentences of Section 3.02, or (ii) the
absence of any pending or threatened legal or arbitral proceedings, or any
proceedings by or before any Governmental Authority, that could have a
Material Adverse Effect on the Company, as provided in Section 3.03, shall be
required as a condition to any Borrowing following the earlier of (i) the
Initial Funding Date and (ii) the date of the first borrowing under the
Facility B Credit Agreement.
(c) Each Borrower shall be in compliance with all the terms and provisions
set forth herein and in each other Loan Document on its part to be observed or
performed, and at the time of and immediately after such Borrowing no Event of
Default or Default shall have occurred and be continuing.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrowers on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Borrowing. On the Initial Funding Date:
(a) The Administrative Agent shall have received a favorable written opinion
of Mudge Rose Guthrie Alexander & Ferdon, counsel for the Company, dated the
Initial Funding Date and addressed to the Lenders, to the effect set forth in
Exhibit D-1 hereto.
(b) All legal matters incident to this Agreement and the borrowings hereunder
shall be satisfactory to the Lenders and to Cravath, Swaine & Moore, counsel
for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate of incorporation, including all amendments thereto, of the
Company, certified as of a recent date by the Secretary of State of the State
of Delaware, and a certificate as to the good standing of the Company as of a
recent date, from such Secretary of State; (ii) a certificate of the Secretary
or Assistant Secretary of the Company dated the Initial Funding Date and
certifying (A) that attached thereto is a true and complete copy of the by-
laws of the Company as in effect on the Initial Funding Date and at all times
since a date prior to the date of the resolutions described in clause (B)
below, (B) that attached thereto is a true and complete copy of resolutions
duly adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of the Loan Documents and the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the certificate of
incorporation of the Company has not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished pursuant
to clause (i) above, and (D) as to the incumbency and specimen signature of
each officer executing any Loan Document or any other document delivered in
connection herewith on behalf of the Company; (iii) a certificate of another
officer as to the incumbency and specimen signature of the Secretary or
Assistant Secretary executing the certificate pursuant to (ii) above; and (iv)
such other documents as the Lenders or Cravath, Swaine & Moore, counsel for
the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate of the
Company, dated the Initial Funding Date and signed by a Financial Officer of
the Company, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(e) The Administrative Agent shall have received a copy of a termination
letter or similar document duly executed and delivered by the Company,
terminating the commitments under the Predecessor Credit Agreement.
(f) The Administrative Agent shall have received all Fees and other amounts
due and payable on or prior to the Initial Funding Date.
SECTION 4.03. First Borrowing by Each Approved Borrower. On the first date
on which Loans are made to each Approved Borrower:
(a) The Administrative Agent shall have received a favorable written opinion
of the general counsel of the applicable Approved Borrower, dated such date
and addressed to the Lenders, to the effect set forth in Exhibit D-2 hereto,
subject to necessary changes to reflect local law.
(b) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation (or such other analogous documents),
including all amendments thereto, of such Approved Borrower, certified as of a
recent date by the Secretary of State (or other appropriate Governmental
Authority) of the state (or country) of its organization or such other
evidence as is reasonably satisfactory to the Administrative Agent, and a
certificate as to the good standing (or other analogous certification to the
extent available) of such Approved Borrower as of a recent date, from such
Secretary of State (or other appropriate Governmental Authority) or such other
evidence reasonably acceptable to the Administrative Agent; (ii) a certificate
of the Secretary or Assistant Secretary of such Approved Borrower dated the
date on which such Loans are to be made and certifying (A) that attached
thereto is a true and complete copy of the by-laws (or such other analogous
documents to the extent available) of such Approved Borrower as in effect on
the date of such certificate and at all times since a date prior to the date
of the resolution of such Approved Borrower described in item (B) below, (B)
that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of such Approved Borrower authorizing the execution,
delivery and performance of the Designation Letter delivered by such Approved
Borrower and the borrowings hereunder by such Approved Borrower, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation (or other
analogous documents) of such Approved Borrower have not been amended since the
date of the last amendment thereto shown on the certificate of good standing
(or other analogous certification or such other evidence reasonably acceptable
to the Agent) furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer of such Approved Borrower
executing the Designation Letter delivered by such Approve of Borrower or any
other document delivered in connection herewith or therewith; (iii) a
certificate of another officer of such Approved Borrower as to the incumbency
and signature of the Secretary or such Assistant Secretary of such Approved
Borrower executing the certificate pursuant to (ii) above; and (iv) such other
documents as the Lenders or Cravath, Swaine & Moore, counsel for the Agent,
may reasonably request.
(c) The Administrative Agent shall have received (with sufficient copies for
each Lender) a Designation Letter, duly executed by such Approved Borrower and
the Company and acknowledged by the Administrative Agent.
(d) The Administrative Agent shall have received a certificate of each of the
Borrowers, dated such date and signed, in the case of the Company, by a
Financial Officer of the Company, and in the case of the Borrowers other than
the Company, a Responsible Officer of such Borrower, confirming compliance
with the conditions precedent set forth in paragraphs (b) and (c) of Section
4.01.
(e) The Administrative Agent shall have received all fees and other amounts
due and payable on or prior to such date.
Upon the satisfaction of the conditions precedent set forth in this Section
4.03, such Approved Borrower shall become a Borrower hereunder with the same
force and effect as if originally named as a Borrower hereunder. The rights
and obligations of each Borrower hereunder shall remain in full force and
effect notwithstanding the addition of any new Borrower as a party to this
Agreement.
ARTICLE V. AFFIRMATIVE COVENANTS
The Company covenants and agrees with each Lender and the Administrative Agent
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable under
any Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Company will, and will cause each of its Subsidiaries
to:
SECTION 5.01. Existence; Businesses and Properties. (a) Preserve and
maintain its corporate existence, rights (charter and statute) and material
franchises, except as otherwise permitted by Section 6.03; provided, however,
that the Company shall not be required to preserve any such right or franchise
if (i) the Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and (ii) the loss of
any such right or franchise is not disadvantageous in any material respect to
the Lenders.
(b) Comply in all material respects with all applicable laws (including
environmental laws), rules, regulations and orders (including, without
limitation, laws requiring payment of all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent contested in
good faith by appropriate proceedings) except where the failure to so comply
would not result in a Material Adverse Change.
(c) Maintain and preserve all of its properties which are used in the conduct
of its business in good working order and condition, ordinary wear and tear
excepted, to the extent that any failure to do so would result in a Material
Adverse Change and except for dispositions thereof permitted by Section 6.03.
SECTION 5.02. Insurance. Maintain insurance with financially sound and
reputable insurance companies (which insurance companies shall, in any event,
have an A.M. Best rating of "B+" or better), and with respect to property and
risks of a character usually maintained by corporations engaged in the same or
similar business similarly situated, against loss, damage and liability of the
kinds and in the amounts customarily maintained by such corporations.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Company shall have set aside on its books adequate reserves with respect
thereto.
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, its consolidated balance
sheets and related statements of income, changes in stockholders' equity and
cash flows, showing the financial condition of the Company and its
Subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of its Subsidiaries during such year, all
audited by Coopers & Lybrand or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be qualified in
any material respect) to the effect that such consolidated financial
statements fairly present the financial condition and results of operations of
the Company on a consolidated basis in accordance with GAAP consistently
applied;
(b) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, its consolidated balance sheets and related statements of
income, changes in stockholders' equity and cash flows, showing the financial
condition of the Company and its Subsidiaries as of the close of such fiscal
quarter and the results of its operations and the operations of its
Subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year, all certified by one of its Financial Officers as fairly
presenting the financial condition and results of operations of the Company on
a consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements under (a) or (b)
above, a certificate of the accounting firm or Financial Officer opining on or
certifying such statements (which certificate, when furnished by an accounting
firm, may be limited to accounting matters and disclaim responsibility for
legal interpretations) (i) certifying that no Event of Default or Default has
occurred or, if such an Event of Default or Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed to
be taken with respect thereto and (ii) setting forth computations in
reasonable detail satisfactory to the Administrative Agent demonstrating
compliance with the covenants contained in Sections 6.06 and 6.07;
(d) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by it with the
Securities and Exchange Commission, or any Governmental Authority succeeding
to any of or all the functions of such Commission, or with any national
securities exchange, or distributed to its shareholders, as the case may be;
and
(e) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Company or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent thereof
and the corrective action (if any) proposed to be taken with respect thereto;
(b) the filing or commencement of, or any threat or notice of intention of any
person to file or commence, any action, suit or proceeding, whether at law or
in equity or by or before any Governmental Authority, against the Company or
any Affiliate thereof which, if adversely determined, could result in a
Material Adverse Change; and
(c) any other development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Change.
SECTION 5.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent and each Lender (i) as soon as possible, and in any event
within 30 days after any Responsible Officer of the Company or any ERISA
Affiliate either knows or has reason to know that any Reportable Event has
occurred that alone or together with any other Reportable Event could
reasonably be expected to result in liability of the Company to the PBGC in an
aggregate amount exceeding $5,000,000, a statement of a Financial Officer
setting forth details as to such Reportable Event and the action proposed to
be taken with respect thereto, together with a copy of the notice, if any, of
such Reportable Event given to the PBGC, (ii) promptly after receipt thereof,
a copy of any notice the Company or any ERISA Affiliate may receive from the
PBGC relating to the intention of the PBGC to terminate any Plan or Plans
(other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code) or to appoint a trustee to administer any Plan or Plans, and (iii)
within 10 days after the due date for filing with the PBGC pursuant to Section
412(n) of the Code of a notice of failure to make a required installment or
other payment with respect to a Plan, a statement of a Financial Officer
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together with a copy of such notice given to the PBGC.
SECTION 5.07. Maintaining Records. Maintain all financial records in
accordance with GAAP and permit any representatives designated by any Lender
to discuss the affairs, finances and condition of the Company or any
Subsidiary with the officers thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for the
purposes set forth in the preamble to this Agreement.
ARTICLE VI. NEGATIVE COVENANTS
The Company covenants and agrees with each Lender and the Administrative Agent
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable under
any Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Company will not, and will not cause or permit any of
its Subsidiaries to:
SECTION 6.01. Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired, except:
(a) Liens in existence on the date hereof and listed in Part B of Schedule
3.12 hereto;
(b) Liens imposed by any Governmental Authority for taxes, assessments or
charges not yet due or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or the affected Subsidiaries, as the
case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business that are not overdue for
a period of more than 30 days or that are being contested in good faith and by
appropriate proceedings and Liens securing judgments but only to the extent
for an amount and for a period not resulting in an Event of Default under
Article VII clause (i) hereof;
(d) pledges or deposits under worker's compensation, unemployment insurance
and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other than
for Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of property
or minor imperfections in title thereto that, in the aggregate, are not
material in amount, and that do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct
of the business of the Company or any of its Subsidiaries;
(g) Liens on property of any corporation that becomes a Subsidiary of the
Company after the date of this Agreement; provided that such Liens are in
existence at the time such corporation becomes a Subsidiary of the Company and
were not created in anticipation thereof;
(h) Liens upon real and/or tangible personal property acquired after the date
hereof (by purchase, construction or otherwise) by the Company or any of its
Subsidiaries, each of which Liens either (A) existed on such property before
the time of its acquisition and was not created in anticipation thereof or (B)
was created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including the cost of
construction) of such property; provided that no such Lien shall extend to or
cover any property of the Company or such Subsidiary other than the property
so acquired and improvements thereon;
(i) additional Liens upon real and/or personal property created after the date
hereof; provided that the aggregate Indebtedness secured thereby and incurred
on and after the date hereof shall not exceed $5,000,000 in the aggregate at
any one time outstanding; and
(j) any extension, renewal or replacement of the foregoing; provided that the
Liens permitted hereunder shall not be spread to cover any additional
Indebtedness or property (other than a substitution of like property).
SECTION 6.02. Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned
or hereafter acquired, and thereafter rent or lease such property or other
property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (such an arrangement, a
"Sale and Lease-Back Transaction"), other than (i) Sale and Lease-Back
Transactions capitalized on the books of the Company in an aggregate
capitalized amount not in excess of $25,000,000 entered into in connection
with the financing of aircraft to be used in connection with the Company's
business and (ii) Sale and Lease-Back Transactions capitalized on the books of
the Company (other than a Sale and Lease-Back Transaction permitted by clause
(i) above) if the capitalized amount of all such Sale and Lease-Back
Transactions shall not exceed $5,000,000 in aggregate amount at any time
outstanding.
SECTION 6.03. Mergers, Sales of Assets, etc. (a) In the case of any
Borrower, consolidate with or merge into any other corporation or convey,
transfer or lease its properties and assets substantially as an entirety to
any person, unless:
(i)the corporation formed by such consolidation or into which such Borrower is
merged or the person which acquires by conveyance or transfer, or which
leases, the properties and assets of such Borrower substantially as an
entirety shall be a corporation organized and existing under the laws of the
United States of America or any state or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and delivered
to each other party hereto, in form satisfactory to the Administrative Agent,
the due and punctual payment of the principal of and interest on the Loans and
all other obligations of such Borrower under the Loan Documents and the
performance or observance of every covenant of this Agreement on the part of
such Borrower to be performed or observed;
(ii)immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and
(iii)the Company shall have delivered to the Administrative Agent an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and such supplemental agreement comply
with this paragraph (a) and that all conditions precedent herein provided for
relating to such transaction have been complied with.
(b) Upon any consolidation by any Borrower with or merger by any Borrower
into any other corporation or any conveyance, transfer or lease of the
properties and assets of any Borrower substantially as an entirety in
accordance with paragraph (a) above, the successor corporation formed by such
consolidation or into which such Borrower is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the applicable Borrower under
the Loan Documents with the same effect as if such successor corporation had
been named as a Borrower herein, and thereafter, the predecessor corporation
shall be relieved of all obligations and covenants under the Loan Documents.
SECTION 6.04. Lines of Business; Fiscal Year. Engage or invest in operations
engaging to any substantial extent in any line or lines of business activity
other than the business of manufacturing, providing, distributing and selling
such diverse goods and industrial services, principally for industrial,
commercial, construction and defense applications, the same or similar to
those goods and services as are manufactured, provided, distributed and sold
by the Company on the date hereof. In the case of the Company, change its
fiscal year end from that in effect at December 31, 1993.
SECTION 6.05. Transactions with Affiliates. Sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except that as
long as no Default or Event of Default shall have occurred and be continuing,
the Company or any Subsidiary may engage in any of the foregoing transactions
in the ordinary course of business at prices and on terms and conditions not
less favorable to the Company or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties.
SECTION 6.06. Net Worth. The Company will not permit its Net Worth at any
time during any period set forth below to be less than the required minimum
Net Worth set forth opposite such period:
Period
Required Minimum Net Worth
From the date hereof
through December 31, 1994
$435,000,000
From January 1, 1995 and at
all times thereafter
$435,000,000 plus 50% of Net Income for the Company's 1994 fiscal year
For purposes of determining Net Income to be added to the required minimum Net
Worth in Section 6.06 herein, negative Net Income shall be counted as zero.
SECTION 6.07. Total Debt to Total Capital Ratio. The Company will not permit
the ratio of Total Debt to Total Capital at any time on or after the date
hereof to exceed the ratio of 0.55 to 1.
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of Default"):
(a) any representation or warranty made or deemed made in or in connection
with any Loan Document or the borrowings hereunder, or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with or
pursuant to any Loan Document, shall prove to have been false or misleading in
any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or by acceleration thereof or
otherwise;
(c) default shall be made in the payment of any interest on any Loan or any
Fee or any other amount (other than an amount referred to in (b) above) due
under any Loan Document, when and as the same shall become due and payable,
and such default shall continue unremedied for a period of five days;
(d) default shall be made in the due observance or performance by the
Borrowers or any Subsidiary of any covenant, condition or agreement contained
in Section 5.01(a) or 5.05 or in Article VI;
(e) default shall be made in the due observance or performance by the
Borrowers or any Subsidiary of any covenant, condition or agreement contained
in any Loan Document (other than those specified in (b), (c) or (d) above) and
such default shall continue unremedied for a period of 30 days after notice
thereof from the Administrative Agent or any Lender to the Company;
(f) (i) the Company or any Subsidiary shall (A) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess of (I) $15,000,000, in the case of any single
obligation, or (II) $15,000,000, in the case of all obligations in the
aggregate, in each case, when and as the same shall become due and payable, or
(B) fail to observe or perform any other term, covenant, condition or
agreement contained in any agreement or instrument evidencing or governing any
Indebtedness in an aggregate principal amount in excess of $15,000,000 and
such failure shall continue beyond any applicable grace period; or (ii)
Indebtedness of the Company and its Subsidiaries, or any of them, in a
principal amount in excess of (A) $15,000,000, in the case of any single
obligation, or (B) $15,000,000, in the case of all obligations in the
aggregate, shall be declared due and payable or required to be prepaid prior
to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of any Borrower or any Subsidiary, or of a substantial part of the
property or assets of any Borrower or a Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law (or
similar statute or law in any other jurisdiction), (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for any Borrower or any Subsidiary or for a substantial part of the property
or assets of any Borrower or a Subsidiary or (iii) the winding-up or
liquidation of any Borrower or any Subsidiary; and such proceeding or petition
shall continue undismissed for 30 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) any Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law (or similar statute
or law in any other jurisdiction), (ii) consent to the institution of, or fail
to contest in a timely and appropriate manner, any proceeding or the filing of
any petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Borrower or any Subsidiary or for a substantial part
of the property or assets of any Borrower or any Subsidiary, (iv) file an
answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for the
purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate amount in
excess of $10,000,000 (exclusive of amounts fully covered by insurance where
the insurer has admitted liability in respect of such judgment) or in excess
of $20,000,000 (regardless of insurance coverage) shall be rendered against
any Borrower, any Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 60 consecutive days during which 60 days
execution shall not be effectively stayed, or otherwise being appropriately
contested in good faith, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of any Borrower or any Subsidiary
to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to make a required
installment or other payment (within the meaning of Section 412(n)(l) of the
Code), shall have occurred with respect to any Plan or Plans that reasonably
could be expected to result in liability of any Borrower to the PBGC or to a
Plan in an aggregate amount exceeding $5,000,000 and, within 30 days after the
reporting of any such Reportable Event to the Administrative Agent or after
the receipt by the Administrative Agent of the statement required pursuant to
Section 5.06, the Administrative Agent shall have notified such Borrower in
writing that (i) the Required Lenders have made a determination that, on the
basis of such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (A) for the termination of such
Plan or Plans by the PBGC, (B) for the appointment by the appropriate United
States District Court of a trustee to administer such Plan or Plans or (C) for
the imposition of a lien in favor of a Plan and (ii) as a result thereof an
Event of Default exists hereunder; or a trustee shall be appointed by a United
States District Court to administer any such Plan or Plans; or the PBGC shall
institute proceedings to terminate any Plan or Plans; or
(k) there shall have occurred a Change in Control; then, and in every such
event (other than an event with respect to a Borrower described in paragraph
(g) or (h) above), and at any time thereafter during the continuance of such
event, the Administrative Agent, with the consent of Required Lenders, may, or
at the request of the Required Lenders, shall, by notice to the Borrowers,
take either or both of the following actions, at the same or different times:
(i) terminate forthwith the Commitments and the Swingline Commitments and (ii)
declare the Loans then outstanding to be forthwith due and payable in whole or
in part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrowers accrued hereunder and under any
other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained herein or in any
other Loan Document to the contrary notwithstanding; and in any event with
respect to a Borrower described in paragraph (g) or (h) above, the Commitments
and the Swingline Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrowers accrued
hereunder and under any other Loan Document, shall automatically become due
and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein or in any other Loan Document to the contrary
notwithstanding.
ARTICLE VIII. THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement, Chemical
Bank is hereby appointed to act as Administrative Agent on behalf of the
Lenders. Each of the Lenders hereby irrevocably authorizes the Administrative
Agent to take such actions on behalf of such Lender or holder and to exercise
such powers as are specifically delegated to the Administrative Agent by the
terms and provisions hereof and of the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto. The
Administrative Agent is hereby expressly authorized by the Lenders, without
hereby limiting any implied authority, (a) to receive on behalf of the Lenders
all payments of principal of and interest on the Loans and all other amounts
due to the Lenders hereunder, and promptly to distribute to each Lender its
proper share of each payment so received; (b) as provided in Article VII, to
give notice on behalf of each of the Lenders to the Borrowers of any Event of
Default specified in this Agreement of which the Administrative Agent has
actual knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and
other materials delivered by any Borrower pursuant to this Agreement as
received by the Administrative Agent.
Neither the Administrative Agent nor any of its directors, officers, employees
or agents shall be liable as such for any action taken or omitted by any of
them except for its or his own gross negligence or willful misconduct, or be
responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by
the Borrowers of any of the terms, conditions, covenants or agreements
contained in any Loan Document. The Administrative Agent shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement, or any other Loan Documents
or other instruments or agreements. The Administrative Agent shall in all
cases be fully protected in acting, or refraining from acting, in accordance
with written instructions signed by the Required Lenders and, except as
otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders. The
Administrative Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrowers on account
of the failure of or delay in performance or breach by any Lender of any of
its obligations hereunder or to any Lender on account of the failure of or
delay in performance or breach by any other Lender or the Borrowers of any of
their respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. The Administrative Agent may execute any
and all duties hereunder by or through agents or employees and shall be
entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent shall be under no
duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement unless it shall be requested in writing to do
so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent may resign at any time by
notifying the Lenders and the Company. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent which shall be
a bank with an office in New York, New York, having a combined capital and
surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
bank, such successor shall 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 hereunder. After the Administrative Agent's resignation
hereunder, the provisions of this Article and Section 10.05 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Administrative Agent.
With respect to the Loans made by it hereunder, the Administrative Agent in
its individual capacity and not as Administrative Agent shall have the same
rights and powers as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the Administrative Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrowers or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses incurred for the benefit of the Lenders by the Administrative Agent,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been
reimbursed by the Borrowers and (ii) to indemnify and hold harmless the
Administrative Agent and any of its directors, officers, employees or agents,
on demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, 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 it in its
capacity as the Administrative Agent or any of them in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken
or omitted by it or any of them under this Agreement or any other Loan
Document, to the extent the same shall not have been reimbursed by the
Borrowers; provided that no Lender shall be liable to the Administrative Agent
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or willful misconduct of the Administrative Agent or any of
its directors, officers, employees or agents. Each Lender agrees that any
reasonable allocation of expenses or other amounts referred to in this
paragraph between this Agreement and the Facility B Credit Agreement shall be
conclusive and binding for all purposes.
Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement or any other Loan Document,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX. GUARANTEE
SECTION 9.01. Guarantee. The Guarantor hereby guarantees to each Lender and
the Administrative Agent and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration,
by optional prepayment or otherwise) of the principal of and interest on the
Loans made by the Lenders to any Approved Borrower and all other amounts from
time to time owing to the Lenders or the Administrative Agent by any Approved
Borrower under this Agreement pursuant to its Designation Letter, strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). The Guarantor hereby further agrees
that if any Approved Borrower shall fail to pay in full when due (whether at
stated maturity, by acceleration, by optional prepayment or otherwise) any of
the Guaranteed Obligations, the Guarantor will promptly pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.
SECTION 9.02. Obligations Unconditional. The obligations of the Guarantor
under Section 9.01 hereof are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of the obligations
of any Approved Borrower under this Agreement or any other agreement or
instrument referred to herein or therein (including, without limitation, any
Designation Letter), or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 9.02 that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not affect the liability of the Guarantor
hereunder:
(i) at any time or from time to time, without notice to the Guarantor, the
time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of this Agreement or
any other agreement or instrument referred to herein or therein shall be done
or omitted; or
(iii) the maturity of any of the Guaranteed Obligations shall be accelerated,
or any of the Guaranteed Obligations shall be modified, supplemented or
amended in any respect, or any right under this Agreement or any other
agreement or instrument referred to herein or therein shall be waived or any
other guarantee of any of the Guaranteed Obligations or any security therefor
shall be released or exchanged in whole or in part or otherwise dealt with.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or
proceed against any Approved Borrower under this Agreement or any other
agreement or instrument referred to herein or therein, or against any other
person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
SECTION 9.03. Reinstatement. The obligations of the Guarantor under this
Article IX shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Approved Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise and the Guarantor
agrees that it will indemnify the Administrative Agent and each Lender on
demand for all reasonable costs and expenses (including, without limitation,
fees of counsel) incurred by the Administrative Agent or such Lender in
connection with such rescission or restoration.
SECTION 9.04. Subrogation. The Guarantor hereby irrevocably waives all
rights of subrogation or contribution, whether arising by operation of law
(including, without limitation, any such right arising under Title 11 of the
United States Code) or otherwise, by reason of any payment by it pursuant to
the provisions of this Article IX and further agrees that for the benefit of
each of its creditors (including, without limitation, each Lender and the
Administrative Agent) that any such payment by it of the Guaranteed
Obligations of any Approved Borrower shall constitute a contribution of
capital by the Guarantor to such Approved Borrower.
SECTION 9.05. Remedies. The Guarantor agrees that, as between the Guarantor
and the Lenders, the obligations of any Approved Borrower under this Agreement
may be declared to be forthwith due and payable as provided in Article VII
hereof (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Article VII) for purposes of Section 9.01
hereof notwithstanding any stay, injunction or other prohibition preventing
such declaration (or such obligations from becoming automatically due and
payable) as against any Approved Borrower and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by such
Approved Borrower) shall forthwith become due and payable by the Guarantor for
purposes of such Section 9.01.
SECTION 9.06. Continuing Guarantee. The guarantee in this Article IX is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
ARTICLE X. MISCELLANEOUS
SECTION 10.01. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:
(a) if to the Company, to it at P.O. Box 8888, Camp Hill, Pennsylvania 17001-
8888, Attention of Barry M. Sullivan (Telecopy No. 717-763-6402);
(b) if to an Approved Borrower, to it at its address as set forth in its
Designation Letter;
(c) if to the Administrative Agent, to Chemical Bank Agency Services
Corporation, Grand Central Tower, 140 East 45th Street, New York, New York
10017, Attention of Sandra J. Miklave (Telecopy No. 212-622-0002), with copies
to Chemical Bank, 270 Park Avenue, New York, New York 10017, Attention of Ann
Kerns (Telecopy No. 212-270-2112); and
(d) if to a Lender, to it at its address (or telecopy number) set forth in
Schedule 2.01 or in the Assignment and Acceptance pursuant to which such
Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on
the date of receipt if delivered by hand or overnight courier service or sent
by telecopy, or on the date five Business Days after dispatch by certified or
registered mail, in each case delivered, sent or mailed (properly addressed)
to such party as provided in this Section 10.01 or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section 10.01.
SECTION 10.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the making by the
Lenders of the Loans, regardless of any investigation made by the Lenders or
on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid and so long as the Commitments and the Swingline Commitments have
not been terminated.
SECTION 10.03. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Company and the Administrative Agent and when
the Administrative Agent shall have received copies hereof which, when taken
together, bear the signatures of each Lender, and thereafter shall be binding
upon and inure to the benefit of the Borrowers, the Administrative Agent and
each Lender and their respective successors and assigns, except that the
Borrowers shall not have the right to assign rights hereunder or any interest
herein without the prior consent of all the Lenders.
SECTION 10.04. Successors and Assigns. (a) Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Borrowers, the Administrative Agent or the
Lenders that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment, Swingline Commitment, participations in outstanding
Swingline Loans and the Loans at the time owing to it); provided, however,
that (i) except in the case of an assignment to a Lender or an Affiliate of
such Lender, the Company and the Administrative Agent must give their prior
written consent to such assignment (which consent shall not be unreasonably
withheld), (ii) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations under
this Agreement, (iii) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $10,000,000 (or, if smaller, such Lender's
remaining Commitment) and the amount of the Commitment of such Lender
remaining after such assignment shall not be less than $10,000,000 or shall be
zero, (iv) the parties to each such assignment shall execute and deliver to
the Administrative Agent an Assignment and Acceptance, and a processing and
recordation fee of $4,000 and (v) the assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.
Upon acceptance and recording pursuant to paragraph (e) of this Section 10.04,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the execution
thereof, (A) the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and (B) the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, 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 Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto (but shall
continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and
10.05, as well as to any Fees accrued for its account hereunder and not yet
paid)). Notwithstanding the foregoing, any Lender assigning its rights and
obligations under this Agreement may retain any Competitive Loans made by it
outstanding at such time, and in such case shall retain its rights hereunder
in respect of any Loans so retained until such Loans have been repaid in full
in accordance with this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to
and agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that
its Commitment and Swingline Commitment, if any, and the outstanding balances
of its Standby Loans, Competitive Loans and Swingline Loans, if any, in each
case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender 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, any other Loan Document or any other instrument or
document furnished pursuant hereto or the financial condition of the Company
or any Subsidiary or the performance or observance by any Borrower of any of
its obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.04 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; (v) such assignee will
independently and without reliance upon the Administrative Agent, such
assigning Lender or any other Lender 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; (vi)
such assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender.
(d) The Administrative Agent shall maintain at one of its offices in The City
of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and
the Commitment of, and principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries
in the Register shall be conclusive in the absence of manifest error and the
Borrower, the Administrative Agent and the Lenders may treat each person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Company and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Company and the
Administrative Agent to such assignment, the Administrative Agent shall (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Lenders.
(f) Each Lender may without the consent of the Company or the Administrative
Agent sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) the participating banks or
other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if
they were Lenders and (iv) the Borrowers, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrowers relating to the Loans and to approve any amendment, modification or
waiver of any provision of this Agreement (other than amendments,
modifications or waivers decreasing any fees payable hereunder or the amount
of principal of or the rate at which interest is payable on the Loans,
extending any scheduled principal payment date or date fixed for the payment
of interest on the Loans or changing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers; provided that, prior to any such disclosure
of information designated by the Company as confidential, each such assignee
or participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information.
It is understood that confidential information relating to the Borrowers would
not ordinarily be provided in connection with assignments or participations of
Competitive Loans.
(h) Any Lender may at any time assign all or any portion of its rights under
this Agreement to a Federal Reserve Bank; provided that no such assignment
shall release a Lender from any of its obligations hereunder. In order to
facilitate such an assignment to a Federal Reserve Bank, the applicable
Borrower shall, at the request of the assigning Lender, duly execute and
deliver to the assigning Lender a promissory note or notes evidencing the
Loans made to such Borrower by the assigning Lender hereunder.
(i) The Borrowers shall not assign or delegate any of their rights or duties
hereunder, except as permitted by Section 6.03.
SECTION 10.05. Expenses; Indemnity. (a) Each Borrower agrees to pay all
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby contemplated shall
be consummated) or incurred by the Administrative Agent or any Lender in
connection with the enforcement or protection of their rights in connection
with this Agreement and the other Loan Documents or in connection with the
Loans made hereunder, including the reasonable fees, charges and disbursements
of Cravath, Swaine & Moore, counsel for the Administrative Agent, and, in
connection with any such amendment, modification or waiver or any such
enforcement or protection, the reasonable fees, charges and disbursements of
any other counsel for the Administrative Agent or any Lender. Each Borrower
further agrees that it shall indemnify the Lenders from and hold them harmless
against any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Agreement or any of
the other Loan Documents.
(b) Each Borrower agrees to indemnify the Administrative Agent, each Lender
and each of their respective directors, officers, employees and agents (each
such person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any way
connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the transactions
contemplated thereby, (ii) the actual or proposed use of the proceeds of the
Loans or (iii) any claim, litigation, investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement,
the consummation of the transactions contemplated hereby, the repayment of any
of the Loans, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Administrative Agent or any Lender. All amounts due under this
Section 10.05 shall be payable on written demand therefor.
SECTION 10.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby 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 Lender to or for
the credit or the account of any Borrower against any of and all the
obligations of such Borrower now or hereafter existing under this Agreement
and other Loan Documents held by such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 10.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
SECTION 10.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent or any Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies which
they would otherwise have. No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by any Borrower therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice or
demand on any Borrower in any case shall entitle such Borrower to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Company and the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount of, or extend the maturity
of or any scheduled principal payment date or date for the payment of any
interest on any Loan, or waive or excuse any such payment or any part thereof,
or decrease the rate of interest on any Loan, without the prior written
consent of each Lender affected thereby, (ii) change or extend the Commitment
or the Swingline Commitment or decrease the Utilization Fees or Facility Fees
of any Lender without the prior written consent of such Lender, or (iii) amend
or modify the provisions of Section 2.16, the provisions of Article IX, the
provisions of this Section or the definition of "Required Lenders", without
the prior written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent.
SECTION 10.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the applicable interest rate, together with all
fees and charges which are treated as interest under applicable law
(collectively the "Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for, charged,
received, taken or reserved by any Lender, shall exceed the maximum lawful
rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by such Lender in accordance with applicable law, the
rate of interest payable on the Loan of such Lender, together with all Charges
payable to such Lender, shall be limited to the Maximum Rate.
SECTION 10.10. Entire Agreement. This Agreement and the other Loan Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 10.11. Waiver of Jury Trial. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any litigation directly or indirectly arising out of,
under or in connection with this Agreement or any of the other Loan Documents.
Each party hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver
and (b) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement and the other Loan Documents, as applicable, by,
among other things, the mutual waivers and certifications in this Section
10.11.
SECTION 10.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close
as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective
as provided in Section 10.03.
SECTION 10.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 10.15. Jurisdiction; Consent to Service of Process. (a) Each
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New York
State 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 Lender may otherwise have to bring any action
or proceeding relating to this Agreement or the other Loan Documents against
any Borrower or its properties in the courts of any jurisdiction.
(b) Each Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which 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 other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in
any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
IN WITNESS WHEREOF, the Company, the Administrative Agent and the Lenders have
caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
HARSCO CORPORATION,
by
__________________________
Name:
Title:
by
__________________________
Name:
Title:
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
(FIVE-YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY)
Dated As of August 24, 1993,
As Amended and Restated As of June 21, 1994
Among
HARSCO CORPORATION,
THE LENDERS NAMED HEREIN
and
CHEMICAL BANK,
as Administrative Agent
[CS&M Ref. No. 6700-229]
AMENDED AND RESTATED CREDIT AGREEMENT (FIVE-YEAR COMPETITIVE ADVANCE AND
REVOLVING CREDIT FACILITY) dated as of August 24, 1993, as amended and
restated as of June 21, 1994, among HARSCO CORPORATION, a Delaware corporation
(the "Company"); the lenders listed in Schedule 2.01 hereto (the "Lenders");
and CHEMICAL BANK, a New York banking corporation, as administrative agent (in
such capacity, the "Administrative Agent").
The Company and certain lenders (the "Original Lenders"), including certain of
the Lenders, are parties to the Predecessor Credit Agreement (as herein
defined) and (A) the Company wishes to substitute new Lenders for certain of
the Original Lenders and to add to the Original Lenders one or more Lenders
who were not Original Lenders, (B) the Lenders wish to appoint Chemical Bank
as their Administrative Agent and (C) the Company, the Lenders and Chemical
Bank wish to amend and restate the Predecessor Credit Agreement to read as set
forth herein and in the Facility A Credit Agreement (as herein defined).
In that connection, the Company has requested the Lenders to extend credit to
enable the Borrowers (as herein defined) to borrow on a standby revolving
credit basis on and after the date hereof and at any time and from time to
time prior to the Maturity Date (as herein defined) a principal amount not in
excess of $150,000,000 or the equivalent in any one or more Alternative
Currencies (as herein defined) at any time outstanding. The Company has also
requested the Lenders to provide a procedure pursuant to which any Borrower
may invite the Lenders to bid on an uncommitted basis on short-term borrowings
by such Borrower. The proceeds of such borrowings, together with the proceeds
of borrowings under the Facility A Credit Agreement (as herein defined), are
to be used (a) to continue, convert or repay amounts outstanding, if any,
under the Predecessor Credit Agreement and (b) to provide working capital and
for other general corporate purposes, including providing backup liquidity for
the Company's commercial paper program. The Lenders are willing to extend
such credit to the Borrowers on the terms and subject to the conditions herein
set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any Standby Loan or Swingline Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Administrative Fees" shall have the meaning assigned to such term in Section
2.06(b).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in
the form of Exhibit B hereto.
"Affiliate" shall mean, when used with respect to a specified person, another
person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to time by
the Administrative Agent as its prime rate in effect at its principal office
in New York City; each change in the Prime Rate shall be effective on the date
such change is publicly announced as effective. "Federal Funds Effective
Rate" shall mean, for any day, 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 on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition until the circumstances
giving rise to such inability no longer exist.
"Alternative Currency" shall mean (a) Belgian Francs, Deutsche Marks, French
Francs and Sterling and (b) any other freely available currency which is
freely transferable and freely convertible into Dollars and in which dealings
in deposits are carried on in the London or other interbank market, which
shall be requested by a Borrower in respect of an Alternative Currency
Borrowing and approved by each Lender making an Alternative Currency Loan
comprising a part of such Borrowing.
"Alternative Currency Borrowing" shall mean a Borrowing comprised of
Alternative Currency Loans. All Alternative Currency Borrowings shall be
Eurocurrency Borrowings.
"Alternative Currency Equivalent" shall mean, with respect to each of an
amount of Dollars on any date in relation to any specified Alternative
Currency, the amount of such specified Alternative Currency that may be
purchased with such amount of Dollars at the Spot Exchange Rate with respect
to Dollars on such date. The term "Alternative Currency Equivalent" may be
preceded by a reference to an Alternative Currency (e.g., "DEM Alternative
Currency Equivalent"), in which case the Alternative Currency so referenced
shall be the "specified" Alternative Currency.
"Alternative Currency Loan" shall mean any Loan denominated in an Alternative
Currency.
"Applicable Margin" shall mean on any date, (A) with respect to ABR Loans, 0%
and (B) with respect to Eurocurrency Loans, the applicable spreads set forth
below based upon the ratings applicable on such date to senior, unsecured,
non-credit, long-term indebtedness of the Company for borrowed money ("Index
Debt"):
<TABLE>
<CAPTION>
Eurocurrency
Loan Spread
___________
<S> <C>
Category 1
A- or higher by S&P; .25%
A3 or higher by Moody's
Category 2
BBB+ by S&P; .30%
Baa1 by Moody's
Category 3
BBB by S&P; .3125%
Baa2 by Moody's
Category 4
BBB- by S&P; .375%
Baa3 by Moody's
Category 5
BB+ or lower by S&P; .45%
Ba1 or lower by Moody's
</TABLE>
For purposes of determining the Applicable Margin for Eurocurrency Loans, (a)
if either Moody's or S&P shall not have in effect a rating for Index Debt
(other than because such rating agency shall no longer be in the business of
rating corporate debt obligations), then such rating agency will be deemed to
have established a rating for Index Debt in Category 5; (b) if the ratings
established or deemed to have been established by Moody's and S&P shall fall
within different Categories, the Applicable Margin shall be determined by
reference to the superior (or numerically lower) Category; and (c) if any
rating established or deemed to have been established by Moody's or S&P shall
be changed (other than as a result of a change in the rating system of either
Moody's or S&P), such change shall be effective as of the date on which such
change is first announced by the rating agency making such change. Each
change in the Applicable Margin shall apply to all Eurocurrency Loans and ABR
Loans that are outstanding at any time during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change. If the rating system of either
Moody's or S&P shall change, or if either such rating agency shall cease to be
in the business of rating corporate debt obligations, the Company and the
Lenders shall negotiate in good faith to amend the references to specific
ratings in this definition to reflect such changed rating system or the
nonavailability of ratings from such rating agency.
"Applicable Percentage" shall mean, with respect to any Lender at any time,
the percentage of the Total Commitment represented by such Lender's Commitment
at such time.
"Approved Borrower" shall mean any wholly owned Subsidiary of the Company as
to which a Designation Letter shall have been delivered to the Administrative
Agent in accordance with Section 2.22 hereof and as to which a Termination
Letter shall not have been delivered to the Administrative Agent.
"Assigned Dollar Value" shall mean, in respect of any Borrowing denominated in
an Alternative Currency, the Dollar Equivalent thereof determined based upon
the applicable Spot Exchange Rate as of the Denomination Date for such
Borrowing.
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Administrative Agent, in
the form of Exhibit C or such other form as shall be approved by the
Administrative Agent.
"Belgian Francs" or "BEF" shall mean lawful money of the Kingdom of Belgium.
"Board" shall mean the Board of Governors of the Federal Reserve System of the
United States.
"Borrowers" shall mean the Company and each Approved Borrower.
"Borrowing" shall mean a group of Loans of a single Type made by the Lenders
(or (a) in the case of a Competitive Borrowing, by the Lender or Lenders whose
Competitive Bids have been accepted pursuant to Section 2.03 or (b) in the
case of a Swingline Borrowing, by the Swingline Lenders) on a single date and
as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which banks are open for
business in New York City; provided, however, that, when used in connection
with a Eurocurrency Loan, the term "Business Day" shall also exclude any day
on which banks are not open for dealings in Dollar deposits in the London
interbank market and, if such reference relates to the date on which any
amount is to be paid or made available in an Alternative Currency, the term
"Business Day" shall also exclude any day on which commercial banks and
foreign exchange markets are not open for business in the principal financial
center in the country of such Alternative Currency.
"Capital Lease Obligations" of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such person under GAAP and, for the
purposes of this Agreement, the amount of such obligations at any time shall
be the capitalized amount thereof at such time determined in accordance with
GAAP.
A "Change in Control" shall be deemed to have occurred if (a) any person or
group (within the meaning of Rule 13d-5 of the Securities and Exchange
Commission as in effect on the date hereof) shall own directly or indirectly,
beneficially or of record, shares representing more than 20% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of the Company; (b) a majority of the seats (other than vacant seats) on the
board of directors of the Company shall at any time have been occupied by
persons who were neither (i) nominated by the board of directors of the
Company, nor (ii) appointed by directors so nominated; or (c) any person or
group shall otherwise directly or indirectly Control the Company.
"Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"Committed Credit Exposure" shall mean, with respect to any Lender at any
time, the sum of (a) the aggregate amount of such Lender's Standby Loan
Exposure at such time, plus (b) the aggregate amount of such Lender's
Swingline Loan Exposure at such time.
"Commitment" shall mean, with respect to each Lender, the commitment of such
Lender hereunder as set forth in Schedule 2.01 hereto, as such Lender's
Commitment may be permanently terminated or reduced from time to time pursuant
to Section 2.11.
"Competitive Bid" shall mean an offer by a Lender to make a Competitive Loan
pursuant to Section 2.03.
"Competitive Bid Accept/Reject Letter" shall mean a notification made by a
Borrower pursuant to Section 2.03(d) in the form of Exhibit A-4.
"Competitive Bid Rate" shall mean, as to any Competitive Bid made by a Lender
pursuant to Section 2.03(b), (i) in the case of a Eurocurrency Loan, the
Competitive Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate
of interest offered by the Lender making such Competitive Bid.
"Competitive Bid Request" shall mean a request made pursuant to Section 2.03
in the form of Exhibit A-1.
"Competitive Borrowing" shall mean a borrowing consisting of a Competitive
Loan or concurrent Competitive Loans from the Lender or Lenders whose
Competitive Bids for such Borrowing have been accepted by a Borrower under the
bidding procedure described in Section 2.03.
"Competitive Loan" shall mean a loan from a Lender to a Borrower pursuant to
the bidding procedure described in Section 2.03. Each Competitive Loan shall
be a Eurocurrency Competitive Loan or a Fixed Rate Loan.
"Competitive Margin" shall mean, as to any Eurocurrency Competitive Loan, the
margin (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) to be added to or subtracted from the LIBO
Rate in order to determine the interest rate applicable to such Loan, as
specified in the Competitive Bid relating to such Loan.
"Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings correlative thereto.
"Default" shall mean any event or condition which upon notice, lapse of time
or both would constitute an Event of Default.
"Denomination Date" shall mean, in relation to any Alternative Currency
Borrowing, the date that is three Business Days before the date such Borrowing
is made.
"Deutsche Marks" or "DEM" shall mean lawful money of the Federal Republic of
Germany.
"Dollar Equivalent" shall mean, with respect to an amount of any Alternative
Currency on any date, the amount of Dollars that may be purchased with such
amount of such Alternative Currency at the Spot Exchange Rate with respect to
such Alternative Currency on such date.
"Dollars" or "$" shall mean lawful money of the United States of America.
"Domestic Subsidiaries" shall mean any Subsidiary organized or incorporated
under the laws of one of the States of the United States of America, the laws
of the District of Columbia or the Federal laws of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group which the Company is a member and
which is treated as a single employer under Section 414 of the Code.
"Eurocurrency Borrowing" shall mean a Borrowing comprised of Eurocurrency
Loans.
"Eurocurrency Competitive Borrowing" shall mean a Competitive Borrowing
comprised of Eurocurrency Competitive Loans.
"Eurocurrency Competitive Loan" shall mean any Competitive Loan bearing
interest at a rate determined by reference to the LIBO Rate in accordance with
the provisions of Article II.
"Eurocurrency Loan" shall mean any Eurocurrency Competitive Loan or
Eurocurrency Standby Loan.
"Eurocurrency Standby Borrowing" shall mean a Standby Borrowing comprised of
Eurocurrency Standby Loans.
"Eurocurrency Standby Loan" shall mean any Standby Loan bearing interest at a
rate determined by reference to the LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Facility A Credit Agreement" shall mean the $150,000,000 Amended and Restated
Credit Agreement (364-Day Competitive Advance and Revolving Credit Facility)
dated as of August 24, 1993, as amended and restated as of the date hereof
among the Company, the lenders named therein and Chemical Bank, as
administrative agent for the lenders.
"Facility Fee" shall have the meaning assigned to such term in Section
2.06(a).
"Facility Fee Percentage" shall mean on any date, the applicable percentage
set forth below based upon the ratings applicable on such date to the
Company's Index Debt:
<TABLE>
<CAPTION>
Facility
Fee
Percentage
__________
<S> <C>
Category 1
A- or higher by S&P; .125%
A3 or higher by Moody's
Category 2
BBB+ by S&P; .15%
Baa1 by Moody's
Category 3
BBB by S&P; .1875%
Baa2 by Moody's
Category 4
BBB- by S&P; .25%
Baa3 by Moody's
Category 5
BB+ or lower by S&P; .30%
Ba1 or lower by Moody's
</TABLE>
For purposes of the foregoing, (a) if either Moody's or S&P shall not have in
effect a rating for Index Debt (other than because such rating agency shall no
longer be in the business of rating corporate debt obligations), then such
rating agency will be deemed to have established a rating for Index Debt in
Category 5; (b) if the ratings established or deemed to have been established
by Moody's and S&P shall fall within different Categories, the Facility Fee
Percentage shall be determined by reference to the superior (or numerically
lower) Category; and (c) if any rating established or deemed to have been
established by Moody's or S&P shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the date on which such change is first announced by the rating
agency making such change. Each change in the Facility Fee Percentage shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of either Moody's or S&P shall change, or if
either such rating agency shall cease to be in the business of rating
corporate debt obligations, the Company and the Lenders shall negotiate in
good faith to amend the references to specific ratings in this definition to
reflect such changed rating system or the non-availability of ratings from
such rating agency.
"Fees" shall mean the Administrative Fees, the Facility Fee and the
Utilization Fee.
"Financial Officer" of any corporation shall mean the Chief Financial Officer,
principal accounting officer, Treasurer or Controller of such corporation.
"Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans.
"Fixed Rate Loan" shall mean any Competitive Loan 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 Lender making such Loan in its
Competitive Bid.
"French Francs" or "FRF" shall mean lawful money of the Republic of France.
"GAAP" shall mean United States generally accepted accounting principles,
applied on a basis consistent with the financial statements referred to in
Section 3.02.
"Governmental Authority" shall mean any Federal, state, local or foreign court
or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of
such person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that
the term Guarantee shall not include endorsements for collection or deposit,
in either case in the ordinary course of business.
"Guarantor" shall mean the Company in its capacity as the guarantor under
Section 9.01.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or
services, (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such person, whether or
not the obligations secured thereby have been assumed, (g) all Guarantees by
such person of Indebtedness of others, (h) all Capital Lease Obligations of
such person, (i) all obligations of such person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest
or exchange rate hedging arrangements and (j) all obligations of such person
as an account party in respect of letters of credit and bankers' acceptances;
provided, however, that Indebtedness shall not include trade accounts payable
in the ordinary course of business. The Indebtedness of any person shall
include the Indebtedness of any partnership in which such person is a general
partner.
"Index Debt" shall have the meaning given such term under Applicable Margin.
"Initial Funding Date" shall mean the date of the first Borrowing hereunder.
"Interest Payment Date" shall mean, with respect to any Loan, the last day of
each Interest Period applicable thereto and, in the case of a Eurocurrency
Loan with an Interest Period of more than three months' duration or a Fixed
Rate Loan with an Interest Period of more than 90 days' duration, each day
that would have been an Interest Payment Date for such Loan had successive
Interest Periods of three months' duration or 90 days duration, as the case
may be, been applicable to such Loan and, in addition, the date of any
refinancing of such Loan with a Loan of a different Type.
"Interest Period" shall mean (a) as to any Eurocurrency Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the
last day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
applicable Borrower may elect, (b) as to any ABR Borrowing or Swingline
Borrowing, the period commencing on the date of such Borrowing and ending on
the earlier of (i) the next succeeding day which shall be the last day of any
March, June, September or December and (ii) the Maturity Date and (c) as to
any Fixed Rate Borrowing, the period commencing on the date of such Borrowing
and ending on the date specified in the Competitive Bids in which the offer to
make the Fixed Rate Loans comprising such Borrowing were extended, which shall
not be earlier than seven days after the date of such Borrowing or later than
360 days after the date of such Borrowing; provided, however, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the
case of Eurocurrency Loans only, such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day. Interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such Interest
Period.
"LIBO Rate" shall mean, with respect to any Eurocurrency Borrowing for any
Interest Period, (i) the interest rate per annum for deposits for a maturity
most nearly comparable to such Interest Period in the currency in which such
Borrowing is denominated which appears on page 3740 or 3750, as applicable, of
the Dow Jones Telerate Screen as of 11:00 a.m., London time, on the date that
is two Business Days prior to the first day of such Interest Period or, if
such a rate does not appear on page 3740 or 3750, as applicable, of the Dow
Jones Telerate Screen, (ii) an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the rate at which deposits in the
currency in which such Borrowing is denominated approximately equal in
principal amount to the Loan of the Administrative Agent, in its capacity as a
Lender (or, if the Administrative Agent is not a Lender in respect of such
Borrowing, then the Loan of the Lender in respect of such Borrowing with the
greatest Loan Amount), included in such Eurocurrency Borrowing and for a
maturity comparable to such Interest Period are offered to the principal
London office of the Administrative Agent in immediately available funds in
the London interbank market at approximately 11:00 a.m., London time, on the
relevant date of determination.
"Lien" shall mean with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, encumbrance, charge or security interest in or on such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement relating to such asset and (c) in
the case of securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Loan" shall mean any Competitive Loan, Standby Loan or Swingline Loan.
"Loan Documents" shall mean this Agreement and the Fee Letter dated May 2,
1994 among the Administrative Agent, Chemical Securities Inc. and the Company.
"Margin Stock" shall have the meaning given such term under Regulation U.
"Material Adverse Change" or "Material Adverse Effect" shall mean (a) a
materially adverse change in, or a materially adverse effect on, the business,
assets, operations, prospects or condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or (b) a material impairment of
the ability of the Company or any Approved Borrower to perform any of its
respective obligations under any Loan Document to which it is or becomes a
party.
"Maturity Date" shall mean June 21, 1999.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than
one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Code Section 414) 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.
"Net Income" shall mean, for any period for the Company and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP), net income for such period.
"Net Worth" shall mean, as at any date, the sum for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) of the following:
(a) the amount of common stock; plus
(b) the amount of any preferred stock that does not have any requirement for
the Company to purchase, redeem, retire or otherwise acquire the same; plus
(c) the amount of additional paid-in capital and retained earnings (or, in the
case of an additional paid-in capital or retained earnings deficit, minus the
amount of such deficit); plus
(d) cumulative translation adjustments (or, in the case of negative
adjustments, minus the amount of such adjustments); plus
(e) cumulative pension liability adjustments (or, in the case of negative
adjustments, minus the amount of such adjustments); minus
(f) the cost of treasury stock.
"Obligation Currency" shall have the meaning assigned to such term in Section
10.13.
"Other Taxes" shall have the meaning assigned to such term in Section 2.19(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code which is maintained for current or former employees, or any
beneficiary thereof, of the Company or any ERISA Affiliate.
"Predecessor Credit Agreement" shall mean the Amended and Restated Credit
Agreement dated as of August 24, 1993, amended and restated as of October 20,
1993, among the Company, the lenders named therein and Chase Manhattan Bank
(National Association), as agent.
"Register" shall have the meaning given such term in Section 10.04(d).
"Regulation D" shall mean Regulation D of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"Reportable Event" shall mean any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having Commitments
representing a majority of the Total Commitment or, for purposes of
acceleration pursuant to clause (ii) of Article VII, Lenders holding Loans
representing a majority of the aggregate principal amount of the Loans
outstanding. For purposes of determining the Required Lenders, any Loans
denominated in an Alternative Currency shall be translated into Dollars at the
Spot Exchange Rate in effect on the applicable Denomination Date.
"Responsible Officer" of any corporation shall mean any executive officer or
Financial Officer of such corporation and any other officer or similar
official thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"S&P" shall mean Standard and Poor's Corporation.
"Spot Exchange Rate" shall mean, on any day, (a) with respect to any
Alternative Currency, the spot rate at which Dollars are offered on such day
by Chemical Bank in London for such Alternative Currency at approximately
11:00 a.m. (London time), and (b) with respect to Dollars in relation to any
specified Alternative Currency, the spot rate at which such specified
Alternative Currency is offered on such day by Chemical Bank in London for
Dollars at approximately 11:00 a.m. (London time). For purposes of
determining the Spot Exchange Rate in connection with an Alternative Currency
Borrowing, such Spot Exchange Rate shall be determined as of the Denomination
Date for such Borrowing with respect to transactions in the applicable
Alternative Currency that will settle on the date of such Borrowing.
"Standby Borrowing" shall mean a borrowing consisting of simultaneous Standby
Loans from each of the Lenders.
"Standby Borrowing Request" shall mean a request made pursuant to Section 2.04
in the form of Exhibit A-5.
"Standby Loan" shall mean a revolving loan made by a Lender pursuant to
Section 2.04. Each Standby Loan shall be a Eurocurrency Standby Loan or an
ABR Loan.
"Standby Loan Exposure" shall mean, with respect to any Lender at any time,
the sum of (a) the aggregate principal amount at such time of all outstanding
Standby Loans of such Lender denominated in Dollars, plus (b) the Assigned
Dollar Value at such time of the aggregate principal amount at such time of
all outstanding Standby Loans of such Lender that are Alternative Currency
Loans.
"Sterling" or "GBP" shall mean lawful money of the United Kingdom.
"subsidiary" shall mean, with respect to any person (herein referred to as the
"parent"), any corporation, partnership, association or other business entity
(a) of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or more than
50% of the general partnership interests are, at the time any determination is
being made, owned, Controlled or held, or (b) which is, at the time any
determination is made, otherwise Controlled by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.
"Subsidiary" shall mean any subsidiary of the Company.
"Swingline Borrowing" shall mean a borrowing consisting of simultaneous
Swingline Loans from each of the Swingline Lenders.
"Swingline Commitment" shall mean, with respect to any Lender, the commitment
of such Lender to make Swingline Loans hereunder as set forth in Schedule
2.21, as such Lender's Swingline Commitment may be permanently terminated or
reduced from time to time pursuant to Section 2.21(d).
"Swingline Commitment Percentage" shall mean, with respect to any Swingline
Lender at any time, the percentage that the Swingline Commitment of such
Swingline Lender represents of the Total Swingline Commitment at such time.
"Swingline Lender" shall mean any Lender with a Swingline Commitment.
"Swingline Loan" shall mean any loan made by a Lender pursuant to Section
2.21. Each Swingline Loan shall be denominated in Dollars and shall be an ABR
Loan.
"Swingline Loan Exposure" shall mean, at any time, the aggregate principal
amount at such time of all Swingline Loans. The Swingline Loan Exposure of
any Lender at any time shall mean its Applicable Percentage of the aggregate
Swingline Loan Exposure at such time.
"Taxes" shall have the meaning assigned to such term in Section 2.19(a).
"Total Capital" shall mean, at any time, Net Worth plus Total Debt.
"Total Commitment" shall mean, at any time, the aggregate amount of the
Commitments, as in effect at such time.
"Total Debt" shall mean, at any time, the aggregate outstanding principal
amount of all Indebtedness of the Company and its Subsidiaries at such time
(other than Indebtedness described in clause (i) or (j) of the definition of
the term "Indebtedness") determined on a consolidated basis (without
duplication) in accordance with GAAP; provided that the term "Total Debt"
shall include any preferred stock that provides for the mandatory purchase,
retirement, redemption or other acquisition of the same by the Company or any
Subsidiary (other than preferred stock held by the Company or any Subsidiary).
"Total Swingline Commitment" shall mean, at any time, the aggregate amount of
the Swingline Commitments, as in effect at such time.
"Transferee" shall have the meaning assigned to such term in Section 2.19(a).
"Type", when used in respect of any Loan or Borrowing, shall refer to the rate
by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined and the currency in which such Loan or the Loans
comprising such Borrowings are denominated. For purposes hereof, "rate" shall
include the LIBO Rate, the Alternate Base Rate and the Fixed Rate, and
"currency" shall include Dollars and any Alternative Currency permitted
hereunder.
"Utilization Fee" shall have the meaning assigned to such term in Section
2.06(c).
"Utilization Fee Percentage" shall mean on any date, the applicable percentage
set forth below for the Utilization Fee based upon the ratings applicable on
such date the Company's Index Debt:
<TABLE>
<CAPTION>
Utilization
Fee
Percentage
___________
<S> <C>
Category 1
A- or higher by S&P; .075%
A3 or higher by Moody's
Category 2
BBB+ by S&P; .125%
Baa1 by Moody's
Category 3
BBB by S&P; .125%
Baa2 by Moody's
Category 4
BBB- by S&P; .125%
Baa3 by Moody's
Category 5
BB+ or lower by S&P; .125%
Ba1 or lower by Moody's
</TABLE>
For purposes of the foregoing, (a) if either Moody's or S&P shall not have in
effect a rating for Index Debt (other than because such rating agency shall no
longer be in the business of rating corporate debt obligations), then such
rating agency will be deemed to have established a rating for Index Debt in
Category 5; (b) if the ratings established or deemed to have been established
by Moody's and S&P shall fall within different Categories, the Utilization Fee
Percentage shall be determined by reference to the superior (or numerically
lower) Category; and (c) if any rating established or deemed to have been
established by Moody's or S&P shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the date on which such change is first announced by the rating
agency making such change. Each change in the Utilization Fee Percentage shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change. If the rating system of either Moody's or S&P shall change, or if
either such rating agency shall cease to be in the business of rating
corporate debt obligations, the Company and the Lenders shall negotiate in
good faith to amend the references to specific ratings in this definition to
reflect such changed rating system or the non-availability of ratings from
such rating agency.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as
otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided, however, that if the Company notifies the Administrative Agent
that the Company wishes to amend any covenant in Article VI or any related
definition to eliminate the effect of any change in GAAP occurring after the
date of this Agreement on the operation of such covenant (or if the
Administrative Agent notifies the Company that the Required Lenders wish to
amend Article VI or any related definition for such purpose), then the
Company's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended
in a manner satisfactory to the Company and the Required Lenders. The phrase
"the date of this Agreement" or "the date hereof", or words to similar effect,
when used herein, shall mean June 21, 1994.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Standby Loans to the Borrowers, at
any time and from time to time on and after the date hereof and until the
earlier of the Maturity Date and the termination of the Commitment of such
Lender, in Dollars or one or more Alternative Currencies (as specified in the
Borrowing Requests with respect thereto), in an aggregate principal amount at
any time outstanding that will not result in such Lender's Committed Credit
Exposure exceeding such Lender's Commitment, subject, however, to the
conditions that (i) at no time shall (A) the sum of (I) the aggregate Standby
Loan Exposure of all the Lenders, plus (II) the outstanding aggregate
principal amount or Assigned Dollar Value of all Competitive Loans made by all
Lenders, plus (III) the amount of the Swingline Loan Exposure, exceed (B) the
Total Commitment and (ii) at all times the outstanding aggregate principal
amount of all Standby Loans made by each Lender shall equal such Lender's
Applicable Percentage of the outstanding aggregate principal amount of all
Standby Loans made pursuant to Section 2.04. Each Lender's Commitment is set
forth opposite its name in Schedule 2.01. Such Commitments may be terminated
or reduced from time to time pursuant to Section 2.11. Within the foregoing
limits, the Borrowers may borrow, pay or prepay and reborrow hereunder, on and
after the date hereof and prior to the Maturity Date, subject to the terms,
conditions and limitations set forth herein.
(b) For purposes of paragraph (a) above, if the Dollar Equivalent of an
outstanding Borrowing denominated in an Alternative Currency, determined by
the Administrative Agent based upon the applicable Spot Exchange Rate as of
the date that is three Business Days before the end of the Interest Period
with respect to such Borrowing, does not exceed by more than 5% the Assigned
Dollar Value of such Borrowing, and if the entire amount of such Borrowing is
to be refinanced with a new Borrowing of equivalent amount in the same
currency and by the same Borrower, then such Borrowing shall continue to have
the same Assigned Dollar Value as in effect prior to such refinancing. The
Administrative Agent shall determine the applicable Spot Exchange Rate as of
the date three Business Days before the end of an Interest Period with respect
to a Borrowing denominated in an Alternative Currency and shall promptly
notify the Company and the Lenders whether the Dollar Equivalent of such
Borrowing exceeds by more than 5% the Assigned Dollar Value thereof.
SECTION 2.02. Loans. (a) Each Standby Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their applicable Commitments; provided, however, that the failure of any
Lender to make any Standby Loan shall not in itself relieve any other Lender
of its obligation to lend hereunder (it being understood, however, that no
Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). Each Competitive Loan shall
be made in accordance with the procedures set forth in Section 2.03. The
Competitive Loans and Standby Loans comprising any Borrowing shall be in (i)
an aggregate principal amount or Assigned Dollar Value which is not less than
$10,000,000 and, except in the case of Alternative Currency Borrowings, an
integral multiple of $1,000,000 or (ii) an aggregate principal amount equal to
the remaining balance of the available applicable Commitments. The Loans
comprising each Alternative Currency Borrowing shall be made in the
Alternative Currency specified in the applicable Standby Borrowing Request in
an amount equal to the Alternative Currency amount specified in such Standby
Borrowing Request; provided, however, that for purposes of clause (i) above,
each Alternative Currency Borrowing shall be deemed to be in an aggregate
principal amount equal to the Dollar Equivalent of such Alternative Currency
Borrowing, which Dollar Equivalent shall be determined by the Administrative
Agent as of the Denomination Date for such Borrowing (which determination
shall be conclusive absent manifest error).
(b) Each Competitive Borrowing shall be comprised entirely of Eurocurrency
Competitive Loans or Fixed Rate Loans, and each Standby Borrowing shall be
comprised entirely of Eurocurrency Standby Loans or ABR Loans, as the
Borrowers may request pursuant to Section 2.03 or 2.04, as applicable. Each
Lender may at its option make any Eurocurrency Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided that
any exercise of such option shall not affect the obligation of the applicable
Borrower to repay such Loan in accordance with the terms of this Agreement.
Borrowings of more than one Type may be outstanding at the same time;
provided, however, that none of the Borrowers shall be entitled to request any
Borrowing which, if made, would result in an aggregate of more than ten
separate Standby Loans of any Lender being outstanding hereunder at any one
time. For purposes of the foregoing, Borrowings having different Interest
Periods or denominated in different currencies, regardless of whether they
commence on the same date, shall be considered separate Borrowings.
(c) Subject to Section 2.05, each Lender shall make each Loan to be made by
it hereunder on the proposed date thereof by wire transfer to such account as
the Administrative Agent may designate in federal funds (in the case of any
Loan denominated in Dollars) or such other immediately available funds as may
then be customary for the settlement of international transactions in the
relevant currency not later than 11:00 a.m., New York City time, in the case
of fundings to an account in New York City, or 11:00 a.m., local time, in the
case of fundings to an account(s) in another jurisdiction, and the
Administrative Agent shall by 12:00 (noon), New York City time, in the case of
fundings to (an) account(s) in New York City, or 12:00 (noon), local time, in
the case of fundings to an account(s) in another jurisdiction, credit the
amounts so received to an account(s) designated by the applicable Borrower in
the applicable Borrowing Request, which account(s) must be in the country of
the currency of the Loan (it being understood that the funding may be for the
credit of an account outside such country) or, if a Borrowing shall not occur
on such date because any condition precedent herein specified shall not have
been met, return the amounts so received to the respective Lenders.
Competitive Loans shall be made by the Lender or Lenders whose Competitive
Bids therefor are accepted pursuant to Section 2.03 in the amounts so accepted
and Standby Loans shall be made by the Lenders pro rata in accordance with
Section 2.16. Unless the Administrative Agent shall have received notice from
a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with this paragraph (c) and the Administrative Agent may, in
reliance upon such assumption, make available to the applicable Borrower on
such date a corresponding amount in the required currency. If the
Administrative Agent shall have so made funds available then to the extent
that such Lender shall not have made such portion available to the
Administrative Agent, such Lender and the applicable Borrower severally agree
to repay to the Administrative Agent forthwith on demand such corresponding
amount together with interest thereon in such currency, for each day from the
date such amount is made available to the applicable Borrower until the date
such amount is repaid to the Administrative Agent at (i) in the case of the
Borrower, the interest rate applicable at the time to the Loans comprising
such Borrowing and (ii) in the case of such Lender, a rate determined by the
Administrative Agent to represent its cost of overnight or short-term funds in
the relevant currency (which determination shall be conclusive absent manifest
error). If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Lender's Loan as part
of such Borrowing for purposes of this Agreement.
(d) Notwithstanding any other provision of this Agreement, none of the
Borrowers shall be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date.
SECTION 2.03. Competitive Bid Procedure. (a) In order to request
Competitive Bids, a Borrower shall hand deliver or telecopy to the
Administrative Agent a duly completed Competitive Bid Request in the form of
Exhibit A-1 hereto, to be received by the Administrative Agent (i) in the case
of a Eurocurrency Competitive Borrowing, not later than 11:00 a.m., New York
City time (or, if the Bid Request is delivered or telecopied to the
Administrative Agent in London, 10:00 a.m., London time), four Business Days
before a proposed Competitive Borrowing and (ii) in the case of a Fixed Rate
Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before a proposed Competitive Borrowing. No ABR Loan shall be requested in,
or made pursuant to, a Competitive Bid Request. A Competitive Bid Request
that does not conform substantially to the format of Exhibit A-1 may be
rejected in the Administrative Agent's sole discretion, and the Administrative
Agent shall promptly notify the applicable Borrower of such rejection by
telecopier. Such request shall in each case refer to this Agreement and
specify (A) whether the Borrowing then being requested is to be a Eurocurrency
Borrowing or a Fixed Rate Borrowing, (B) the date of such Borrowing (which
shall be a Business Day), (C) the aggregate principal amount of the Borrowing,
(D) the currency of such Borrowing and (E) the Interest Period with respect
thereto (which may not end after the Maturity Date). If no election as to the
currency of Borrowing is specified in any Competitive Bid Request, then the
applicable Borrower shall be deemed to have requested Borrowings in Dollars.
Promptly after its receipt of a Competitive Bid Request that is not rejected
as aforesaid, the Administrative Agent shall invite by telecopier (in the form
set forth in Exhibit A-2 hereto) the Lenders to bid, on the terms and
conditions of this Agreement, to make Competitive Loans pursuant to the
Competitive Bid Request.
(b) Each Lender may, in its sole discretion, make one or more Competitive
Bids to a Borrower responsive to a Competitive Bid Request. Each Competitive
Bid by a Lender must be received by the Administrative Agent via telecopier,
in the form of Exhibit A-3 hereto, (i) in the case of Eurocurrency Competitive
Borrowing not later than 11:00 a.m., New York City time (or, if the
Competitive Bid is delivered or telecopied to the Administrative Agent in
London, 10:00 a.m., London time), three Business Days before a proposed
Competitive Borrowing and (ii) in the case of a Fixed Rate Borrowing, not
later than 11:00 a.m., New York City time, on the day of a proposed
Competitive Borrowing. Multiple bids will be accepted by the Administrative
Agent. Competitive Bids that do not conform substantially to the format of
Exhibit A-3 may be rejected by the Administrative Agent after conferring with,
and upon the instruction of, the applicable Borrower, and the Administrative
Agent shall notify the Lender making such nonconforming bid of such rejection
as soon as practicable. Each Competitive Bid shall refer to this Agreement
and specify (A) the principal amount (which (x) shall be in a minimum
principal amount or Assigned Dollar Value of $5,000,000 and (except in the
case of Alternative Currency Borrowings) in an integral multiple of
$1,000,000, (y) shall be expressed in Dollars or, in the case of an
Alternative Currency Borrowing, in both the Alternative Currency and the
Assigned Dollar Value thereof and (z) may equal the entire principal amount of
the Competitive Borrowing requested by the Borrower) of the Competitive Loan
or Loans that the Lender is willing to make to the applicable Borrower, (B)
the Competitive Bid Rate or Rates at which the Lender is prepared to make the
Competitive Loan or Loans and (C) the Interest Period and the last day
thereof. If any Lender shall elect not to make a Competitive Bid, such Lender
shall so notify the Administrative Agent by telecopier (I) in the case of
Eurocurrency Competitive Loans, not later than 11:00 a.m., New York City time
(or, if the notice is delivered or telecopied to the Administrative Agent in
London, 10:00 a.m., London time), three Business Days before a proposed
Competitive Borrowing, and (II) in the case of Fixed Rate Loans, not later
than 11:00 a.m., New York City time, on the day of a proposed Competitive
Borrowing; provided, however, that failure by any Lender to give such notice
shall not cause such Lender to be obligated to make any Competitive Loan as
part of such Competitive Borrowing. A Competitive Bid submitted by a Lender
pursuant to this paragraph (b) shall be irrevocable.
(c) The Administrative Agent shall promptly notify the applicable Borrower by
telecopier of all the Competitive Bids made, the Competitive Bid Rate and the
principal amount of each Competitive Loan in respect of which a Competitive
Bid was made and the identity of the Lender that made each bid. The
Administrative Agent shall send a copy of all Competitive Bids to the
applicable Borrower for its records as soon as practicable after completion of
the bidding process set forth in this Section 2.03.
(d) The applicable Borrower may in its sole and absolute discretion, subject
only to the provisions of this paragraph (d), accept or reject any Competitive
Bid referred to in paragraph (c) above. The Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopier in the form of a
Competitive Bid Accept/Reject Letter, whether and to what extent it has
decided to accept or reject any of or all the bids referred to in paragraph
(c) above, (x) in the case of a Eurocurrency Competitive Borrowing, not later
than 11:30 a.m., New York City time (or, if the notice is delivered or
telecopied to the Administrative Agent in London, 10:30 a.m., London time),
three Business Days before a proposed Competitive Borrowing, and (y) in the
case of a Fixed Rate Borrowing, not later than 11:30 a.m., New York City time,
on the day of a proposed Competitive Borrowing; provided, however, that (i)
the failure by the applicable Borrower to give such notice shall be deemed to
be a rejection of all the bids referred to in paragraph (c) above, (ii) such
Borrower shall not accept a bid made at a particular Competitive Bid Rate if
the Borrower has decided to reject a bid made at a lower Competitive Bid Rate,
(iii) the aggregate amount of the Competitive Bids accepted by such Borrower
shall not exceed the principal amount specified in the Competitive Bid
Request, (iv) if such Borrower shall accept a bid or bids made at a particular
Competitive Bid Rate but the amount of such bid or bids shall cause the total
amount of bids to be accepted by the Borrower to exceed the amount specified
in the Competitive Bid Request, then such Borrower shall accept a portion of
such bid or bids in an amount equal to the amount specified in the Competitive
Bid Request less the amount of all other Competitive Bids accepted with
respect to such Competitive Bid Request, which acceptance, in the case of
multiple bids at such Competitive Bid Rate, shall be made pro rata in
accordance with the amount of each such bid at such Competitive Bid Rate, and
(v) except pursuant to clause (iv) above, no bid shall be accepted for a
Competitive Loan unless such Competitive Loan is in (x) a minimum principal
amount or Assigned Dollar Value of $5,000,000 and (except in the case of
Alternative Currency Borrowings) an integral multiple of $1,000,000 or (y) an
aggregate principal amount equal to the remaining balance of the available
applicable Commitments; provided further, however, that if a Competitive Loan
must be in an amount less than $5,000,000 because of the provisions of clause
(iv) above, such Competitive Loan may be for a minimum of $1,000,000 or any
integral multiple thereof, and in calculating the pro rata allocation of
acceptances of portions of multiple bids at a particular Competitive Bid Rate
pursuant to clause (iv) the amounts shall be rounded to integral multiples of
$1,000,000 in a manner which shall be in the discretion of the applicable
Borrower. A notice given by the applicable Borrower pursuant to this
paragraph (d) shall be irrevocable.
(e) The Administrative Agent shall promptly notify each bidding Lender
whether or not its Competitive Bid has been accepted (and if so, in what
amount and at what Competitive Bid Rate) by telecopy sent by the
Administrative Agent, and each successful bidder will thereupon become bound,
subject to the other applicable conditions hereof, to make the Competitive
Loan in respect of which its bid has been accepted.
(f) A Competitive Bid Request shall not be made within five Business Days
after the date of any previous Competitive Bid Request.
(g) If the Administrative Agent shall elect to submit a Competitive Bid in
its capacity as a Lender, it shall submit such bid directly to the applicable
Borrower one quarter of an hour earlier than the latest time at which the
other Lenders are required to submit their bids to the Administrative Agent
pursuant to paragraph (b) above.
(h) In the event that any Borrower wishes to make a Borrowing in any
Alternative Currency other than Belgian Francs, Deutche Marks, French Francs
or Sterling, such Borrowing shall be made as a Competitive Borrowing.
(i) All notices required by this Section 2.03 shall be given in accordance
with Section 10.01.
SECTION 2.04. Standby Borrowing Procedure. In order to request a Standby
Borrowing, a Borrower shall hand deliver or telecopy to the Administrative
Agent a duly completed Standby Borrowing Request in the form of Exhibit A-5
hereto, to be received by the Administrative Agent (a) in the case of a
Eurocurrency Standby Borrowing, not later than 11:00 a.m., New York City time
(or, if the Borrowing Request is delivered or telecopied to the Administrative
Agent in London, 10:00 a.m., London time), three Business Days before a
proposed borrowing and (b) in the case of an ABR Borrowing, not later than
11:00 a.m., New York City time, one Business Day before a proposed borrowing;
provided, however, that Borrowing Requests with respect to Borrowings to be
made on the Closing Date may, at the discretion of the Administrative Agent,
be delivered later than the times specified above (but in no event later than
the time necessary to effect the funding of the Loan). No Fixed Rate Loan
shall be requested or made pursuant to a Standby Borrowing Request. Such
notice shall be irrevocable and shall in each case specify (i) whether the
Borrowing then being requested is to be a Eurocurrency Borrowing or an ABR
Borrowing; (ii) the date of such Borrowing (which shall be a Business Day),
(iii) the aggregate principal amount of the Borrowing, (iv) the currency of
such Borrowing (which, in the case of an ABR Borrowing, shall be Dollars) and
(v) if such Borrowing is to be a Eurocurrency Borrowing, the Interest Period
with respect thereto. If no election as to the currency of Borrowing is
specified in any Standby Borrowing Request, then the applicable Borrower shall
be deemed to have requested Borrowings in Dollars. If no election as to the
Type of Borrowing is specified, then the requested Borrowing shall be an ABR
Borrowing if denominated in Dollars or a Eurocurrency Borrowing if denominated
in an Alternative Currency. If no Interest Period with respect to any
Eurocurrency Borrowing is specified, then the applicable Borrower shall be
deemed to have selected an Interest Period of one month's duration. If the
applicable Borrower shall not have given notice in accordance with this
Section 2.04 of its election to refinance a Standby Borrowing prior to the end
of the Interest Period in effect for such Borrowing, then such Borrower shall
(unless such Borrowing is repaid at the end of such Interest Period) be deemed
to have given notice of an election to refinance such Borrowing with an ABR
Borrowing if denominated in Dollars or a Eurocurrency Borrowing in the same
currency and with an Interest Period of one month if denominated in an
Alternative Currency. The Administrative Agent shall promptly advise the
Lenders of any notice given pursuant to this Section 2.04 (and the contents
thereof), of each Lender's portion of the requested Borrowing and, in the case
of an Alternative Currency Borrowing, of the Dollar Equivalent of the
Alternative Currency amount specified in the applicable Borrowing Request and
the Spot Exchange Rate utilized to determine such Dollar Equivalent. Subject
to Section 2.01(b), if the Dollar Equivalent of a Lender's portion of any such
Borrowing would exceed such Lender's remaining available applicable
Commitment, then such Lender's portion of such Borrowing shall be reduced to
the Alternative Currency Equivalent of such Lender's remaining available
Commitment.
SECTION 2.05. Refinancings. A Borrower may refinance all or any part of any
Competitive Borrowing or Standby Borrowing with a Competitive Borrowing or a
Standby Borrowing of the same or a different Type made pursuant to Section
2.03 or Section 2.04, subject to the conditions and limitations set forth
herein and elsewhere in this Agreement, including refinancings of Competitive
Borrowings with Standby Borrowings and Standby Borrowings with Competitive
Borrowings. Any Borrowing or part thereof so refinanced shall be deemed to be
repaid in accordance with Section 2.07 with the proceeds of a new Borrowing
hereunder and the proceeds of the new Borrowing, to the extent they do not
exceed the principal amount of the Borrowing being refinanced, shall not be
paid by the Lenders to the Administrative Agent or by the Administrative Agent
to the applicable Borrower pursuant to Section 2.02(c); provided, however,
that in the case of any refinancing of a Borrowing with another Borrowing in
the same currency, (i) if the principal amount extended by a Lender in a
refinancing is greater than the principal amount extended by such Lender in
the Borrowing being refinanced, then such Lender shall pay such difference to
the Administrative Agent for distribution to the Lenders described in (ii)
below, (ii) if the principal amount extended by a Lender in the Borrowing
being refinanced is greater than the principal amount being extended by such
Lender in the refinancing, the Administrative Agent shall return the
difference to such Lender out of amounts received pursuant to (i) above, and
(iii) to the extent any Lender fails to pay the Administrative Agent amounts
due from it pursuant to (i) above, any Loan or portion thereof being
refinanced with such amounts shall not be deemed repaid in accordance with
Section 2.07 and shall be payable by the applicable Borrower.
SECTION 2.06. Fees. (a) The Company agrees to pay to each Lender, through
the Administrative Agent, on each March 31, June 30, September 30 and December
31 and on the Maturity Date, a facility fee (a "Facility Fee") equal to the
Facility Fee Percentage of the daily average amount of the Commitment of such
Lender, whether used or unused (and whether or not the conditions set forth in
Section 4.01 shall have been satisfied), during the preceding quarter (or
shorter period commencing with the date hereof or ending with the Maturity
Date or any date on which the Commitment of such Lender shall be terminated
and all outstanding Loans of such Lender repaid). All Facility Fees shall be
computed on the basis of the actual number of days elapsed in a year of 365
days. The Facility Fee due to each Lender shall commence to accrue on the
date of this Agreement and shall cease to accrue on the earlier of the
Maturity Date and the date on which the Commitment of such Lender shall have
been terminated and the Loans of such Lender shall have been repaid.
(b) The Company agrees to pay the Administrative Agent, for its own account,
the fees set forth in the letter agreements dated May 2, 1994 among the
Administrative Agent, Chemical Securities Inc. and the Company (the
"Administra-tive Fees") at the times and in the amounts set forth therein.
(c) The Company agrees to pay to each Lender, through the Administrative
Agent, on each March 31, June 30, September 30 and December 31 and on each
date on which the Commitment of such Lender shall be terminated or reduced as
provided herein, a utilization fee (a "Utilization Fee") equal to the
Utilization Fee Percentage of the sum of (i) the Committed Credit Exposure of
such Lender plus (ii) the outstanding principal amount (or Assigned Dollar
Value, in the case of Loans denominated in an Alternative Currency) of the
Competitive Loans of such Lender for each day on which the sum of (A) the
outstanding aggregate principal amount (or Assigned Dollar Value) of Loans
plus (B) the outstanding aggregate principal amount (or Assigned Dollar Value)
of loans under the Facility A Credit Agreement exceeds 50% of the sum of (A)
the Total Commitment plus (B) the aggregate amount of the commitments of the
lenders under the Facility A Credit Agreement. All Utilization Fees shall be
computed on the basis of the actual number of days elapsed in a year of 360
days.
(d) All Fees shall be paid on the dates due, in immediately available funds,
to the Administrative Agent for distribution, if and as appropriate, among the
Lenders. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.07. Repayment of Loans. (a) Each Borrower agrees to pay the
outstanding principal balance of each Loan on the last day of the Interest
Period applicable to such Loan and on the Maturity Date. Each Loan shall bear
interest from the date of the Borrowing of which such Loan is a part on the
outstanding principal balance thereof as set forth in Section 2.08.
(b) Each Lender shall, and is hereby authorized by the Borrowers to,
maintain, in accordance with its usual practice, records evidencing the
indebtedness of each Borrower to such Lender hereunder from time to time,
including the date, amount, currency and Type of and the Interest Period
applicable to each Loan made by such Lender from time to time and the amounts
of principal and interest paid to such Lender from time to time in respect of
each such Loan.
(c) The entries made in the records maintained pursuant to paragraph (b) of
this Section 2.07 and in the Register maintained by the Administrative Agent
pursuant to Section 10.04(d) shall be prima facie evidence of the existence
and amounts of the obligations of each Borrower to which such entries relate;
provided, however, that the failure of any Lender or the Administrative Agent
to maintain or to make any entry in such records or the Register, as
applicable, or any error therein shall not in any manner affect the obligation
of any Borrower to repay any Loans in accordance with the terms of this
Agreement.
SECTION 2.08. Interest on Loans. (a) Subject to the provisions of Section
2.09, the Loans comprising each Eurocurrency Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days (or, in the case of Loans denominated in (A) Belgian Francs or Sterling,
over a year of 365 or 366 days, or (B) any Alternative Currency other than
Belgian Francs, Deutsche Marks, French Francs or Sterling, on the basis
customarily used for borrowings between banks in the principal market for each
Alternative Currency)), at a rate per annum equal to (i) in the case of each
Eurocurrency Standby Loan, the LIBO Rate for the Interest Period in effect for
the Borrowing of which such Loan is part plus the Applicable Margin from time
to time in effect and (ii) in the case of each Eurocurrency Competitive Loan,
the LIBO Rate for the Interest Period in effect for the Borrowing of which
such Loan is a part plus the Competitive Margin offered by the Lender making
such Loan and accepted by the Borrower pursuant to Section 2.03.
(b) Subject to the provisions of Section 2.09, the Loans comprising each ABR
Borrowing (including each Swingline Borrowing) shall bear interest (computed
on the basis of the actual number of days elapsed over a year of 365 or 366
days, as appropriate, when determined by reference to the Prime Rate and over
a year of 360 days at all other times) at a rate per annum equal to the
Alternate Base Rate.
(c) Subject to the provisions of Section 2.09, each Fixed Rate Loan shall
bear interest at a rate per annum (computed on the basis of the actual number
of days elapsed over a year of 360 days) equal to the fixed rate of interest
offered by the Lender making such Loan and accepted by the Borrower pursuant
to Section 2.03.
(d) Interest on each Loan shall be payable in arrears on each Interest
Payment Date applicable to such Loan except as otherwise provided in this
Agreement. The applicable LIBO Rate or Alternate Base Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.09. Default Interest. If any Borrower shall default in the payment
of the principal of or interest on any Loan or any other amount becoming due
hereunder, whether by scheduled maturity, notice of prepayment, acceleration
or otherwise, such Borrower shall on demand from time to time from the
Administrative Agent pay interest, to the extent permitted by law, on such
defaulted amount up to (but not including) the date of actual payment (after
as well as before judgment) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the Alternate
Base Rate plus 2% per annum (or, in the case of the principal of any Loan, if
higher, the rate of interest otherwise applicable, or most recently
applicable, to such Loan hereunder plus 2% per annum).
SECTION 2.10. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurocurrency Borrowing of any Type the Administrative
Agent shall have determined that Dollar deposits or deposits in the
Alternative Currency in which such Borrowing is to be denominated in the
principal amounts of the Loans comprising such Borrowing are not generally
available in the London interbank market, or that the rates at which such
deposits are being offered will not adequately and fairly reflect the cost to
any Lender of making or maintaining its Eurocurrency Loan during such Interest
Period, or that reasonable means do not exist for ascertaining the LIBO Rate,
the Administrative Agent shall, as soon as practicable thereafter, give
written or telecopy notice of such determination to the applicable Borrower
and the Lenders. In the event of any such determination, until the
Administrative Agent shall have advised the applicable Borrower and the
Lenders that the circumstances giving rise to such notice no longer exist, (i)
any request by a Borrower for a Eurocurrency Competitive Borrowing pursuant to
Section 2.03 shall be of no force or effect and shall be denied by the
Administrative Agent and (ii) any request by a Borrower for a Eurocurrency
Standby Borrowing of the affected Type or in the affected currency shall be
deemed to be a request for an ABR Borrowing denominated in Dollars. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.11. Termination and Reduction of Commitments. (a) The Commitments
shall be automatically terminated at the Administrative Agent's close of
business in New York City on the Maturity Date.
(b) Upon at least two Business Days' prior irrevocable written or telecopy
notice to the Administrative Agent, the Company (on behalf of all the
Borrowers) may at any time in whole permanently terminate, or from time to
time in part permanently reduce, the Total Commitment; provided, however, that
(i) each partial reduction of the Total Commitment shall be in an integral
multiple of $1,000,000 and in a minimum principal amount of $5,000,000 and
(ii) no such termination or reduction shall be made which would reduce the
Total Commitment to an amount less than the aggregate outstanding principal
amount of the Competitive Loans and Standby Loans.
(c) Each reduction in the Total Commitment hereunder shall be made ratably
among the Lenders in accordance with their respective Commitments. The
Company shall pay to the Administrative Agent for the account of the Lenders,
on the date of each termination or reduction, the Facility Fees on the amount
of the Commitments so terminated or reduced accrued to but not including the
date of such termination or reduction.
SECTION 2.12. Prepayment. (a) Each Borrower shall have the right at any
time and from time to time to prepay any Standby Borrowing, in whole or in
part, upon giving written or telecopy notice (or telephone notice promptly
confirmed by written or telecopy notice) to the Administrative Agent: (i) in
the case of Eurocurrency Loans before 11:00 a.m., New York City time (or, if
such notice is delivered or telecopied to the Administrative Agent in London,
10:00 a.m., London time), three Business Days prior to prepayment and (ii) in
the case of ABR Loans, before 11:00 a.m., New York City time, one Business Day
prior to prepayment; provided, however, that each partial prepayment shall be
in an amount which is an integral multiple of $1,000,000 and not less than
$5,000,000. The Borrowers shall not have the right to prepay any Competitive
Borrowing.
(b) On the date of any termination or reduction of the Commitments pursuant
to Section 2.11, the Company shall (or shall cause each responsible Borrower
to) pay or prepay so much of the Swingline Borrowings and Standby Borrowings,
in accordance with the following sentence, as shall be necessary in order that
the aggregate outstanding principal amount of all Loans will not exceed the
Total Commitment after giving effect to such termination or reduction.
Mandatory prepayments under this paragraph (b) shall be applied (i) first, to
prepay outstanding Swingline Borrowings and (ii) second, to prepay outstanding
Standby Borrowings.
(c) Each notice of prepayment under this Section 2.12 shall specify the
prepayment date and the principal amount of each Borrowing (or portion
thereof) to be prepaid, shall be irrevocable and shall commit the applicable
Borrower to prepay such Borrowing (or portion thereof) by the amount stated
therein on the date stated therein. All prepayments under this Section 2.12
shall be subject to Section 2.15 but otherwise without premium or penalty.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender (or any
lending office of any Lender) of the principal of or interest on any
Eurocurrency Loan or Fixed Rate Loan made by such Lender or any Fees or other
amounts payable hereunder (other than changes in respect of taxes imposed on
the overall net income of such Lender by the jurisdiction in which such Lender
has its principal office or by any political subdivision or taxing authority
therein), or shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of or credit extended by such Lender (or any lending office of such
Lender), or shall impose on such Lender or the London interbank market any
other condition affecting this Agreement or any Eurocurrency Loan or Fixed
Rate Loan made by such Lender, and the result of any of the foregoing shall be
to increase the cost to such Lender of making or maintaining any Eurocurrency
Loan or Fixed Rate Loan or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise) by an amount deemed by such Lender to be material, then the Company
shall (or shall cause the Borrowers to) pay to such Lender upon demand such
additional amount or amounts as will compensate such Lender for such
additional costs incurred or reduction suffered. Notwithstanding the
foregoing, no Lender shall be entitled to request compensation under this
paragraph with respect to any Competitive Loan if it shall have been aware of
the change giving rise to such request at the time of submission of the
Competitive Bid pursuant to which such Competitive Loan shall have been made.
(b) If any Lender shall have determined that any change after the date hereof
in the applicability of any law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards", or the adoption
after the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Lender (or any lending office
of such Lender) or any Lender's holding company with any request or directive
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 Lender's capital or on the
capital of such Lender's holding company, if any, as a consequence of this
Agreement or the Loans made by such Lender pursuant hereto to a level below
that which such Lender or such Lender's holding company could have achieved
but for such applicability, adoption, change or compliance (taking into
consideration such Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy) by an amount deemed by such Lender
to be material, then from time to time the Company shall (or shall cause the
responsible Borrower to) pay to such Lender such additional amount or amounts
as will compensate such Lender or such Lender's holding company for any such
reduction suffered.
(c) A certificate of a Lender setting forth such amount or amounts as shall
be necessary to compensate such Lender as specified in paragraph (a) or (b)
above, as the case may be, shall be delivered to the Company and shall be
conclusive absent manifest error. The Company shall (or shall cause the
responsible Borrower to) pay each Lender the amount shown as due on any such
certificate delivered by it within 10 days after the receipt of the same.
(d) Except as provided below in this paragraph (d), failure on the part of
any Lender to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect
to any period shall not constitute a waiver of such Lender's right to demand
compensation with respect to such period or any other period. The protection
of this Section shall be available to each Lender regardless of any possible
contention of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change or condition which shall have occurred or been
imposed. No Lender shall be entitled to compensation under this Section 2.13
for any costs incurred or reductions suffered with respect to any date unless
it shall have notified the Company that it will demand compensation for such
costs or reductions not more than 60 days after the later of (i) such date and
(ii) the date on which it shall have, or should have, become aware of such
costs or reductions.
SECTION 2.14. Change in Legality. (a) Notwith-standing any other provision
herein, if, after the date hereof, (i) any change in any law or regulation or
in the interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurocurrency Loan or Alternative Currency Loan or to
give effect to its obligations as contemplated hereby with respect to any
Eurocurrency Loan or Alternative Currency Loan, or (ii) there shall have
occurred any change in national or international financial, political or
economic conditions (including the imposition of or any change in exchange
controls) or currency exchange rates which would make it impracticable for any
Lender to make Loans denominated in such Alternative Currency or to any
Borrower, then, by written notice to the Company and to the Administrative
Agent, such Lender may:
(i) declare that Eurocurrency Loans or Alternative Currency Loans (in the
affected currency or currencies or to the affected Borrower), as the case may
be, will not thereafter (for the duration of such unlawfulness or
impracticability) be made by such Lender hereunder, whereupon such Lender
shall not submit a Competitive Bid in response to a request for such
Alternative Currency Loans or Eurocurrency Competitive Loans and any request
by a Borrower for a Eurocurrency Standby Borrowing or Alternative Currency
Borrowing (in the affected currency or currencies or to the affected
Borrower), as the case may be, shall, as to such Lender only, be deemed a
request for an ABR Loan or a Loan denominated in Dollars, as the case may be,
unless such declaration shall be subsequently withdrawn (or, if a Loan to the
requesting Borrower cannot be made for the reasons specified above, such
request shall be deemed to have been withdrawn); and
(ii) require that all outstanding Eurocurrency Loans or Alternative Currency
Loans (in the affected currency or currencies or to the affected Borrower), as
the case may be, made by it be converted to ABR Loans or Loans denominated in
Dollars, as the case may be, in which event all such Eurocurrency Loans or
Alternative Currency Loans (in the affected currency or currencies or to the
affected Borrower) shall be automatically converted to ABR Loans or Loans
denominated in Dollars, as the case may be, as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the Eurocurrency Loans or Alternative Currency Loans, as the case may
be, that would have been made by such Lender or the converted Eurocurrency
Loans or Alternative Currency Loans, as the case may be, of such Lender shall
instead be applied to repay the ABR Loans or Loans denominated in Dollars, as
the case may be, made by such Lender in lieu of, or resulting from the
conversion of, such Eurocurrency Loans or Loans denominated in Dollars, as the
case may be.
(b) For purposes of this Section 2.14, a notice to the Company by any Lender
shall be effective as to each Eurocurrency Loan, if lawful, on the last day of
the Interest Period currently applicable to such Eurocurrency Loan; in all
other cases such notice shall be effective on the date of receipt by the
Company.
SECTION 2.15. Indemnity. Each Borrower shall indemnify each Lender against
any loss or expense which such Lender may sustain or incur as a consequence of
(a) any failure by such Borrower to fulfill on the date of any borrowing
hereunder the applicable conditions set forth in Article IV, (b) any failure
by such Borrower to borrow or to refinance or continue any Loan hereunder
after irrevocable notice of such borrowing, refinancing or continuation has
been given pursuant to Section 2.03 or 2.04, (c) any payment, prepayment,
conversion or transfer of a Eurocurrency Loan or Fixed Rate Loan required by
any other provision of this Agreement or otherwise made or deemed made on a
date other than the last day of the Interest Period applicable thereto, (d)
any default in payment or prepayment of the principal amount of any Loan or
any part thereof or interest accrued thereon, as and when due and payable (at
the due date thereof, whether by scheduled maturity, acceleration, irrevocable
notice of prepayment or otherwise) or (e) the occurrence of any other Event of
Default, including, in each such case, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain such Loan
or any part thereof as a Eurocurrency Loan or Fixed Rate Loan. Such loss or
reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by such Lender, of (i) its cost of obtaining the funds
for the Loan being paid, prepaid, converted, transferred or not borrowed
(assumed to be the LIBO Rate or, in the case of a Fixed Rate Loan, the fixed
rate of interest applicable thereto) for the period from the date of such
payment, prepayment, conversion, transfer or failure to borrow to the last day
of the Interest Period for such Loan (or, in the case of a failure to borrow,
the Interest Period for such Loan which would have commenced on the date of
such failure) over (ii) the amount of interest (as reasonably determined by
such Lender) that would be realized by such Lender in reemploying the funds so
paid, prepaid, converted, transferred or not borrowed for such period or
Interest Period, as the case may be. A certificate of any Lender setting
forth any amount or amounts which such Lender is entitled to receive pursuant
to this Section shall be delivered to the Company and shall be conclusive
absent manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.14,
each Standby Borrowing, each payment or prepayment of principal of any Standby
Borrowing, each payment of interest on the Standby Loans, each payment of the
Facility Fees and Utilization Fees, each reduction of the Commitments and each
refinancing of any Borrowing with a Standby Borrowing of any Type, shall be
allocated pro rata among the Lenders in accordance with their respective
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Standby
Loans). Each payment of principal of any Competitive Borrowing shall be
allocated pro rata among the Lenders participating in such Borrowing in
accordance with the respective principal amounts of their outstanding
Competitive Loans comprising such Borrowing. Each payment of interest on any
Competitive Borrowing shall be allocated pro rata among the Lenders
participating in such Borrowing in accordance with the respective amounts of
accrued and unpaid interest on their outstanding Competitive Loans comprising
such Borrowing. For purposes of determining (i) the aggregate available
Commitments of the Lenders at any time and (ii) the available Commitment of
each Lender, each outstanding Competitive Borrowing shall be deemed to have
utilized the Commitments of the Lenders (including those Lenders which shall
not have made Loans as part of such Competitive Borrowing) pro rata in
accordance with such respective Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing to the next higher or lower whole Dollar (or comparable unit of
any applicable Alternative Currency) amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim
against any Borrower, or pursuant to a secured claim under Section 506 of
Title 11 of the United States Code or other security or interest arising from,
or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any
Standby Loan or Standby Loans as a result of which the unpaid principal
portion of its Standby Loans shall be proportionately less than the unpaid
principal portion of the Standby Loans of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and
shall promptly pay to such other Lender the purchase price for, a
participation in the Standby Loans of such other Lender, so that the aggregate
unpaid principal amount of the Standby Loans and participations in the Standby
Loans held by each Lender shall be in the same proportion to the aggregate
unpaid principal amount of all Standby Loans then outstanding as the principal
amount of its Standby Loans prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Standby Loans
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that, if any such purchase or purchases or
adjustments shall be made pursuant to this Section 2.17 and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or
adjustments shall be rescinded to the extent of such recovery and the purchase
price or prices or adjustment restored without interest. The Borrower
expressly consents to the foregoing arrangements and agrees that any Lender
holding a participation in a Standby Loan deemed to have been so purchased may
exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by such Borrower to such Lender by reason
thereof as fully as if such Lender had made a Standby Loan directly to such
Borrower in the amount of such participation.
SECTION 2.18. Payments. (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any Fees or other amounts)
hereunder and under each other Loan Document not later than 12:00 noon, local
time at the place of payment, on the date when due in immediately available
funds. Each such payment (other than principal of and interest on Swingline
Loans, which shall be paid directly to the applicable Swingline Lender except
as otherwise provided in Section 2.21(c)) shall be made to the Administrative
Agent at its offices at 270 Park Avenue, New York, New York. Each such
payment (other than principal of and interest on Alternative Currency Loans,
which shall be made in the applicable Alternative Currency) shall be made in
Dollars.
(b) Whenever any payment (including principal of or interest on any Borrowing
or any Fees or other amounts) hereunder or under any other Loan Document shall
become due, or otherwise would occur, on a day that is not a Business Day,
such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by each Borrower hereunder
shall be made, in accordance with Section 2.18, free and clear of and without
deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) income taxes imposed on the net income of the Administrative
Agent or any Lender (or any transferee or assignee thereof, including a
participation holder (any such individual or entity, a "Transferee")) and (ii)
franchise taxes imposed on the net income of the Administrative Agent or any
Lender (or Transferee), in each case by the jurisdiction under the laws of
which the Administrative Agent or such Lender (or Transferee) is organized,
domiciled, resident or doing business or any political subdivision thereof
(all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities, collectively or individually, "Taxes"). If any
Borrower shall be required to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender (or any Transferee) or the Administrative
Agent, (i) the sum payable shall be increased by the amount (an "additional
amount") necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.19) such
Lender (or Transferee) or the Administrative Agent (as the case may be) shall
receive an amount equal to the sum it would have received had no such
deductions been made, (ii) each Borrower shall make such deductions and (iii)
each Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, each Borrower agrees to bear and to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document ("Other Taxes").
(c) The Borrowers will indemnify each Lender (or Transferee) and the
Administrative Agent for the full amount of Taxes and Other Taxes paid by such
Lender (or Transferee) or the Administrative Agent, as the case may be, and
any liability (including penalties, interest and expenses (including
reasonable attorney's fees and expenses)) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability prepared by a Lender, or the
Administrative Agent on its behalf, absent manifest error, shall be final,
conclusive and binding for all purposes. Such indemnification shall be made
within 30 days after the date the Lender (or Transferee) or the Administrative
Agent, as the case may be, makes written demand therefor.
(d) If a Lender (or Transferee) or the Administrative Agent shall become
aware that it is entitled to claim a refund from a Governmental Authority in
respect of Taxes or Other Taxes as to which it has been indemnified by a
Borrower, or with respect to which any Borrower has paid additional amounts,
pursuant to this Section 2.19, it shall promptly notify the Company of the
availability of such refund claim and shall, within 30 days after receipt of a
request by the Company, make a claim to such Governmental Authority for such
refund at the Company's expense. If a Lender (or Transferee) or the
Administrative Agent receives a refund (including pursuant to a claim for
refund made pursuant to the preceding sentence) in respect of any Taxes or
Other Taxes as to which it has been indemnified by a Borrower or with respect
to which any Borrower has paid additional amounts pursuant to this Section
2.19, it shall within 30 days from the date of such receipt pay over such
refund to the Company (but only to the extent of indemnity payments made, or
additional amounts paid, by such Borrower under this Section 2.19 with respect
to the Taxes or Other Taxes giving rise to such refund), net of all out-of-
pocket expenses of such Lender (or Transferee) or the Administrative Agent and
without interest (other than interest paid by the relevant Governmental
Authority with respect to such refund); provided, however, that the Company,
upon the request of such Lender (or Transferee) or the Administrative Agent,
agrees to (or to cause the responsible Borrower to) repay the amount paid over
to the Company (plus penalties, interest or other charges) to such Lender (or
Transferee) or the Administrative Agent in the event such Lender (or
Transferee) or the Administrative Agent is required to repay such refund to
such Governmental Authority.
(e) As soon as practicable after the date of any payment of Taxes or Other
Taxes by any Borrower to the relevant Governmental Authority, the Company will
deliver to the Administrative Agent, at its address referred to in Section
10.01, the original or a certified copy of a receipt issued by such
Governmental Authority evidencing payment thereof.
(f) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.19 shall
survive the payment in full of the principal of and interest on all Loans made
hereunder.
(g) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District
of Columbia (a "Non-U.S. Lender") shall deliver to the Company and the
Administrative Agent two copies of either United States Internal Revenue
Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. Federal withholding tax under Section 871(h) or 881(c) of
the Code with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such Non-U.S.
Lender delivers a Form W-8, a certificate representing that such Non-U.S.
Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-
percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code)
of the Company and is not a controlled foreign corporation related to the
Company (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or reduced rate of, U.S. Federal withholding tax on payments
by the Borrowers under this Agreement and the other Loan Documents. Such
forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of a Transferee that is a
participation holder, on or before the date such participation holder becomes
a Transferee hereunder) and on or before the date, if any, such Non-U.S.
Lender changes its applicable lending office by designating a different
lending office (a "New Lending Office"). In addition, each Non-U.S. Lender
shall deliver such forms promptly upon the obsolescence or invalidity of any
form previously delivered by such Non-U.S. Lender. Notwithstanding any other
provision of this Section 2.19(g), a Non-U.S. Lender shall not be required to
deliver any form pursuant to this Section 2.19(g) that such Non-U.S. Lender is
not legally able to deliver.
(h) None of the Borrowers shall be required to indemnify any Non-U.S. Lender,
or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Lender became
a party to this Agreement (or, in the case of a Transferee that is a
participation holder, on the date such participation holder became a
Transferee hereunder) or, with respect to payments to a New Lending Office,
the date such Non-U.S. Lender designated such New Lending Office with respect
to a Loan; provided, however, that this clause (i) shall not apply to any
Transferee or New Lending Office that becomes a Transferee or New Lending
Office as a result of an assignment, participation, transfer or designation
made at the request of the Company; and provided further, however, that this
clause (i) shall not apply to the extent the indemnity payment or additional
amounts any Transferee, or Lender (or Transferee) through a New Lending
Office, would be entitled to receive (without regard to this clause (i)) do
not exceed the indemnity payment or additional amounts that the person making
the assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (g) above.
(i) Any Lender (or Transferee) claiming any indemnity payment or additional
amounts payable pursuant to this Section 2.19 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document reasonably requested in writing by the Company or to change the
jurisdiction of its applicable lending office if the making of such a filing
or change would avoid the need for or reduce the amount of any such indemnity
payment or additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender (or Transferee), be otherwise
disadvantageous to such Lender (or Transferee).
(j) Nothing contained in this Section 2.19 shall require any Lender (or
Transferee) or the Administrative Agent to make available any of its tax
returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.20. Assignment of Commitments and Swingline Commitments Under
Certain Circumstances. (a) Any Lender (or Transferee) claiming any
additional amounts payable pursuant to Section 2.13 or Section 2.19 shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document requested by the Company or to change the
jurisdiction of its applicable lending office if the making of such a filing
or change would avoid the need for or reduce the amount of any such additional
amounts which may thereafter accrue and would not, in the judgment of such
Lender, be otherwise disadvantageous to such Lender (or Transferee).
(b) In the event that any Lender shall have delivered a notice or certificate
pursuant to Section 2.13 or 2.14, or the Borrowers shall be required to make
additional payments to any Lender under Section 2.19, the Company shall have
the right, at its own expense, upon notice to such Lender and the
Administrative Agent, to require such Lender to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in
Section 10.04) all its interests, rights and obligations under this Agreement
to another financial institution acceptable to the Administrative Agent which
shall assume such obligations; provided that (i) no such assignment shall
conflict with any law, rule or regulation or order of any Governmental
Authority and (ii) the Company or the assignee, as the case may be, shall pay
to the affected Lender in immediately available funds on the date of such
assignment the principal of and interest accrued to the date of payment on the
Loans made by it hereunder and all other amounts accrued for its account or
owed to it hereunder.
SECTION 2.21. Swingline Loans. (a) On the terms, subject to the conditions
and relying upon the representations and warranties herein set forth, each
Swingline Lender agrees, severally and not jointly, at any time and from time
to time on and after the date hereof and until the earlier of the Business Day
immediately preceding the Maturity Date and the termination of the Swingline
Commitment of such Swingline Lender, to make Swingline Loans to the Borrowers
in an aggregate principal amount at any time outstanding not to exceed the
lesser of (i) such Swingline Lender's Swingline Commitment Percentage of the
difference between (A) the Total Swingline Commitment and (B) the Swingline
Loan Exposure, and (ii) the difference between (A) the aggregate Commitment of
such Swingline Lender and (B) the outstanding aggregate principal amount or
Assigned Dollar Value, as the case may be, of all Loans made by such Swingline
Lender. Each Swingline Loan shall be made as part of a Borrowing consisting
of Swingline Loans made by the Swingline Lenders ratably in accordance with
their respective Swingline Commitment Percentages (it being understood that no
Swingline Lender shall be responsible for the failure of any other Swingline
Lender to make any Swingline Loan required to be made by such other Swingline
Lender). The Swingline Loans comprising any Swingline Borrowing shall be in
an aggregate principal amount that is an integral multiple of $1,000,000 and
not less than $5,000,000 (or an aggregate principal amount equal to the
remaining balance of the available Swingline Commitments). Each Swingline
Lender shall make its portion of each Swingline Borrowing available to the
applicable Borrower by means of a credit to the general deposit account of
such Borrower with the Administrative Agent by 3:00 p.m. on the date such
Swingline Borrowing is requested to be made pursuant to paragraph (b) below.
Within the limits set forth in the first sentence of this paragraph, the
Borrowers may borrow, pay or prepay and reborrow Swingline Loans on or after
the Initial Funding Date and prior to the Maturity Date on the terms and
subject to the conditions and limitations set forth herein. The Swingline
Commitments shall automatically and permanently terminate on the Maturity
Date.
(b) The applicable Borrower shall give the Administrative Agent telephonic,
written or telecopy notice (in the case of telephonic notice, such notice
shall be promptly confirmed by telecopy) no later than 11:00 a.m., New York
City time, on the day of a proposed Swingline Borrowing. Such notice shall be
delivered on a Business Day, shall be irrevocable and shall refer to this
Agreement and shall specify the requested date (which shall be a Business Day)
and amount of such Swingline Borrowing. The Administrative Agent shall
promptly advise the Swingline Lenders of any notice received from the Borrower
pursuant to this paragraph (b).
(c) If any Borrower does not fully repay a Swingline Borrowing on or prior to
the last day of the Interest Period with respect thereto, the Administrative
Agent shall promptly notify each Lender thereof (by telecopy or by telephone,
confirmed in writing) and of its Applicable Percentage of such Swingline
Borrowing. Upon such notice but without any further action, each Swingline
Lender hereby agrees to grant to each Lender, and each Lender hereby agrees to
acquire from each Swingline Lender, a participation in the Swingline Loan made
by such Swingline Lender as part of such Swingline Borrowing equal to such
Lender's Applicable Percentage of the principal amount of such Swingline Loan.
In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay to the Administrative Agent, for the account of the applicable
Swingline Lender, such Lender's Applicable Percentage of each Swingline
Borrowing (including the interest accrued thereon) that is not repaid on the
last day of the Interest Period with respect thereto. Each such payment
shall, for all purposes hereof, be deemed to be an ABR Standby Loan. Each
Lender acknowledges and agrees that its obligation to acquire participations
in Swingline Loans pursuant to this paragraph is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including the
occurrence and continuance of a Default or an Event of Default or the failure
of any condition precedent set forth in Article IV, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligation under this paragraph
by wire transfer of immediately available funds, in the same manner as
provided in Section 2.02(c) with respect to Loans made by such Lender, and the
Administrative Agent shall promptly pay to the Swingline Lenders their
respective shares of the amounts so received by it from the Lenders. The
Administrative Agent shall notify the applicable Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the applicable Swingline Lender. Any amounts
received by a Swingline Lender from a Borrower (or other party on behalf of a
Borrower) in respect of a Swingline Loan after receipt by such Swingline
Lender of the proceeds of a sale of participations therein shall be promptly
remitted to the Administrative Agent; any such amounts received by the
Administrative Agent shall be promptly remitted by the Administrative Agent to
the Lenders that shall have made their payments pursuant to this paragraph and
to the applicable Swingline Lender, as their interests may appear.
Notwithstanding anything herein to the contrary, the purchase of
participations in a Swingline Borrowing pursuant to this paragraph shall not
relieve the Borrower of its obligation in respect of the payment thereof so
long as ABR Loans that resulted from any such default shall remain outstanding
or any accrued interest thereon shall remain unpaid.
(d) Upon written or telecopy notice to the Swingline Lenders and to the
Administrative Agent, the Company (on behalf of any Borrower or Borrowers) may
at any time permanently terminate, or from time to time in part permanently
reduce, the Swingline Commitment of the Swingline Lenders. Each reduction of
the Swingline Commitments shall be allocated pro rata among the Swingline
Lenders in accordance with their respective Swingline Commitment Percentages.
On the date of any termination or reduction of the Swingline Commitments
pursuant to this paragraph (d), the Borrower shall pay or prepay so much of
the Swingline Borrowings as shall be necessary in order that (i) the aggregate
outstanding principal amount of Swingline Loans will not exceed (ii) the Total
Swingline Commitment after giving effect to such termination of reduction.
(e) Any Borrower may prepay any Swingline Borrowing in whole or in part at
any time without premium or penalty; provided that such Borrower shall have
given the Administrative Agent written or telecopy notice (or telephone notice
promptly confirmed in writing or by telecopy) of such prepayment not later
than 11:00 a.m., New York City time, on the Business Day designated by such
Borrower for such prepayment; and provided further that each partial payment
shall be in an amount that is not less than $5,000,000 and in an integral
multiple of $1,000,000. Each notice of prepayment under this paragraph (e)
shall specify the prepayment date and the principal amount of each Swingline
Borrowing (or portion thereof) to be prepaid, shall be irrevocable and shall
commit such Borrower to prepay such Swingline Borrowing (or portion thereof)
by the amount stated therein on the date stated therein. Each payment of
principal of or interest on or any other amount in respect of Swingline Loans
shall be allocated, as between the Swingline Lenders, pro rata in accordance
with their respective Swingline Commitment Percentages.
SECTION 2.22. Borrowings by Approved Borrowers. The Company may, at any time
or from time to time, designate one or more wholly owned Subsidiaries as
Borrowers hereunder by furnishing to the Administrative Agent a letter (a
"Designation Letter") substantially in the form of Exhibit E-1 hereto, duly
completed and executed by the Company and such Subsidiary, whereupon each
Subsidiary so designated shall become an Approved Borrower. There may be no
more than ten Approved Borrowers at any one time. So long as all principal
and interest on all Loans of any Approved Borrower have been paid in full, the
Company may terminate an Approved Borrower's status as an Approved Borrower by
furnishing to the Administrative Agent a letter (a "Termination Letter"),
substantially in the form of Exhibit E-2 hereto, duly completed and executed
by the Company and such Approved Borrower. Any Termination Letter furnished
in accordance with this Section 2.22 shall be effective upon receipt by the
Administrative Agent. Notwithstanding the foregoing, the delivery of a
Termination Letter with respect to any Approved Borrower shall not affect any
obligation of such Approved Borrower theretofore incurred. Each Subsidiary
set forth in Schedule 2.22 shall be deemed an Approved Borrower until delivery
of a Termination Letter with respect to such Subsidiary.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Part A. Representations and Warranties of the Company. The Company
represents and warrants to each of the Lenders that:
SECTION 3.01. Corporate Existence. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
SECTION 3.02. Financial Condition. The Company has heretofore furnished to
each of the Lenders a consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1993, and the related consolidated statements
of income, cash flows and changes in shareholders' equity of the Company and
its Subsidiaries for the fiscal year ended on such date, with the opinion
thereon of Coopers & Lybrand, and the unaudited consolidated balance sheet of
the Company and its Subsidiaries as at March 31, 1994, and the related
consolidated statements of income and cash flows of the Company and its
Subsidiaries for the three-month period ended on such date. All such
financial statements present fairly, in all material respects, the
consolidated financial condition of the Company and its Subsidiaries as at
such dates and the consolidated results of their operations for the fiscal
year and three-month period ended on such dates (subject, in the case of the
financial statements as at March 31, 1994, to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis. None of the Company nor any of
its Subsidiaries has on the date hereof any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized
or anticipated losses from any unfavorable commitments, except as referred to
or reflected or provided for in the balance sheets as at such dates (or the
notes thereto in the case of such year end financial statements). Since
December 31, 1993, there has been no Material Adverse Change from that set
forth in the financial statements as at such date (or the notes thereto).
SECTION 3.03. Litigation. Except as disclosed in Schedule 3.03 hereto, there
are no legal or arbitral proceedings, or any proceedings by or before any
Governmental Authority, now pending or (to the knowledge of the Company)
threatened against the Company or any of its Subsidiaries that, if adversely
determined could (either individually or in the aggregate) have a Material
Adverse Effect.
SECTION 3.04. No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result
in a breach of, or require any consent under, the charter or by-laws of the
Company, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or Governmental Authority, or any agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their assets or properties is bound or to which
any of them is subject, or constitute a default under any such agreement or
instrument.
SECTION 3.05. Action. The Company has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance by the Company
of this Agreement has been duly authorized by all necessary corporate action
on its part (including, without limitation, any required shareholder
approvals); and this Agreement has been duly and validly executed and
delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
SECTION 3.06. Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority, or any securities
exchange, are necessary for the execution, delivery or performance by the
Company of this Agreement or for the legality, validity or enforceability
hereof.
SECTION 3.07. Use of Credit. None of the Company nor any of its Subsidiaries
in engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
the Loans hereunder will be used to buy or carry any Margin Stock.
SECTION 3.08. ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or state law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 5.06
hereof.
SECTION 3.09. Taxes. As of the date hereof, the Company and its Domestic
Subsidiaries are members of an affiliated group of corporations filing
consolidated returns for Federal income tax purposes, of which the Company is
the "common parent" (within the meaning of Section 1504 of the Code) of such
group. The Company and its Subsidiaries have filed all Federal income tax
returns and all other material tax returns that are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company or any of its Subsidiaries. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Company, adequate. The Company has not given or been requested to give a
waiver of the statute of limitations relating to the payment of Federal,
states local and foreign taxes or other impositions.
SECTION 3.10. Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
SECTION 3.11. Public Utility Holding Company Act. Neither the Company nor
any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
SECTION 3.12. Material Agreements and Liens. (a) Part A of Schedule 3.12
hereto is a complete and correct list, as of the date hereof, of each credit
agreement, loan agreement, indenture, guarantee, letter of credit or other
arrangement providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or
guarantee by, the Company or any of its Subsidiaries the aggregate principal
or face amount of which equals or exceeds (or may equal or exceed) $5,000,000,
and the aggregate principal or face amount outstanding or that may become
outstanding under each such arrangement is correctly described in Part A of
such Schedule 3.12.
(b) Part B of Schedule 3.12 hereto is a complete and correct list, as of the
date hereof, of each Lien securing Indebtedness of any person the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$5,000,000 and covering any property of the Company or any of its
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured)
by each such Lien and the property covered by each such Lien is correctly
described in Part B of such Schedule 3.12.
SECTION 3.13. Environmental Matters. Each of the Company and its
Subsidiaries has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to
carry on its business as now being or as proposed to be conducted, except to
the extent failure to have any such permit, license or authorization would not
(either individually or in the aggregate) have a Material Adverse Effect.
Each of such permits, licenses and authorizations is in full force and effect
and each of the Company and its Subsidiaries is in compliance with the terms
and conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except to
the extent failure to comply therewith would not (either individually or in
the aggregate) have a Material Adverse Effect. There have been no
environmental investigations, studies, audits, tests, reviews or other
analyses conducted by or that are in the possession of the Company or any of
its subsidiaries in relation to any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries that have not
been made available to the Lenders.
SECTION 3.14. Subsidiaries, etc. Set forth in Schedule 3.14 hereto is a
complete and correct list, as of the date hereof, of all of the Subsidiaries
of the Company, together with, for each such Subsidiary, (i) the jurisdiction
of organization of such Subsidiary, (ii) each person holding ownership
interests in such Subsidiary and (iii) the nature of the ownership interests
held by each such person and the percentage of ownership of such Subsidiary
represented by such ownership interests.
SECTION 3.15. True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement or included herein or
delivered pursuant hereto, when taken as a whole, do not contain any untrue
statement of material fact or omit to state any material fact necessary to
make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished after
the date hereof by the Company and its Subsidiaries to the Administrative
Agent and the Lenders in connection with this Agreement and the transactions
contemplated hereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on the
date as of which such information is stated or certified. There is no fact
known to the Company that could have a Material Adverse Effect that has not
been disclosed herein or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby.
Part B. Representations and Warranties of the Approved Borrowers. Each
Approved Borrower represents and warrants to each of the Lenders that:
SECTION 3.16. Corporate Existence of Approved Borrower. It and each of its
Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents
and approvals necessary to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business and
is in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a Material Adverse Effect.
SECTION 3.17. No Breach. None of the execution and delivery of its
Designation Letter and this Agreement, the consummation of the transactions
therein and herein contemplated and compliance with the terms and provisions
thereof and hereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws or other organizational documents of
such Approved Borrower, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency,
or any agreement or instrument to which such Approved Borrower or any of its
Subsidiaries is a party or by which any of them or their assets or properties
is bound or to which any of them is subject, or constitute a default under any
such agreement or instrument.
SECTION 3.18. Action. Such Approved Borrower has all necessary corporate or
other power and authority to execute, deliver and perform its obligations
under its Designation Letter and this Agreement, to perform its obligations
hereunder and thereunder; the execution and delivery by such Approved Borrower
of its Designation Letter and the performance by such Approved Borrower hereof
and thereof have been duly authorized by all necessary corporate or other
action on its part (including, without limitation, any required shareholder
approvals); and its Designation Letter when executed and delivered by such
Approved Borrower, will constitute, the legal, valid and binding obligation of
such Approved Borrower, enforceable against such Approved Borrower in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
SECTION 3.19. Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental Authority are necessary for
the execution, delivery or performance by such Approved Borrower of its
Designation Letter or this Agreement or for the validity or enforceability
thereof.
SECTION 3.20. Taxes on Payments of Approved Borrowers. Except as disclosed
to the Lenders in writing prior to the delivery of such Approved Borrower's
Designation Letter, there is no income, stamp or other tax of any country, or
of any taxing authority thereof or therein, imposed by or in the nature of
withholding or otherwise, which is imposed on any payment to be made by such
Approved Borrower pursuant hereto, or is imposed on or by virtue of the
execution, delivery or enforcement of its Designation Letter or this
Agreement.
ARTICLE IV. CONDITIONS OF LENDING
The obligations of the Lenders to make Loans hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. All Borrowings. On the date of each Borrowing, including each
Borrowing in which Loans are refinanced with new Loans as contemplated by
Section 2.05:
(a) The Administrative Agent shall have received a notice of such Borrowing
as required by Section 2.03, Section 2.04 or Section 2.21(b), as applicable.
(b) The representations and warranties set forth in Article III hereof shall
be true and correct in all material respects on and as of the date of such
Borrowing with the same effect as though made on and as of such date, except
to the extent such representations and warranties expressly relate to an
earlier date; provided, however, that no representation as to either (i) the
absence of any Material Adverse Change in the financial condition of the
Company, as provided in the last two sentences of Section 3.02, or (ii) the
absence of any pending or threatened legal or arbitral proceedings, or any
proceedings by or before any Governmental Authority, that could have a
Material Adverse Effect on the Company, as provided in Section 3.03, shall be
required as a condition to any Borrowing following the earlier of (i) the
Initial Funding Date and (ii) the date of the first borrowing under the
Facility A Credit Agreement.
(c) Each Borrower shall be in compliance with all the terms and provisions
set forth herein and in each other Loan Document on its part to be observed or
performed, and at the time of and immediately after such Borrowing no Event of
Default or Default shall have occurred and be continuing.
Each Borrowing shall be deemed to constitute a representation and warranty by
the Borrowers on the date of such Borrowing as to the matters specified in
paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Borrowing. On the Initial Funding Date:
(a) The Administrative Agent shall have received a favorable written opinion
of Mudge Rose Guthrie Alexander & Ferdon, counsel for the Company, dated the
Initial Funding Date and addressed to the Lenders, to the effect set forth in
Exhibit D-1 hereto.
(b) All legal matters incident to this Agreement and the borrowings hereunder
shall be satisfactory to the Lenders and to Cravath, Swaine & Moore, counsel
for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate of incorporation including all amendments thereto, of the Company,
certified as of a recent date by the Secretary of State of the state of
Delaware, and a certificate as to the good standing of the Company as of a
recent date, from such Secretary of State; (ii) a certificate of the Secretary
or Assistant Secretary of the Company dated the Initial Funding Date and
certifying (A) that attached thereto is a true and complete copy of the by-
laws of the Company as in effect on the Initial Funding Date and at all times
since a date prior to the date of the resolutions described in clause (B)
below, (B) that attached thereto is a true and complete copy of resolutions
duly adopted by the Board of Directors of the Company authorizing the
execution, delivery and performance of the Loan Documents and the borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the certificate of
incorporation of the Company has not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished pursuant
to clause (i) above, and (D) as to the incumbency and specimen signature of
each officer executing any Loan Document or any other document delivered in
connection herewith on behalf of the Company; (iii) a certificate of another
officer as to the incumbency and specimen signature of the Secretary or
Assistant Secretary executing the certificate pursuant to (ii) above; and (iv)
such other documents as the Lenders or Cravath, Swaine & Moore, counsel for
the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate of the
Company, dated the Initial Funding Date and signed by a Financial Officer of
the Company, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01.
(e) The Administrative Agent shall have received a copy of a termination
letter or similar document duly executed and delivered by the Company,
terminating the commitments under the Predecessor Credit Agreement.
(f) The Administrative Agent shall have received all Fees and other amounts
due and payable on or prior to the Initial Funding Date.
SECTION 4.03. First Borrowing by Each Approved Borrower. On the first date
on which Loans are made to each Approved Borrower:
(a) The Administrative Agent shall have received a favorable written opinion
of the general counsel of the applicable Approved Borrower dated as of a
recent date and addressed to the Lenders, to the effect set forth in Exhibit
D-2 hereto, subject to necessary changes to reflect local law.
(b) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation (or such other analogous documents),
including all amendments thereto, of such Approved Borrower, certified as of a
recent date by the Secretary of State (or other appropriate Governmental
Authority) of the state (or country) of its organization or such other
evidence as is reasonably satisfactory to the Administrative Agent, and a
certificate as to the good standing (or other analogous certification to the
extent available) of such Approved Borrower as of a recent date, from such
Secretary of State (or other appropriate Governmental Authority) or such other
evidence reasonably acceptable to the Administrative Agent; (ii) a certificate
of the Secretary or Assistant Secretary of such Approved Borrower dated the
date on which such Loans are to be made and certifying (A) that attached
thereto is a true and complete copy of the by-laws (or such other analogous
documents to the extent available) of such Approved Borrower as in effect on
the date of such certificate and at all times since a date prior to the date
of the resolution of such Approved Borrower described in item (B) below, (B)
that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of such Approved Borrower authorizing the execution,
delivery and performance of the Designation Letter delivered by such Approved
Borrower and the borrowings hereunder by such Approved Borrower, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation (or other
analogous documents) of such Approved Borrower have not been amended since the
date of the last amendment thereto shown on the certificate of good standing
(or other analogous certification or such other evidence reasonably acceptable
to the Agent) furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer of such Approved Borrower
executing the Designation Letter delivered by such Approve of Borrower or any
other document delivered in connection herewith or therewith; (iii) a
certificate of another officer of such Approved Borrower as to the incumbency
and signature of the Secretary or such Assistant Secretary of such Approved
Borrower executing the certificate pursuant to (ii) above; and (iv) such other
documents as the Lenders or Cravath, Swaine & Moore, counsel for the Agent,
may reasonably request.
(c) The Administrative Agent shall have received (with sufficient copies for
each Lender) a Designation Letter, duly executed by such Approved Borrower and
the Company and acknowledged by the Administrative Agent.
(d) The Administrative Agent shall have received a certificate of each of the
Borrowers, dated such date and signed, in the case of the Company, by a
Financial Officer of the Company, and in the case of the Borrowers other than
the Company, a Responsible Officer of such Borrower, confirming compliance
with the conditions precedent set forth in paragraphs (b) and (c) of Section
4.01.
(e) The Administrative Agent shall have received all fees and other amounts
due and payable on or prior to such date.
Upon the satisfaction of the conditions precedent set forth in this Section
4.03, such Approved Borrower shall become a Borrower hereunder with the same
force and effect as if originally named as a Borrower hereunder. The rights
and obligations of each Borrower hereunder shall remain in full force and
effect notwithstanding the addition of any new Borrower as a party to this
Agreement.
ARTICLE V. AFFIRMATIVE COVENANTS
The Company covenants and agrees with each Lender and the Administrative Agent
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable under
any Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Company will, and will cause each of its Subsidiaries
to:
SECTION 5.01. Existence; Businesses and Properties. (a) Preserve and
maintain its corporate existence, rights (charter and statute) and material
franchises, except as otherwise permitted by Section 6.03; provided, however,
that the Company shall not be required to preserve any such right or franchise
if (i) the Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and (ii) the loss of
any such right or franchise is not disadvantageous in any material respect to
the Lenders.
(b) Comply in all material respects with all applicable laws (including
environmental laws), rules, regulations and orders (including, without
limitation, laws requiring payment of all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent contested in
good faith by appropriate proceedings) except where the failure to so comply
would not result in a Material Adverse Change.
(c) Maintain and preserve all of its properties which are used in the conduct
of its business in good working order and condition, ordinary wear and tear
excepted, to the extent that any failure to do so would result in a Material
Adverse Change and except for dispositions thereof permitted by Section 6.03.
SECTION 5.02. Insurance. Maintain insurance with financially sound and
reputable insurance companies (which insurance companies shall, in any event,
have an A.M. Best rating of "B+" or better), and with respect to property and
risks of a character usually maintained by corporations engaged in the same or
similar business similarly situated, against loss, damage and liability of the
kinds and in the amounts customarily maintained by such corporations.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such tax, assessment, charge, levy or claim so long as the validity or
amount thereof shall be contested in good faith by appropriate proceedings and
the Company shall have set aside on its books adequate reserves with respect
thereto.
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 90 days after the end of each fiscal year, its consolidated balance
sheets and related statements of income, changes in stockholders' equity and
cash flows, showing the financial condition of the Company and its
Subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of its Subsidiaries during such year, all
audited by Coopers & Lybrand or other independent public accountants of
recognized national standing acceptable to the Required Lenders and
accompanied by an opinion of such accountants (which shall not be qualified in
any material respect) to the effect that such consolidated financial
statements fairly present the financial condition and results of operations of
the Company on a consolidated basis in accordance with GAAP consistently
applied;
(b) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, its consolidated balance sheets and related statements of
income, changes in stockholders' equity and cash flows, showing the financial
condition of the Company and its Subsidiaries as of the close of such fiscal
quarter and the results of its operations and the operations of its
Subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year, all certified by one of its Financial Officers as fairly
presenting the financial condition and results of operations of the Company on
a consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements under (a) or (b)
above, a certificate of the accounting firm or Financial Officer opining on or
certifying such statements (which certificate, when furnished by an accounting
firm, may be limited to accounting matters and disclaim responsibility for
legal interpretations) (i) certifying that no Event of Default or Default has
occurred or, if such an Event of Default or Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed to
be taken with respect thereto and (ii) setting forth computations in
reasonable detail satisfactory to the Administrative Agent demonstrating
compliance with the covenants contained in Sections 6.06 and 6.07;
(d) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by it with the
Securities and Exchange Commission, or any Governmental Authority succeeding
to any of or all the functions of such Commission, or with any national
securities exchange, or distributed to its shareholders, as the case may be;
and
(e) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Company or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Administrative Agent or any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative
Agent and each Lender prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and extent thereof
and the corrective action (if any) proposed to be taken with respect thereto;
(b) the filing or commencement of, or any threat or notice of intention of any
person to file or commence, any action, suit or proceeding, whether at law or
in equity or by or before any Governmental Authority, against the Company or
any Affiliate thereof which, if adversely determined, could result in a
Material Adverse Change; and
(c) any other development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Change.
SECTION 5.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent and each Lender (i) as soon as possible, and in any event
within 30 days after any Responsible Officer of the Company or any ERISA
Affiliate either knows or has reason to know that any Reportable Event has
occurred that alone or together with any other Reportable Event could
reasonably be expected to result in liability of the Company to the PBGC in an
aggregate amount exceeding $5,000,000, a statement of a Financial Officer
setting forth details as to such Reportable Event and the action proposed to
be taken with respect thereto, together with a copy of the notice, if any, of
such Reportable Event given to the PBGC, (ii) promptly after receipt thereof,
a copy of any notice the Company or any ERISA Affiliate may receive from the
PBGC relating to the intention of the PBGC to terminate any Plan or Plans
(other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code) or to appoint a trustee to administer any Plan or Plans, and (iii)
within 10 days after the due date for filing with the PBGC pursuant to Section
412(n) of the Code of a notice of failure to make a required installment or
other payment with respect to a Plan, a statement of a Financial Officer
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together with a copy of such notice given to the PBGC.
SECTION 5.07. Maintaining Records. Maintain all financial records in
accordance with GAAP and permit any representatives designated by any Lender
to discuss the affairs, finances and condition of the Company or any
Subsidiary with the officers thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans only for the
purposes set forth in the preamble to this Agreement.
ARTICLE VI. NEGATIVE COVENANTS
The Company covenants and agrees with each Lender and the Administrative Agent
that, so long as this Agreement shall remain in effect or the principal of or
interest on any Loan, any Fees or any other expenses or amounts payable under
any Loan Document shall be unpaid, unless the Required Lenders shall otherwise
consent in writing, the Company will not, and will not cause or permit any of
its Subsidiaries to:
SECTION 6.01. Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired, except:
(a) Liens in existence on the date hereof and listed in Part B of Schedule
3.12 hereto;
(b) Liens imposed by any Governmental Authority for taxes, assessments or
charges not yet due or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or the affected Subsidiaries, as the
case may be, in accordance with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business that are not overdue for
a period of more than 30 days or that are being contested in good faith and by
appropriate proceedings and Liens securing judgments but only to the extent
for an amount and for a period not resulting in an Event of Default under
Article VII clause (i) hereof;
(d) pledges or deposits under worker's compensation, unemployment insurance
and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other than
for Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of property
or minor imperfections in title thereto that, in the aggregate, are not
material in amount, and that do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary conduct
of the business of the Company or any of its Subsidiaries;
(g) Liens on property of any corporation that becomes a Subsidiary of the
Company after the date of this Agreement; provided that such Liens are in
existence at the time such corporation becomes a Subsidiary of the Company and
were not created in anticipation thereof;
(h) Liens upon real and/or tangible personal property acquired after the date
hereof (by purchase, construction or otherwise) by the Company or any of its
Subsidiaries, each of which Liens either (A) existed on such property before
the time of its acquisition and was not created in anticipation thereof or (B)
was created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including the cost of
construction) of such property; provided that no such Lien shall extend to or
cover any property of the Company or such Subsidiary other than the property
so acquired and improvements thereon;
(i) additional Liens upon real and/or personal property created after the date
hereof; provided that the aggregate Indebtedness secured thereby and incurred
on and after the date hereof shall not exceed $5,000,000 in the aggregate at
any one time outstanding; and
(j) any extension, renewal or replacement of the foregoing; provided that the
Liens permitted hereunder shall not be spread to cover any additional
Indebtedness or property (other than a substitution of like property).
SECTION 6.02. Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned
or hereafter acquired, and thereafter rent or lease such property or other
property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (such an arrangement, a
"Sale and Lease-Back Transaction"), other than (i) Sale and Lease-Back
Transactions capitalized on the books of the Company in an aggregate
capitalized amount not in excess of $25,000,000 entered into in connection
with the financing of aircraft to be used in connection with the Company's
business and (ii) Sale and Lease-Back Transactions capitalized on the books of
the Company (other than a Sale and Lease-Back Transaction permitted by clause
(i) above) if the capitalized amount of all such Sale and Lease-Back
Transactions shall not exceed $5,000,000 in aggregate amount at any time
outstanding.
SECTION 6.03. Mergers, Sales of Assets, etc. (a) In the case of any
Borrower, consolidate with or merge into any other corporation or convey,
transfer or lease its properties and assets substantially as an entirety to
any person, unless:
(i)the corporation formed by such consolidation or into which such Borrower is
merged or the person which acquires by conveyance or transfer, or which
leases, the properties and assets of such Borrower substantially as an
entirety shall be a corporation organized and existing under the laws of the
United States of America or any state or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and delivered
to each other party hereto, in form satisfactory to the Administrative Agent,
the due and punctual payment of the principal of and interest on the Loans and
all other obligations of such Borrower under the Loan Documents and the
performance or observance of every covenant of this Agreement on the part of
such Borrower to be performed or observed;
(ii)immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing; and
(iii)the Company shall have delivered to the Administrative Agent an officers'
certificate and an opinion of counsel, each stating that such consolidation,
merger, conveyance, transfer or lease and such supplemental agreement comply
with this paragraph (a) and that all conditions precedent herein provided for
relating to such transaction have been complied with.
(b) Upon any consolidation by any Borrower with or merger by any Borrower
into any other corporation or any conveyance, transfer or lease of the
properties and assets of any Borrower substantially as an entirety in
accordance with paragraph (a) above, the successor corporation formed by such
consolidation or into which such Borrower is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the applicable Borrower under
the Loan Documents with the same effect as if such successor corporation had
been named as a Borrower herein, and thereafter, the predecessor corporation
shall be relieved of all obligations and covenants under the Loan Documents.
SECTION 6.04. Lines of Business; Fiscal Year. Engage or invest in operations
engaging to any substantial extent in any line or lines of business activity
other than the business of manufacturing, providing, distributing and selling
such diverse goods and industrial services, principally for industrial,
commercial, construction and defense applications, the same or similar to
those goods and services as are manufactured, provided, distributed and sold
by the Company on the date hereof. In the case of the Company, change its
fiscal year end from that in effect at December 31, 1993.
SECTION 6.05. Transactions with Affiliates. Sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except that as
long as no Default or Event of Default shall have occurred and be continuing,
the Company or any Subsidiary may engage in any of the foregoing transactions
in the ordinary course of business at prices and on terms and conditions not
less favorable to the Company or such Subsidiary than could be obtained on an
arm's-length basis from unrelated third parties.
SECTION 6.06. Net Worth. The Company will not permit its Net Worth at any
time during any period set forth below to be less than the required minimum
Net Worth set forth opposite such period:
<TABLE>
<CAPTION>
Period Required Minimum Net Worth
______ __________________________
<S><C> <C>
From the date hereof $435,000,000
through December 31, 1994
From January 1, 1995 and at $435,000,000 plus 50% of
all times thereafter Net Income for each of the
Company's previous fiscal
years commencing with 1994
</TABLE>
For purposes of determining Net Income to be added to the required minimum Net
Worth in Section 6.06 herein, negative Net Income shall be counted as zero.
SECTION 6.07. Total Debt to Total Capital Ratio. The Company will not permit
the ratio of Total Debt to Total Capital at any time during any period set
forth below to exceed the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
______ _____
<S><C> <C>
From the date hereof 0.55 to 1
through June 30, 1995
From July 1, 1995 and at 0.50 to 1
all times thereafter
</TABLE>
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of Default"):
(a) any representation or warranty made or deemed made in or in connection
with any Loan Document or the borrowings hereunder, or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with or
pursuant to any Loan Document, shall prove to have been false or misleading in
any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or by acceleration thereof or
otherwise;
(c) default shall be made in the payment of any interest on any Loan or any
Fee or any other amount (other than an amount referred to in (b) above) due
under any Loan Document, when and as the same shall become due and payable,
and such default shall continue unremedied for a period of five days;
(d) default shall be made in the due observance or performance by the
Borrowers or any Subsidiary of any covenant, condition or agreement contained
in Section 5.01(a) or 5.05 or in Article VI;
(e) default shall be made in the due observance or performance by the
Borrowers or any Subsidiary of any covenant, condition or agreement contained
in any Loan Document (other than those specified in (b), (c) or (d) above) and
such default shall continue unremedied for a period of 30 days after notice
thereof from the Administrative Agent or any Lender to the Company;
(f) (i) the Company or any Subsidiary shall (A) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess of (I) $15,000,0000, in the case of any single
obligation, or (II) $15,000,000, in the case of all obligations in the
aggregate, in each case, when and as the same shall become due and payable, or
(B) fail to observe or perform any other term, covenant, condition or
agreement contained in any agreement or instrument evidencing or governing any
Indebtedness in an aggregate principal amount in excess of $15,000,000 and
such failure shall continue beyond any applicable grace period; or (ii)
Indebtedness of the Company and its Subsidiaries, or any of them, in a
principal amount in excess of (A) $15,000,000, in the case of any single
obligation, or (B) $15,000,000, in the case of all obligations in the
aggregate, shall be declared due and payable or required to be prepaid prior
to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed in a court of competent jurisdiction seeking (i) relief in
respect of any Borrower or any Subsidiary, or of a substantial part of the
property or assets of any Borrower or a Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law (or
similar statute or law in any other jurisdiction), (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for any Borrower or any Subsidiary or for a substantial part of the property
or assets of any Borrower or a Subsidiary or (iii) the winding-up or
liquidation of any Borrower or any Subsidiary; and such proceeding or petition
shall continue undismissed for 30 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) any Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law (or similar statute
or law in any other jurisdiction), (ii) consent to the institution of, or fail
to contest in a timely and appropriate manner, any proceeding or the filing of
any petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Borrower or any Subsidiary or for a substantial part
of the property or assets of any Borrower or any Subsidiary, (iv) file an
answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for the
purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate amount in
excess of $10,000,000 (exclusive of amounts fully covered by insurance where
the insurer has admitted liability in respect of such judgment) or in excess
of $20,000,000 (regardless of insurance coverage) shall be rendered against
any Borrower, any Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 60 consecutive days during which 60 days
execution shall not be effectively stayed, or otherwise being appropriately
contested in good faith, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of any Borrower or any Subsidiary
to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to make a required
installment or other payment (within the meaning of Section 412(n)(l) of the
Code), shall have occurred with respect to any Plan or Plans that reasonably
could be expected to result in liability of any Borrower to the PBGC or to a
Plan in an aggregate amount exceeding $5,000,000 and, within 30 days after the
reporting of any such Reportable Event to the Administrative Agent or after
the receipt by the Administrative Agent of the statement required pursuant to
Section 5.06, the Administrative Agent shall have notified such Borrower in
writing that (i) the Required Lenders have made a determination that, on the
basis of such Reportable Event or Reportable Events or the failure to make a
required payment, there are reasonable grounds (A) for the termination of such
Plan or Plans by the PBGC, (B) for the appointment by the appropriate United
States District Court of a trustee to administer such Plan or Plans or (C) for
the imposition of a lien in favor of a Plan and (ii) as a result thereof an
Event of Default exists hereunder; or a trustee shall be appointed by a United
States District Court to administer any such Plan or Plans; or the PBGC shall
institute proceedings to terminate any Plan or Plans; or
(k) there shall have occurred a Change in Control; then, and in every such
event (other than an event with respect to a Borrower described in paragraph
(g) or (h) above), and at any time thereafter during the continuance of such
event, the Administrative Agent, with the consent of Required Lenders, may, or
at the request of the Required Lenders, shall, by notice to the Borrowers,
take either or both of the following actions, at the same or different times:
(i) terminate forthwith the Commitments and the Swingline Commitments and (ii)
declare the Loans then outstanding to be forthwith due and payable in whole or
in part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrowers accrued hereunder and under any
other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained herein or in any
other Loan Document to the contrary notwithstanding; and in any event with
respect to a Borrower described in paragraph (g) or (h) above, the Commitments
and the Swingline Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and any
unpaid accrued Fees and all other liabilities of the Borrowers accrued
hereunder and under any other Loan Document, shall automatically become due
and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by the Borrowers, anything
contained herein or in any other Loan Document to the contrary
notwithstanding.
ARTICLE VIII. THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement, Chemical
Bank is hereby appointed to act as Administrative Agent on behalf of the
Lenders. Each of the Lenders hereby irrevocably authorizes the Administrative
Agent to take such actions on behalf of such Lender or holder and to exercise
such powers as are specifically delegated to the Administrative Agent by the
terms and provisions hereof and of the other Loan Documents, together with
such actions and powers as are reasonably incidental thereto. The
Administrative Agent is hereby expressly authorized by the Lenders, without
hereby limiting any implied authority, (a) to receive on behalf of the Lenders
all payments of principal of and interest on the Loans and all other amounts
due to the Lenders hereunder, and promptly to distribute to each Lender its
proper share of each payment so received; (b) as provided in Article VII, to
give notice on behalf of each of the Lenders to the Borrowers of any Event of
Default specified in this Agreement of which the Administrative Agent has
actual knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and
other materials delivered by any Borrower pursuant to this Agreement as
received by the Administrative Agent.
Neither the Administrative Agent nor any of its directors, officers, employees
or agents shall be liable as such for any action taken or omitted by any of
them except for its or his own gross negligence or wilful misconduct, or be
responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by
the Borrowers of any of the terms, conditions, covenants or agreements
contained in any Loan Document. The Administrative Agent shall not be
responsible to the Lenders for the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement, or any other Loan Documents
or other instruments or agreements. The Administrative Agent shall in all
cases be fully protected in acting, or refraining from acting, in accordance
with written instructions signed by the Required Lenders and, except as
otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders. The
Administrative Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrowers on account
of the failure of or delay in performance or breach by any Lender of any of
its obligations hereunder or to any Lender on account of the failure of or
delay in performance or breach by any other Lender or the Borrowers of any of
their respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. The Administrative Agent may execute any
and all duties hereunder by or through agents or employees and shall be
entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken
or suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that the Administrative Agent shall be under no
duty to take any discretionary action permitted to be taken by it pursuant to
the provisions of this Agreement unless it shall be requested in writing to do
so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent may resign at any time by
notifying the Lenders and the Company. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor. If no successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent which shall be
a bank with an office in New York, New York, having a combined capital and
surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
bank, such successor shall 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 hereunder. After the Administrative Agent's resignation
hereunder, the provisions of this Article and Section 10.05 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Administrative Agent.
With respect to the Loans made by it hereunder, the Administrative Agent in
its individual capacity and not as Administrative Agent shall have the same
rights and powers as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the Administrative Agent and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrowers or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent.
Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in
the amount of its pro rata share (based on its Commitment hereunder) of any
expenses incurred for the benefit of the Lenders by the Administrative Agent,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been
reimbursed by the Borrowers and (ii) to indemnify and hold harmless the
Administrative Agent and any of its directors, officers, employees or agents,
on demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, 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 it in its
capacity as the Administrative Agent or any of them in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken
or omitted by it or any of them under this Agreement or any other Loan
Document, to the extent the same shall not have been reimbursed by the
Borrowers; provided that no Lender shall be liable to the Administrative Agent
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or wilful misconduct of the Administrative Agent or any of
its directors, officers, employees or agents. Each Lender agrees that any
reasonable allocation of expenses or other amounts referred to in this
paragraph between this Agreement and the Facility A Credit Agreement shall be
conclusive and binding for all purposes.
Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement or any other Loan Document,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX. GUARANTEE
SECTION 9.01. Guarantee. The Guarantor hereby guarantees to each Lender and
the Administrative Agent and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration,
by optional prepayment or otherwise) of the principal of and interest on the
Loans made by the Lenders to any Approved Borrower and all other amounts from
time to time owing to the Lenders or the Administrative Agent by any Approved
Borrower under this Agreement pursuant to its Designation Letter, strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). The Guarantor hereby further agrees
that if any Approved Borrower shall fail to pay in full when due (whether at
stated maturity, by acceleration, by optional prepayment or otherwise) any of
the Guaranteed Obligations, the Guarantor will promptly pay the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration
or otherwise) in accordance with the terms of such extension or renewal.
SECTION 9.02. Obligations Unconditional. The obligations of the Guarantor
under Section 9.01 hereof are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of the obligations
of any Approved Borrower under this Agreement or any other agreement or
instrument referred to herein or therein (including, without limitation, any
Designation Letter), or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 9.02 that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not affect the liability of the Guarantor
hereunder:
(i) at any time or from time to time, without notice to the Guarantor, the
time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of this Agreement or
any other agreement or instrument referred to herein or therein shall be done
or omitted; or
(iii) the maturity of any of the Guaranteed Obligations shall be accelerated,
or any of the Guaranteed Obligations shall be modified, supplemented or
amended in any respect, or any right under this Agreement or any other
agreement or instrument referred to herein or therein shall be waived or any
other guarantee of any of the Guaranteed Obligations or any security therefor
shall be released or exchanged in whole or in part or otherwise dealt with.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or
proceed against any Approved Borrower under this Agreement or any other
agreement or instrument referred to herein or therein, or against any other
person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
SECTION 9.03. Reinstatement. The obligations of the Guarantor under this
Article IX shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Approved Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise and the Guarantor
agrees that it will indemnify the Administrative Agent and each Lender on
demand for all reasonable costs and expenses (including, without limitation,
fees of counsel) incurred by the Administrative Agent or such Lender in
connection with such rescission or restoration.
SECTION 9.04. Subrogation. The Guarantor hereby irrevocably waives all
rights of subrogation or contribution, whether arising by operation of law
(including, without limitation, any such right arising under Title 11 of the
United States Code) or otherwise, by reason of any payment by it pursuant to
the provisions of this Article IX and further agrees that for the benefit of
each of its creditors (including, without limitation, each Lender and the
Administrative Agent) that any such payment by it of the Guaranteed
Obligations of any Approved Borrower shall constitute a contribution of
capital by the Guarantor to such Approved Borrower.
SECTION 9.05. Remedies. The Guarantor agrees that, as between the Guarantor
and the Lenders, the obligations of any Approved Borrower under this Agreement
may be declared to be forthwith due and payable as provided in Article VII
hereof (and shall be deemed to have become automatically due and payable in
the circumstances provided in said Article VII) for purposes of Section 9.01
hereof notwithstanding any stay, injunction or other prohibition preventing
such declaration (or such obligations from becoming automatically due and
payable) as against any Approved Borrower and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by such
Approved Borrower) shall forthwith become due and payable by the Guarantor for
purposes of such Section 9.01.
SECTION 9.06. Continuing Guarantee. The guarantee in this Article IX is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
ARTICLE X. MISCELLANEOUS
SECTION 10.01. Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:
(a) if to the Company, to it at P.O. Box 8888, Camp Hill, Pennsylvania 17001-
8888, Attention of Barry M. Sullivan (Telecopy No. 717-763-6402);
(b) if to an Approved Borrower, to it at its address as set forth in its
Designation Letter;
(c) if to the Administrative Agent, to Chemical Bank Agency Services
Corporation, Grand Central Tower, 140 East 45th Street, New York, New York
10017, Attention of Sandra J. Miklave (Telecopy No. 212-622-0002), with copies
to Chemical Bank, 270 Park Avenue, New York, New York 10017, Attention of Ann
Kerns (Telecopy No. 212-270-2112); and
(d) if to a Lender, to it at its address (or telecopy number) set forth in
Schedule 2.01 or in the Assignment and Acceptance pursuant to which such
Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on
the date of receipt if delivered by hand or overnight courier service or sent
by telecopy, or on the date five Business Days after dispatch by certified or
registered mail, in each case delivered, sent or mailed (properly addressed)
to such party as provided in this Section 10.01 or in accordance with the
latest unrevoked direction from such party given in accordance with this
Section 10.01.
SECTION 10.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the making by the
Lenders of the Loans, regardless of any investigation made by the Lenders or
on their behalf, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid and so long as the Commitments and the Swingline Commitments have
not been terminated.
SECTION 10.03. Binding Effect. This Agreement shall become effective when it
shall have been executed by the Company and the Administrative Agent and when
the Administrative Agent shall have received copies hereof which, when taken
together, bear the signatures of each Lender, and thereafter shall be binding
upon and inure to the benefit of the Borrowers, the Administrative Agent and
each Lender and their respective successors and assigns, except that the
Borrowers shall not have the right to assign rights hereunder or any interest
herein without the prior consent of all the Lenders.
SECTION 10.04. Successors and Assigns. (a) Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party; and all covenants, promises and
agreements by or on behalf of the Borrowers, the Administrative Agent or the
Lenders that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of its
interests, rights and obligations under this Agreement (including all or a
portion of its Commitment, Swingline Commitment, participations in outstanding
Swingline Loans and the Loans at the time owing to it); provided, however,
that (i) except in the case of an assignment to a Lender or an Affiliate of
such Lender, the Company and the Administrative Agent must give their prior
written consent to such assignment (which consent shall not be unreasonably
withheld), (ii) each such assignment shall be of a constant, and not a
varying, percentage of all the assigning Lender's rights and obligations under
this Agreement, (iii) the amount of the Commitment of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $10,000,000 (or, if smaller, such Lender's
remaining Commitment) and the amount of the Commitment of such Lender
remaining after such assignment shall not be less than $10,000,000 or shall be
zero, (iv) the parties to each such assignment shall execute and deliver to
the Administrative Agent an Assignment and Acceptance, and a processing and
recordation fee of $4,000 and (v) the assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.
Upon acceptance and recording pursuant to paragraph (e) of this Section 10.04,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the execution
thereof, (A) the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and (B) the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, 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 Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto (but shall
continue to be entitled to the benefits of Sections 2.13, 2.15, 2.19 and
10.05, as well as to any Fees accrued for its account hereunder and not yet
paid)). Notwithstanding the foregoing, any Lender assigning its rights and
obligations under this Agreement may retain any Competitive Loans made by it
outstanding at such time, and in such case shall retain its rights hereunder
in respect of any Loans so retained until such Loans have been repaid in full
in accordance with this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to
and agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that
its Commitment and Swingline Commitment, if any, and the outstanding balances
of its Standby Loans, Competitive Loans and Swingline Loans, if any, in each
case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender 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, any other Loan Document or any other instrument or
document furnished pursuant hereto or the financial condition of the Company
or any Subsidiary or the performance or observance by any Borrower of any of
its obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such assignee confirms that it has received a
copy of this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 5.04 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; (v) such assignee will
independently and without reliance upon the Administrative Agent, such
assigning Lender or any other Lender 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; (vi)
such assignee appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent by the terms hereof, together
with such powers as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender.
(d) The Administrative Agent shall maintain at one of its offices in The City
of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and
the Commitment of, and principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries
in the Register shall be conclusive in the absence of manifest error and the
Borrower, the Administrative Agent and the Lenders may treat each person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Company and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Company and the
Administrative Agent to such assignment, the Administrative Agent shall (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Lenders.
(f) Each Lender may without the consent of the Company or the Administrative
Agent sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided, however, that
(i) such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations, (iii) the participating banks or
other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.13, 2.15 and 2.19 to the same extent as if
they were Lenders and (iv) the Borrowers, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrowers relating to the Loans and to approve any amendment, modification or
waiver of any provision of this Agreement (other than amendments,
modifications or waivers decreasing any fees payable hereunder or the amount
of principal of or the rate at which interest is payable on the Loans,
extending any scheduled principal payment date or date fixed for the payment
of interest on the Loans or changing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
10.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrowers furnished to such Lender
by or on behalf of the Borrowers; provided that, prior to any such disclosure
of information designated by the Company as confidential, each such assignee
or participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information.
It is understood that confidential information relating to the Borrowers would
not ordinarily be provided in connection with assignments or participations of
Competitive Loans.
(h) Any Lender may at any time assign all or any portion of its rights under
this Agreement to a Federal Reserve Bank; provided that no such assignment
shall release a Lender from any of its obligations hereunder. In order to
facilitate such an assignment to a Federal Reserve Bank, the applicable
Borrower shall, at the request of the assigning Lender, duly execute and
deliver to the assigning Lender a promissory note or notes evidencing the
Loans made to such Borrower by the assigning Lender hereunder.
(i) The Borrowers shall not assign or delegate any of their rights or duties
hereunder, except as permitted by Section 6.03.
SECTION 10.05. Expenses; Indemnity. (a) Each Borrower agrees to pay all
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby contemplated shall
be consummated) or incurred by the Administrative Agent or any Lender in
connection with the enforcement or protection of their rights in connection
with this Agreement and the other Loan Documents or in connection with the
Loans made hereunder, including the reasonable fees, charges and disbursements
of Cravath, Swaine & Moore, counsel for the Administrative Agent, and, in
connection with any such amendment, modification or waiver or any such
enforcement or protection, the reasonable fees, charges and disbursements of
any other counsel for the Administrative Agent or any Lender. Each Borrower
further agrees that it shall indemnify the Lenders from and hold them harmless
against any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Agreement or any of
the other Loan Documents.
(b) Each Borrower agrees to indemnify the Administrative Agent, each Lender
and each of their respective directors, officers, employees and agents (each
such person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of, in any way
connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the transactions
contemplated thereby, (ii) the actual or proposed use of the proceeds of the
Loans or (iii) any claim, litigation, investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of
such Indemnitee.
(c) The provisions of this Section 10.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement,
the consummation of the transactions contemplated hereby, the repayment of any
of the Loans, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Administrative Agent or any Lender. All amounts due under this
Section 10.05 shall be payable on written demand therefor.
SECTION 10.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby 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 Lender to or for
the credit or the account of any Borrower against any of and all the
obligations of such Borrower now or hereafter existing under this Agreement
and other Loan Documents held by such Lender, irrespective of whether or not
such Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 10.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
SECTION 10.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent or any Lender in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof
or the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies which
they would otherwise have. No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by any Borrower therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No notice or
demand on any Borrower in any case shall entitle such Borrower to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Company and the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount of, or extend the maturity
of or any scheduled principal payment date or date for the payment of any
interest on any Loan, or waive or excuse any such payment or any part thereof,
or decrease the rate of interest on any Loan, without the prior written
consent of each Lender affected thereby, (ii) change or extend the Commitment
or the Swingline Commitment or decrease the Utilization Fees or Facility Fees
of any Lender without the prior written consent of such Lender, or (iii) amend
or modify the provisions of Section 2.16, the provisions of Article IX, the
provisions of this Section or the definition of "Required Lenders", without
the prior written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder without the prior written consent of the
Administrative Agent.
SECTION 10.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the applicable interest rate, together with all
fees and charges which are treated as interest under applicable law
(collectively the "Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for, charged,
received, taken or reserved by any Lender, shall exceed the maximum lawful
rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by such Lender in accordance with applicable law, the
rate of interest payable on the Loan of such Lender, together with all Charges
payable to such Lender, shall be limited to the Maximum Rate.
SECTION 10.10. Entire Agreement. This Agreement and the other Loan Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 10.11. Waiver of Jury Trial. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any litigation directly or indirectly arising out of,
under or in connection with this Agreement or any of the other Loan Documents.
Each party hereto (a) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that such other party
would not, in the event of litigation, seek to enforce the foregoing waiver
and (b) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement and the other Loan Documents, as applicable, by,
among other things, the mutual waivers and certifications in this Section
10.11.
SECTION 10.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close
as possible to that of the invalid, illegal or unenforceable provisions.
SECTION 10.13. Judgment Currency. (a) The Borrowers' obligations hereunder
and under the other Loan Documents to make payments in Dollars or in any
Alternative Currency (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency, except to the
extent that such tender or recovery results in the effective receipt by the
Administrative Agent or a Lender of the full amount of the Obligation Currency
expressed to be payable to the Administrative Agent or such Lender under this
Agreement or the other Loan Documents. If, for the purpose of obtaining or
enforcing judgment against any Borrower or in any court or in any
jurisdiction, it becomes necessary to convert into or from any currency other
than the Obligation Currency (such other currency being hereinafter referred
to as the "Judgment Currency") an amount due in the Obligation Currency, the
conversion shall be made at the Alternative Currency Equivalent or Dollar
Equivalent, in the case of any Alternative Currency or Dollars, and, in the
case of other currencies, the rate of exchange (as quoted by the
Administrative Agent or if the Administrative Agent does not quote a rate of
exchange on such currency, by a known dealer in such currency designated by
the Administrative Agent) determined, in each case, as of the date immediately
preceding the day on which the judgment is given (such Business Day being
hereinafter referred to as the "Judgment Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing between the
Judgment Currency Conversion Date and the date of actual payment of the amount
due, the Borrower covenants and agrees to pay, or cause to be paid, as a
separate obligation and notwithstanding any judgment, such additional amounts,
if any (but in any event not a lesser amount), as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of
Judgment Currency stipulated in the judgment or judicial award at the rate of
exchange prevailing on the Judgment Currency Conversion Date.
(c) For purposes of determining the Alternative Currency Equivalent or Dollar
Equivalent or rate of exchange for this Section, such amounts shall include
any premium and costs payable in connection with the purchase of the
Obligation Currency.
SECTION 10.14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective
as provided in Section 10.03.
SECTION 10.15. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 10.16. Jurisdiction; Consent to Service of Process. (a) Each
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New York
State 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 Lender may otherwise have to bring any action
or proceeding relating to this Agreement or the other Loan Documents against
any Borrower or its properties in the courts of any jurisdiction.
(b) Each Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which 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 other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in
any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
IN WITNESS WHEREOF, the Company, the Administrative Agent and the Lenders have
caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
HARSCO CORPORATION,
by
__________________________
Name:
Title:
by
__________________________
Name:
Title:
COMMERCIAL PAPER DEALER AGREEMENT
Agreement dated October 11, 1994 between Harsco Corporation ("Issuer") and
J.P. Morgan Securities Inc. ("JPMS") in connection with the placement of the
Commercial Paper Notes referred to in this Agreement and issued pursuant to an
Issuing and Paying Agency Agreement dated October 11, 1994 between the Issuer
and Morgan Guaranty Trust Company of New York (the "Issuing and Paying Agent")
(the "Issuing and Paying Agency Agreement").
1. Appointment of JPMS. The Issuer hereby requests JPMS to act, on the
terms and conditions specified herein, as the Issuer's dealer for the offer
and sale from time to time of short-term promissory notes (the "Commercial
Paper Notes") to be issued by the Issuer in reliance upon the exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act") provided by Section 4(2) thereof. The Issuer is not obligated to sell
and JPMS is not obligated to purchase the Commercial Paper Notes.
2. Sale of Notes. The Commercial Paper Notes will be issued by the Issuer
either (a) as book-entry obligations represented by one or more master notes
and recorded in the electronic book-entry system maintained by The Depository
Trust Company or any clearing corporation (each a "Clearing Corporation")
within the meaning of Section 8-102(3) of the Uniform Commercial Code in
accordance with the terms of the letter of representations among the Issuer,
the Issuing and Paying Agent and the Clearing Corporation (the "Clearing
Corporation Letter of Representations") a copy of which is attached hereto as
Exhibit I, or (b) as physical certificated notes delivered to the purchaser
thereof or a person designated by such purchaser.
The responsibilities of JPMS hereunder will include (i) the soliciting of
purchases of Commercial Paper Notes by investors and (ii) assisting the Issuer
and the Issuing and Paying Agent in effecting and processing such purchases.
Sales of Commercial Paper Notes arranged by JPMS shall be negotiated
verbally between JPMS and an authorized representative of the Issuer, as shall
be designated by the Issuer from time to time. Such negotiations shall
determine the principal amount of Commercial Paper Notes to be sold, the
interest rates applicable thereto, and the maturities thereof.
If the Issuer and JPMS shall agree on the sale of any Commercial Paper Notes
through JPMS (including, but not limited to, agreement with respect to the
price, principal amount, maturity and interest rate of such Commercial Paper
Notes), then (i) JPMS shall deliver to the Issuer, in accordance with its
ordinary practice, confirmation of the agreed upon terms of such sale and (ii)
cause the delivery of instructions to the Issuing and Paying Agent to
complete, authenticate and deliver the Commercial Paper Notes in the manner
described in the Issuing and Paying Agency Agreement. The amount of interest
payable on the Commercial Paper Notes shall be calculated as provided in the
Issuing and Paying Agency Agreement.
The Issuer and JPMS agree that neither of them nor any person acting on
their behalf will offer or sell, or solicit offers to buy, the Commercial
Paper Notes by any form of general solicitation or general advertising. The
Issuer confirms that neither it nor any person other than JPMS or Lehman
Brothers Inc. acting on its behalf has offered or sold any Commercial Paper
Notes or any substantially similar security of the Issuer to, or solicited
offers to buy any Commercial Paper Notes or substantially similar security of
the Issuer from, any person. Each offeree of the Commercial Paper Notes will
be a sophisticated investor whom JPMS reasonably believes to possess such
knowledge and experience (or to be represented by a fiduciary or agent having
such knowledge and experience) in financial and business matters that it is
capable of evaluating the merits and risks of investing in the Commercial
Paper Notes and will be either (a) an "accredited investor" within the meaning
of Regulation D under the Securities Act or (b) a qualified institutional
buyer ("QIB") as defined in Rule 144A under the Securities Act. Resales of
the Commercial Paper Notes will be made in transactions exempt from
registration under the Securities Act and only (i) to JPMS or another dealer
appointed by the Issuer or through JPMS or another dealer appointed by the
Issuer to an accredited investor or to a QIB or (ii) to a QIB in a transaction
made in accordance with Rule 144A.
At any time the Issuer is not subject to Section 13 or 15(d) of the
Securities and Exchange Act of 1934, as amended, the Issuer agrees to furnish
at its own expense, upon request, to holders and prospective purchasers of the
Commercial Paper Notes information satisfying the requirement of subsection
(d)(4)(i) of Rule 144A.
The Commercial Paper Notes will be sold in minimum denominations of
$250,000, will mature not more than 270 days from the date of issuance, will
have no extension, renewal or automatic roll-over provisions, and will be
rated as "prime" quality commercial paper by two nationally recognized
statistical rating organizations.
The Issuer will not (i) take or permit to be taken (to the extent within its
control) any action that would result in the issuance and sale of the
Commercial Paper Notes being subject to the registration requirements of the
Securities Act or the securities or Blue Sky laws of any jurisdiction, or (ii)
offer, offer for sale, offer to sell or sell any securities of the Issuer
other than the Commercial Paper Notes offered or sold hereunder under
circumstances which would require the registration of any such Commercial
Paper Notes under the Securities Act.
3. Representations and Warranties. The Issuer represents and warrants to
JPMS that: the Issuer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite power and authority to execute and deliver the Commercial Paper
Notes and to execute, deliver and perform this Agreement, the Clearing
Corporation Letter of Representations and the Issuing and Paying Agency
Agreement, a copy of which is attached as Exhibit II; this Agreement, the
Issuing and Paying Agency Agreement and the Clearing Corporation Letter of
Representations have been duly authorized, executed and delivered by the
Issuer and are valid and binding agreements of the Issuer enforceable in
accordance with their respective terms; the Commercial Paper Notes have been
duly authorized and, when issued and delivered, will be duly and validly
issued and delivered and will constitute valid and binding obligations of the
Issuer enforceable in accordance with their terms; the execution and delivery
of the Commercial Paper Notes and the execution, delivery, performance of this
Agreement, the Issuing and Paying Agency Agreement and the Clearing
Corporation Letter of Representations will not violate any law, rule,
regulation, order, judgment or decree applicable to the Issuer or conflict
with or result in a breach of or constitute a default under any agreement or
instrument to which the Issuer is a party or by which it or any of its
property is bound or its certificate of incorporation or by-laws; no
governmental, administrative or official consent, approval, authorization,
notice or filing is required for the execution and delivery of the Commercial
Paper Notes or the execution, delivery and performance by the Issuer of this
Agreement, the Issuing and Paying Agency Agreement and the Clearing
Corporation Letter of Representations; the offer and sale of the Commercial
Paper Notes are exempt from registration under Section 4(2) of the Securities
Act; the Commercial Paper Notes will rank at least pari passu with all other
unsecured and unsubordinated indebtedness of the Issuer; and the Issuer is not
an "investment company" or a company "controlled by" an investment company for
purposes of the Investment Company Act of 1940, as amended.
4. Covenants. The Issuer agrees with JPMS that:
(a) Prior to the issuance of Commercial Paper Notes, the Issuer will
furnish to JPMS opinions of counsel (i) to the effect that the Commercial
Paper Notes are not required to be registered under the Securities Act in
connection with the offer and sale of the Notes, (ii) as to each of the other
matters set forth in Section 3 hereof, and (iii) as to such other matters as
JPMS may reasonably request;
(b) Each issuance of Commercial Paper Notes by the Issuer shall be
deemed a representation and warranty by the Issuer to JPMS, as of the date
thereof, that the representations and warranties of the Issuer set forth in
Section 3 hereof are true and correct as if made on and as of such date;
(c) The Issuer shall furnish to JPMS such information about its
operations and financial condition as JPMS may reasonably request regarding
the due authorization and execution of the Commercial Paper Notes and the
Issuer's ability to pay the Commercial Paper Notes as they mature; and
(d) JPMS shall inform the Issuer of all action required to be taken by
the Issuer in order to comply with any applicable state securities or "Blue
Sky" laws in connection with any offer or sale of the Commercial Paper Notes,
and the Issuer shall, unless it declines to proceed with such offer and sale,
take all such required action.
5. Placement Memorandum.
(a) JPMS will prepare and distribute to each purchaser of Commercial
Paper Notes prior to completion of sale a placement memorandum ("Memorandum")
containing financial information about the Issuer. Such Memorandum will be
updated periodically to reflect material changes in the Issuer's business or
financial condition as to which the Issuer shall have advised JPMS. Each
annual Memorandum will include the following "private placement" legend, which
will also appear on the Commercial Paper Notes:
"THIS COMMERCIAL PAPER NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). BY ITS ACCEPTANCE OF THIS NOTE THE PURCHASER
REPRESENTS THAT IT IS AN ACCREDITED INVESTOR AS DEFINED IN REGULATION D UNDER
THE ACT (AND, IF IT IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A
UNDER THE ACT, THEN IT IS AWARE THAT THE SELLER (OTHER THAN THE ISSUER) MAY
RELY ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY
RULE 144A) AND AGREES THAT THIS COMMERCIAL PAPER NOTE IS NOT BEING ACQUIRED
WITH A VIEW TO PUBLIC DISTRIBUTION AND THAT ANY RESALE OF THIS COMMERCIAL
PAPER NOTE WILL BE MADE ONLY (1) TO OR THROUGH J.P. MORGAN SECURITIES INC. OR
LEHMAN BROTHERS INC. TO AN ACCREDITED INVESTOR OR A QUALIFIED INSTITUTIONAL
BUYER IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT OR (2) TO A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION EXEMPT UNDER RULE 144A."
(b) The Issuer agrees to furnish JPMS with sufficient information to
enable JPMS to prepare the original Memorandum and updates thereof, including
(i) as soon as practicable after the end of each of the first three quarters
in the Issuer's fiscal year, the financial statements of the Issuer as of the
end of such fiscal quarter, (ii) as soon as practicable after the end of each
fiscal year of the Issuer, the annual audited financial statements of the
Issuer and (iii) as soon as practicable, any information concerning the
financial condition or results of operations of the Issuer that has been
generally communicated to the public or that makes any statement in the
Memorandum materially false or misleading or by its omission would cause the
Memorandum to be materially false or misleading. The Issuer agrees that all
financial statements delivered to JPMS hereunder will fairly present the
financial condition of the Issuer as of the date set forth therein and the
results of operations for the periods set forth therein, all in conformity
with generally accepted accounting principles.
(c) Before distribution of the Memorandum, or any update thereof, JPMS
will provide a copy thereof to the Issuer, and will not distribute the same
without the Issuer's prior written approval. Such approval shall be deemed to
be a representation and warranty by the Issuer that the Memorandum, or any
update thereof being distributed, does not contain any untrue statement of a
material fact or an omission of a material fact necessary to make any
statement contained therein, in light of the circumstances in which such
statement was made, not misleading.
6. Indemnification.
(a) The Issuer assumes liability for, and will indemnify and hold JPMS
harmless from and against, any liabilities, claims, damages, costs and
expenses (including legal fees and expenses) ("Liabilities") arising out of or
in connection with the issue and sale of the Commercial Paper Notes, including
without limitation, Liabilities arising out of or related to an actual or
alleged untrue statement of a material fact contained in the Memorandum or
otherwise made in connection with the issuance and sale of the Commercial
Paper Notes or an actual or alleged omission of a material fact necessary in
order to make any statement contained in the Memorandum or otherwise made in
connection with the issuance and sale of the Commercial Paper Notes, in light
of the circumstances in which such statement was made, not misleading;
provided, however, that the foregoing indemnity shall not extend to any
Liabilities to the extent they arise from (i) an untrue statement by JPMS of a
material fact relating to JPMS's sale of the Commercial Paper Notes; or an
omission by JPMS of a material fact relating to JPMS's sale of the Commercial
Paper Notes necessary in order to make any statement, in light of the
circumstances in which such statement was made, not misleading or (ii) the
gross negligence or willful misconduct of JPMS in the performance or failure
to perform its obligations hereunder. This indemnity shall survive
termination of the Agreement.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in subparagraph (a) of
this Section 6 is for any reason (other than those set forth in the proviso
clause of subparagraph (a) of this Section 6) held to be unavailable to JPMS,
the Issuer and JPMS shall contribute to the aggregate Liabilities to which the
Issuer and JPMS may be subject, in such proportion that JPMS shall be
responsible for that percentage of such Liabilities equal to the percentage
that any fees and commissions payable to JPMS bears to the aggregate of the
Commercial Paper Notes sold hereunder and the balance of such Liabilities
shall be the responsibility of the Issuer; provided that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7. Notices, Addresses. All communications and notices shall be in writing
or confirmed in writing and shall be effective when received at the address
specified below:
(i) if to JPMS, to it at 60 Wall Street, New York, New York 10260-0060,
Attention: Commercial Paper Origination; Telephone: 212-648-0750; Telecopy
212-648-5913, or at such other address as may from time to time be designated
by notice to the Issuer in writing; and
(ii) if to the Issuer, to it at P.O. Box 8888, Camp Hill, Pennsylvania
17001-8888; Attention: Barry M. Sullivan, Vice President and Treasurer;
Telephone: 717-975-3880; Telecopy: 717-763-6424, or at such other address as
may from time to time be designated by notice to JPMS in writing.
8. Assignment. JPMS may assign its rights and obligations under this
Agreement to any wholly-owned subsidiary of J.P. Morgan & Co. Incorporated.
9. Termination. This Agreement may be terminated at any time by the Issuer
or by JPMS by written notice to the other parties, except that this Agreement
shall, notwithstanding such notice, remain applicable to any Commercial Paper
Notes outstanding at the time of such notice.
10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by officers duly authorized thereunto, all as of the
day and year first above written.
J.P. MORGAN SECURITIES INC.
By: /s/ J. Hunter Brown
Name: J. Hunter Brown
Title: Vice President
HARSCO CORPORATION
By: /s/ Leonard A. Campanaro
Name: Leonard A. Campanaro
Title: Senior Vice President - Finance
and Chief Financial Officer
By: /s/ Barry M. Sullivan
Name: Barry M. Sullivan
Title: Vice President and Treasurer
COMMERCIAL PAPER DEALER AGREEMENT
Agreement dated October 11, 1994 between Harsco Corporation ("Issuer") and
Lehman Brothers Inc. ("Lehman") in connection with the placement of the
Commercial Paper Notes referred to in this Agreement and issued pursuant to an
Issuing and Paying Agency Agreement dated October 11, 1994 between the Issuer
and Morgan Guaranty Trust Company of New York (the "Issuing and Paying Agent")
(the "Issuing and Paying Agency Agreement").
1.Appointment of Lehman. The Issuer hereby requests Lehman to act, on the
terms and conditions specified herein, as the Issuer's dealer for the offer
and sale from time to time of short-term promissory notes (the "Commercial
Paper Notes") to be issued by the Issuer in reliance upon the exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act") provided by Section 4(2) thereof. The Issuer is not obligated to sell
and Lehman is not obligated to purchase the Commercial Paper Notes.
2.Sale of Notes. The Commercial Paper Notes will be issued by the Issuer
either (a) as book-entry obligations represented by one or more master notes
and recorded in the electronic book-entry system maintained by The Depository
Trust Company or any clearing corporation (each a "Clearing Corporation")
within the meaning of Section 8-102(3) of the Uniform Commercial Code in
accordance with the terms of the letter of representations among the Issuer,
the Issuing and Paying Agent and the Clearing Corporation (the "Clearing
Corporation Letter of Representations") a copy of which is attached hereto as
Exhibit I, or (b) as physical certificated notes delivered to the purchaser
thereof or a person designated by such purchaser.
The responsibilities of Lehman hereunder will include (i) the soliciting of
purchases of Commercial Paper Notes by investors and (ii) assisting the Issuer
and the Issuing and Paying Agent in effecting and processing such purchases.
Sales of Commercial Paper Notes arranged by Lehman shall be negotiated
verbally between Lehman and an authorized representative of the Issuer, as
shall be designated by the Issuer from time to time. Such negotiations shall
determine the principal amount of Commercial Paper Notes to be sold, the
interest rates applicable thereto, and the maturities thereof.
If the Issuer and Lehman shall agree on the sale of any Commercial Paper Notes
through Lehman (including, but not limited to, agreement with respect to the
price, principal amount, maturity and interest rate of such Commercial Paper
Notes), then (i) Lehman shall deliver to the Issuer, in accordance with its
ordinary practice, confirmation of the agreed upon terms of such sale and (ii)
cause the delivery of instructions to the Issuing and Paying Agent to
complete, authenticate and deliver the Commercial Paper Notes in the manner
described in the Issuing and Paying Agency Agreement. The amount of interest
payable on the Commercial Paper Notes shall be calculated as provided in the
Issuing and Paying Agency Agreement.
The Issuer and Lehman agree that neither of them nor any person acting on
their behalf will offer or sell, or solicit offers to buy, the Commercial
Paper Notes by any form of general solicitation or general advertising. The
Issuer confirms that neither it nor any person other than Lehman or J.P.
Morgan Securities, Inc. acting on its behalf has offered or sold any
Commercial Paper Notes or any substantially similar security of the Issuer to,
or solicited offers to buy any Commercial Paper Notes or substantially similar
security of the Issuer from, any person. Each offeree of the Commercial Paper
Notes will be a sophisticated investor whom Lehman reasonably believes to
possess such knowledge and experience (or to be represented by a fiduciary or
agent having such knowledge and experience) in financial and business matters
that it is capable of evaluating the merits and risks of investing in the
Commercial Paper Notes and will be either (a) an "accredited investor" within
the meaning of Regulation D under the Securities Act or (b) a qualified
institutional buyer ("QIB") as defined in Rule 144A under the Securities Act.
Resales of the Commercial Paper Notes will be made in transactions exempt from
registration under the Securities Act and only (i) to Lehman or another dealer
appointed by the Issuer or through Lehman or another dealer appointed by the
Issuer to an accredited investor or to a QIB or (ii) to a QIB in a transaction
made in accordance with Rule 144A.
At any time the Issuer is not subject to Section 13 or 15(d) of the Securities
and Exchange Act of 1934, as amended, the Issuer agrees to furnish at its own
expense, upon request, to holders and prospective purchasers of the Commercial
Paper Notes information satisfying the requirement of subsection (d)(4)(i) of
Rule 1 44A.
The Commercial Paper Notes will be sold in minimum denominations of $250,000,
will mature not more than 270 days from the date of issuance, will have no
extension, renewal or automatic roll-over provisions, and will be rated as
"prime" quality commercial paper by two nationally recognized statistical
rating organizations.
The Issuer will not (i) take or permit to be taken (to the extent within its
control) any action that would result in the issuance and sale of the
Commercial Paper Notes being subject to the registration requirements of the
Securities Act or the securities or Blue Sky laws of any jurisdiction, or (ii)
offer, offer for sale, offer to sell or sell any securities of the Issuer
other than the Commercial Paper Notes offered or sold hereunder under
circumstances which would require the registration of any such Commercial
Paper Notes under the Securities Act.
3.Representations and Warranties. The Issuer represents and warrants to
Lehman that: the Issuer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite power and authority to execute and deliver the Commercial Paper
Notes and to execute, deliver and perform this Agreement, the Clearing
Corporation Letter of Representations and the Issuing and Paying Agency
Agreement, a copy of which is attached as Exhibit II; this Agreement, the
Issuing and Paying Agency Agreement and the Clearing Corporation Letter of
Representations have been duly authorized, executed and delivered by the
Issuer and are valid and binding agreements of the Issuer enforceable in
accordance with their respective terms; the Commercial Paper Notes have been
duly authorized and, when issued and delivered, will be duly and validly
issued and delivered and will constitute valid and binding obligations of the
Issuer enforceable in accordance with their terms; the execution and delivery
of the Commercial Paper Notes and the execution, delivery, performance of this
Agreement, the Issuing and Paying Agency Agreement and the Clearing
Corporation Letter of Representations will not violate any law, rule,
regulation, order, judgment or decree applicable to the Issuer or conflict
with or result in a breach of or constitute a default under any agreement or
instrument to which the Issuer is a party or by which it or any of its
property is bound or its certificate of incorporation or by-laws; no
governmental, administrative or official consent, approval, authorization,
notice or filing is required for the execution and delivery of the Commercial
Paper Notes or the execution, delivery and performance by the Issuer of this
Agreement, the Issuing and Paying Agency Agreement and the Clearing
Corporation Letter of Representations; the offer and sale of the Commercial
Paper Notes are exempt from registration under Section 4(2) of the Securities
Act; the Commercial Paper Notes will rank at least pari passu with all other
unsecured and unsubordinated indebtedness of the Issuer; and the Issuer is not
an "investment company" or a company "controlled by" an investment company for
purposes of the Investment Company Act of 1940, as amended.
4.Covenants. The lssuer agrees with Lehman that:
(a)Prior to the issuance of Commercial Paper Notes, the Issuer will furnish to
Lehman opinions of counsel (i) to the effect that the Commercial Paper Notes
are not required to be registered under the Securities Act in connection with
the offer and sale of the Notes, (ii) as to each of the other matters set
forth in Section 3 hereof, and (iii) as to such other matters as Lehman may
reasonably request;
(b)Each issuance of Commercial Paper Notes by the Issuer shall be deemed a
representation and warranty by the Issuer to Lehman, as of the date thereof,
that the representations and warranties of the Issuer set forth in Section 3
hereof are true and correct as if made on and as of such date;
(c)The Issuer shall furnish to Lehman such information about its operations
and financial condition as Lehman may reasonably request regarding the due
authorization and execution of the Commercial Paper Notes and the Issuer's
ability to pay the Commercial Paper Notes as they mature; and
(d)Lehman shall inform the Issuer of all action required to be taken by the
Issuer in order to comply with any applicable state securities or "Blue Sky"
laws in connection with any offer or sale of the Commercial Paper Notes, and
the Issuer shall, unless it declines to proceed with such offer and sale, take
all such required action.
5.Placement Memorandum.
(a)Lehman will prepare and distribute to each purchaser of Commercial Paper
Notes prior to completion of sale a placement memorandum ("Memorandum")
containing financial information about the Issuer. Such Memorandum will be
updated periodically to reflect material changes in the Issuer's business or
financial condition as to which the Issuer shall have advised Lehman. Each
annual Memorandum will include the following "private placement" legend, which
will also appear on the Commercial Paper Notes:
"THIS COMMERCIAL PAPER NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"). BY ITS ACCEPTANCE OF THIS NOTE THE PURCHASER
REPRESENTS THAT IT IS AN ACCREDITED INVESTOR AS DEFINED IN REGULATION D UNDER
THE ACT (AND, IF IT IS A QUALIFIED INSTITUTIONAL BUYER AS DEFINED IN RULE 144A
UNDER THE ACT, THEN IT IS AWARE THAT THE SELLER (OTHER THAN THE ISSUER) MAY
RELY ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY
RULE 144A) AND AGREES THAT THIS COMMERCIAL PAPER NOTE IS NOT BEING ACQUIRED
WITH A VIEW TO PUBLIC DISTRIBUTION AND THAT ANY RESALE OF THIS COMMERCIAL
PAPER NOTE WILL BE MADE ONLY (1) TO OR THROUGH J.P. MORGAN SECURITIES INC. OR
Lehman BROTHERS INC. TO AN ACCREDITED INVESTOR OR A QUALIFIED INSTITUTIONAL
BUYER IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT OR (2) TO A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION EXEMPT UNDER RULE 144A."
(b)The Issuer agrees to furnish Lehman with sufficient information to enable
Lehman to prepare the original Memorandum and updates thereof, including (i)
as soon as practicable after the end of each of the first three quarters in
the Issuer's fiscal year , the financial statements of the Issuer as of the
end of such fiscal quarter, (ii) as soon as practicable after the end of each
fiscal year of the Issuer, the annual audited financial statements of the
Issuer and (iii) as soon as practicable, any information concerning the
financial condition or results of operations of the Issuer that has been
generally communicated to the public or that makes any statement in the
Memorandum materially false or misleading or by its omission would cause the
Memorandum to be materially false or misleading. The Issuer agrees that all
financial statements delivered to Lehman hereunder will fairly present the
financial condition of the Issuer as of the date set forth therein and the
results of operations for the periods set forth therein, all in conformity
with generally accepted accounting principles.
(c)Before distribution of the Memorandum, or any update thereof, Lehman will
provide a copy thereof to the Issuer, and will not distribute the same without
the Issuer's prior written approval. Such approval shall be deemed to be a
representation and warranty by the Issuer that the Memorandum, or any update
thereof being distributed, does not contain any untrue statement of a material
fact or an omission of a material fact necessary to make any statement
contained therein, in light of the circumstances in which such statement was
made, not misleading.
6.Indemnification.
(a)The Issuer assumes liability for, and will indemnify and hold Lehman
harmless from and against, any liabilities, claims, damages, costs and
expenses (including legal fees and expenses) ("Liabilities") arising out of or
in connection with the issue and sale of the Commercial Paper Notes, including
without limitation, Liabilities arising out of or related to an actual or
alleged untrue statement of a material fact contained in the Memorandum or
otherwise made in connection with the issuance and sale of the Commercial
Paper Notes or an actual or alleged omission of a material fact necessary in
order to make any statement contained in the Memorandum or otherwise made in
connection with the issuance and sale of the Commercial Paper Notes, in light
of the circumstances in which such statement was made, not misleading;
provided, however, that the foregoing indemnity shall not extend to any
Liabilities to the extent they arise from (i) an untrue statement by Lehman of
a material fact relating to Lehman's sale of the Commercial Paper Notes; or an
omission by Lehman of a material fact relating to Lehman's sale of the
Commercial Paper Notes necessary in order to make any statement, in light of
the circumstances in which such statement was made, not misleading or (ii) the
gross negligence or willful misconduct of Lehman in the performance or failure
to perform its obligations hereunder. This indemnity shall survive
termination of the Agreement.
(b)In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in subparagraph (a) of this Section 6
is for any reason (other than those set forth in the proviso clause of
subparagraph (a) of this Section 6) held to be unavailable to Lehman, the
Issuer and Lehman shall contribute to the aggregate Liabilities to which the
Issuer and Lehman may be subject, in such proportion that Lehman shall be
responsible for that percentage of such Liabilities equal to the percentage
that any fees and commissions payable to Lehman bears to the aggregate of the
Commercial Paper Notes sold hereunder and the balance of such Liabilities
shall be the responsibility of the Issuer; provided that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
7.Notices, Addresses. All communications and notices shall be in writing or
confirmed in writing and shall be effective when received at the address
specified below:
(i)if to Lehman, to it at 3 World Financial Center, New York, New York 10285,
Attention: Commercial Paper Product Management; Telephone: 212-526- 2074;
Telecopy: 212-528-6925, or at such other address as may from time to time be
designated by notice to the Issuer in writing; and
(ii)if to the Issuer, to it at P.O. 8888, Camp Hill, Pennsylvania 17001-8888;
Attention: Barry M. Sullivan, Vice President and Treasurer, Telephone: 717-
975- 3880; Telecopy: 717-763-6424, or at such other address as may from time
to time be designated by notice to Lehman in writing.
8.Assignment. Lehman may assign its rights and obligations under this
Agreement to any wholly-owned subsidiary of Lehman Brothers Holdings Inc.
9.Termination. This Agreement may be terminated at any time by the Issuer or
by Lehman by written notice to the other parties, except that this Agreement
shall, notwithstanding such notice, remain applicable to any Commercial Paper
Notes outstanding at the time of such notice.
10.Governing Law. THIS A AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by officers duly authorized thereunto, all as of the
day and year first above written.
LEHMAN BROTHERS INC.
By:/s/ Greg J. Hall
Name:
Title:
HARSCO CORPORATION
By:/s/ Leonard A. Campanaro
Name:Leonard A. Campanaro
Title:Senior Vice President -
Finance and Chief Financial Officer
By:/s/ Barry M. Sullivan
Name:Barry M. Sullivan
Title:Vice President and Treasurer
ISSUING AND PAYING AGENCY AGREEMENT
This Agreement dated as of October 12, 1994 is between HARSCO CORPORATION (the
"Issuer") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK ("Morgan") in
connection with the issuance and payment of the Notes and Obligations referred
to in this Agreement.
WITNESSETH
1.Appointment of Morgan.
The Issuer may issue and sell short-term promissory notes in reliance upon an
exemption from the registration requirements of the Securities Act of 1933 as
amended (the "Act"), afforded by Section 4(2) thereof, (the "Notes"), which
will be substantially in the form attached hereto as Exhibit A, and will be
placed through such dealer(s) (individually a "Dealer" and collectively the
"Dealers") of whose appointment Morgan is to be given prior written notice by
the Issuer. The Issuer may also issue certain commercial paper obligations,
also exempt under the Act (the "Obligations") which will be purchased by third
parties ("Purchasers") under an arrangement whereby no individual promissory
notes or other evidences of the Issuer's obligation to repay proceeds will be
issued in accordance with the applicable rules and regulations of The
Depository Trust Company ("DTC"). The Issuer hereby requests Morgan to act,
on the terms and conditions specified herein, as issuing and paying agent for
the Obligations and/or for the Notes which the Issuer shall from time to time
deliver or cause to be delivered to Morgan.
2.Supply of Notes.
The issuer will from time to time furnish Morgan with an adequate supply of
Notes, which will be serially numbered, and will have been executed by manual
or facsimile signature of an Authorized Representative (as hereafter defined),
with the note number, principal amount, payee, date of issue, maturity date,
amount of interest (if an interest-bearing Note), maturity value and place of
payment left blank. Upon receipt of any such Notes, Morgan shall, as promptly
as is practicable, deliver to the Issuer a signed acknowledgment of the
receipt of such Notes.
3.Authorized Representatives of Issuer.
From time to time the Issuer will furnish Morgan with a certificate of the
Issuer, certifying the incumbency and specimen signatures of officers of the
Issuer authorized to (i) execute the Master Notes representing the Obligations
or (ii) execute Notes on behalf of the Issuer by manual or facsimile signature
(an "Authorized Representative"). Until Morgan receives a subsequent
incumbency certificate of the Issuer, Morgan shall be entitled to rely on the
last such certificate delivered to it for purposes of determining the
Authorized Representatives. If Notes are to be issued, Morgan shall not have
any responsibility to the Issuer to determine by whom or by what means a
facsimile signature may have been affixed on the Notes, or to determine
whether any facsimile or manual signature is genuine, if such facsimile or
manual signature resembles the specimen signature(s) filed with Morgan by a
duly authorized officer of the Issuer. Any Note bearing the manual or
facsimile signature of a person who is an Authorized Representative on the
date such signature is affixed shall bind the Issuer after the completion
thereof by Morgan notwithstanding that such person shall have died or shall
have otherwise ceased to hold his office on the date such Note is
countersigned or delivered by Morgan.
4.Issuance of Obligations; Completion, Authentication and Delivery of Notes.
4.1All instructions shall be given via a timesharing terminal or other
electronic means to the Morgan Paper Issue System (the "System"); provided
that instructions may be given by telephone, facsimile transmission or in
writing if the System is inoperative. Instructions given by telephone,
facsimile transmission or in writing shall be given by any person, including
any employee or partner of the Dealer, ("Designated Person") who has been
designated by an Authorized Representative in writing to Morgan as a person
authorized to give such instructions hereunder.
4.1.1The issuer or any Designated Person shall instruct Morgan to issue an
Obligation via the System by entering the appropriate DTC instrument code and,
after entering such issuing instruction, it is understood that the records
maintained in the System shall represent the aggregate principal amounts of
Obligations then outstanding and the aggregate unpaid interest (if any) on
interest-bearing Obligations unless subsequently modified by the Issuer with
appropriate notice to Morgan. At or before the close of business, New York
time, on the settlement date of each Obligation, Morgan shall: (i) access the
System for a determination of the net proceeds due the Issuer on such day and
(ii) credit the Account, as such term is defined herein, in immediately
available funds, such net proceeds in accordance with the instructions set
forth in the System and the provisions of this Agreement, if and only if
Morgan has received Confirmation from DTC that each Obligation has settled in
accordance with DTC's appropriate rules, regulations and procedures. The
Issuer hereby agrees with Morgan that it shall repay such Obligations in
accordance with the instructions set forth in the System, and that the
aggregate amount owing at any time by the Issuer in connection with all
outstanding Obligations shall be the following:
4.1.1.1with respect to all discounted Obligations purchased by Purchasers, the
amount of (i) the aggregate of the face amount of all such Obligations (it
being understood that with respect to such discounted Obligations, the face
amount thereof shall be the amount due at maturity and if any such discounted
Obligation is prepaid prior to its scheduled maturity then the face value
thereof shall be adjusted based upon a 360-day year to reflect such
prepayment) less (ii) the aggregate of the face amounts of all Obligations
purchased by Purchasers which shall have matured or been presented for
prepayment.
4.1.1.2with respect to all interest-bearing Obligations purchased by
Purchasers, the amount of (i) the aggregate of the face amount of such
Obligations plus the aggregate interest to be paid thereon at the scheduled
maturity thereof (it being understood that if any such interest-bearing
Obligation is prepaid by the Issuer prior to its scheduled maturity, then such
interest amount shall be adjusted based upon a 360-day year to reflect such
prepayment) less (ii) the aggregate of the face amount of such Obligations
plus the aggregate interest paid by the Issuer on all interest-bearing
Obligations which shall have either matured or been presented for prepayment.
4.1.2Upon receipt of instructions to issue Notes as described in paragraph 4.1
hereof, Morgan shall withdraw the necessary Note(s) from safekeeping and, in
accordance with such instructions, Morgan shall:
4.1.2.1complete each Note as to its note number, principal amount, payee, date
of issue, maturity date, amount of interest (if any), maturity value and place
of payment; and
4.1.2.2manual countersign each Note by any one of the officers or employees of
Morgan duly authorized and designated by it for this purpose; and
4.1.2.3deliver the Note(s) to the Dealer or the designated consignee, which
delivery shall be against receipt for payment as herein provided or as
otherwise provided in such instructions.
4.2Instructions given via the System should be entered as prescribed in the
user documentation provided by Morgan and must be entered by 1:00 PM New York
time and instructions delivered by telephone, facsimile transmission or in
writing must be received by Morgan by 1:00 PM New York time, if the
Obligation(s) are to be issued or the Note(s) are to be delivered the same
day. Telephone instructions shall be confirmed by facsimile transmission the
same day.
4.3The Issuer understands that although Morgan is instructed to deliver
Note(s) against payment, delivery of the Notes will, in accordance with the
custom prevailing in the commercial paper market, be made before receipt of
payment in immediately available funds. Therefore, once Morgan has delivered
a Note to the designated consignee, the Issuer shall bear the risk that such
designated consignee fails to remit payment for the Note or return the Note to
Morgan. It is understood that each delivery of Notes of the Issuer hereunder
shall be subject to the rules of the New York Clearing House in effect at the
time of such delivery.
5.Proceeds of Sale of the Obligations and Notes.
Funds received in payment for the Obligations or the Note(s) ("Proceeds") are
to be credited to the operating account of the Issuer, numbered 027-50-884
(the "Account"), on the records of Morgan. From time to time, upon telephonic
or written instructions received by Morgan from an Authorized Representative,
amounts equal to the Proceeds may, if Morgan consents, prior to the time that
such Proceeds are received, be (i) deposited by Morgan in an account of the
Issuer maintained at Morgan, (ii) be used in payment of Obligations or Note(s)
presented for payment upon maturity, or (iii) transferred to the account of
the Issuer at another bank. If Morgan makes such a deposit, payment or
transfer of funds before Morgan receives the Proceeds in immediately available
funds, such deposit, payment or transfer shall represent an advance by it to
the Issuer to be repaid from such Proceeds or by the Issuer in the event that
such Proceeds are not received by Morgan. It is intended that any such
advance be for no longer than 24 hours. Interest on each such unpaid advance
shall be at a rate negotiated between Morgan and the Issuer and shall begin to
accrue on the day of the advance.
6.Payment of Matured Obligations or Notes.
On the day any Obligation matures or is prepaid, the Issuer shall transmit to
the Account an amount sufficient to pay all maturing and prepaid Obligations.
Morgan shall, on such day, and to the extent funds sufficient to effect such
payment are available in the Account, or to the extent that Morgan may make
credit available to the Account, pay to each Purchaser the amount due such
Purchaser.
Unless Morgan is otherwise directed, when any matured Note is presented to
Morgan for payment by the holder thereof, payment by Morgan shall be made from
and charged to the Account to the extent funds sufficient to effect such
payment are available in the Account, or to the extent that Morgan may make
credit available to the Account for the purpose of such payment.
Anything in the foregoing to the contrary notwithstanding, (i) Morgan is
authorized in its discretion (but not required) to pay Obligations and/or
matured Note(s) by debit to any other account of the Issuer with Morgan in
which there are sufficient funds and (ii) if Morgan elects to pay Obligations
and/or matured Note(s) and there are not sufficient funds in an account of the
Issuer, such payment shall be deemed to be an advance by Morgan to the Issuer
which shall be repaid by the Issuer with interest in accordance with the terms
of paragraph 5 of this Agreement.
7.Reliance on Instructions.
Morgan shall incur no liability to the Issuer in acting hereunder upon
telephonic, facsimile transmission or other instructions contemplated hereby
which the recipient thereof believed in good faith to have been given by an
Authorized Representative or any Designated Person. In the event a
discrepancy exists between the telephonic instructions and the written
confirmation, or in the absence of receiving a written confirmation, the
telephonic instructions as recorded and understood by Morgan will be deemed
the controlling and proper instructions. It is understood that all telephonic
instructions will be recorded by Morgan, and the Issuer hereby consents to
such recording.
8.Cancellation of Notes.
Morgan will in due course cancel Note(s) presented for payment and return them
to the Issuer. Promptly upon the written request of the Issuer, Morgan agrees
to cancel and return to the Issuer all Notes in its possession at the time of
such request.
9.Representation and Warranties of the Issuer.
Each instruction given to Morgan in accordance with paragraph 4 hereof shall
constitute a representation and warranty to Morgan by the Issuer that the
issuance of the Obligations or the issuance and delivery of the Notes have
been duly and validly authorized by the Issuer and that the Obligations, or,
in the case of the Notes, that the Notes when completed, countersigned and
delivered pursuant hereto, will constitute the legal, valid and binding
obligations of the Issuer, and that Morgan's appointment to act for the Issuer
hereunder has been duly authorized by all necessary corporate action of the
Issuer.
10.Notices; Addresses.
10.1All communications by or on behalf of the Issuer by telephone or
otherwise, relating to the Obligations or to the completion, delivery or
payment of the Note(s) are to be directed to the Commercial Paper Issuance
Unit of Morgan (or such other department or division as Morgan shall specify
in writing to the Issuer). The Issuer will send all Notes to be completed and
delivered by Morgan to Morgan's Commercial Paper Issuance Unit (or such other
department or division as Morgan shall specify in writing to the Issuer) and
for purposes of Morgan's internal control the Issuer will send under separate
cover a copy of the Issuer's letter transmitting such Notes to Morgan's
Auditing Department. Morgan will advise the Issuer from time to time of the
individuals of Morgan generally responsible for the administration of this
Agreement.
10.2Notices and other communications hereunder shall (except to the extent
otherwise expressly provided) be in writing and shall be addressed as follows,
or to such other address as the party receiving such notice shall have
previously specified to the party sending such notice:
10.2.1if to the Issuer:
Barry M. Sullivan
Vice President & Treasurer
Harsco Corporation
P.O. Box 8888
Camp Hill, PA 17001-8888
Telephone: (717) 975-3880Fax: (717) 763-6424
10.2.2if to Morgan:
(a)Concerning the daily issuance and redemption of Obligations and Notes:
Issuance:
23 Wall Street (18/15B)
New York, NY 10260-0023
Attn: Commercial Paper Issuance Unit
Telephone: (212) 235-1782
Telefax: (212) 235-4983 or (212) 235-2663
Telex: RCA 232194, Answerback 232194 MGT UR
Redemption:
23 Wall Street (18/15B)
New York, NY 10260-0023
Attn: Commercial Paper Redemption Unit
Telephone: (212) 235-1804
Telefax: (212) 235-4983 or (212) 235-2663
Telex: RCA 232914, Answerback 232194 MGT UR
Auditing:
23 Wall Street (2/15B)
New York, NY 10260-0023
Attn: Commercial Paper Auditor
Telephone: (212) 235-2517
Telex: RCA 232194, Answerback 232194 MGT UR
(b)All other:
Administration:
60 Wall Street (36/60W)
New York, NY 10260-0060
Attn: Commercial Paper Administration
Telephone: (212) 648-3241
Telefax: (212) 648-5103
Telex: RCA 232194, Answerback 232194 MGT UR
11.Information Furnished by Morgan.
Upon the reasonable request of the Issuer, given at any time and from time to
time, Morgan shall promptly provide the Issuer with information with respect
to the Obligations and Note(s) issued and paid hereunder. Such request shall
be in written form and, to the extent applicable, shall include the serial
number/note number, principal amount, payee, date of issue, maturity date,
amount of interest (if any) and place of payment of each Obligation or Note
which has been issued or paid by Morgan, and for which the request is being
made. Morgan and the Issuer shall discuss from time to time the extent to
which such information is reasonably available and the times at which Morgan
can reasonably furnish such information.
12.Liability.
Neither Morgan nor its officers or employees shall be liable for any act or
omission hereunder except in the case of gross negligence or willful
misconduct. The duties and obligations of Morgan, its officers and employees
shall be determined by the express provisions of this Agreement and they shall
not be liable except for the performance of such duties and obligations as are
specifically set forth herein and no implied covenants shall be read into this
Agreement against them. Neither Morgan nor its officers or employees shall be
required to ascertain whether any issuance or sale of obligations or Note(s)
(or any amendment or termination of this Agreement) has been duly authorized
or is in compliance with any other agreement to which the Issuer is a party
(whether or not Morgan is also a party to such other agreement).
13.Indemnification.
The Issuer agrees to indemnify and hold harmless Morgan, its officers and
employees from and against all liabilities, claims, damages, reasonable costs
and expenses (including reasonable legal fees and expenses) relating to or
arising out of their actions or inactions in connection with this Agreement,
except to the extend they are caused by the gross negligence or willful
misconduct of Morgan, its officers or employees. This indemnity shall survive
termination of this Agreement.
14.Timesharing.
The Issuer understands that timesharing services that may be utilized by the
Issuer and Morgan in the issuance of the Obligations and Note(s) are furnished
to Morgan by the Service Bureau Company, a division of Control Data
Corporation ("SBC"). SBC has granted permission to Morgan to allow its
customers to use such timesharing services, and in consideration for such
permission, it is understood and agreed that, if the Issuer elects to use the
timesharing services, such services will be supplied to the Issuer "AS IS",
WITHOUT WARRANTY by SBC or Morgan. The Issuer hereby waives any claims it may
have against SBC or Morgan arising out of such timesharing services.
15.Benefit of Agreement.
This Agreement is solely for the benefit of the parties hereto and no other
person shall acquire or have any right under or by virtue hereof.
16.Termination.
This Agreement may be terminated at any time by either party by written notice
to the other but such termination shall not affect the respective liabilities
of the parties hereunder arising prior to such termination.
17.Fees
The Issuer shall pay to Morgan all fees for its services provided hereunder in
accordance with Morgan's schedule of fees for commercial paper services,
initially in accordance with Morgan's service proposal of May 10, 1994.
Morgan may, at any time after January 1, 1996, change such fees by written
notice to the Issuer.
18.Governing Law.
This Agreement is to be delivered and performed in, and shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be
executed on their behalf by officers duly authorized thereunto, all as of the
day and year first-above written.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Lloyds A. Baggs
Name:Lloyds A. Baggs
Title:Trust Officer
HARSCO CORPORATION
By: /s/ Barry M. Sullivan
Name:Barry M. Sullivan
Title:Vice President and Treasurer
HARSCO CORPORATION
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
Harsco Corporation (the "Corporation") hereby adopts this Deferred
Compensation Plan for Non-Employee Directors (the "Plan") pursuant to which
eligible members of its Board of Directors may elect to defer receipt of all
or any portion of the compensation payable to them for services rendered to
the Corporation as Directors.
1. Eligible Directors. The Directors of the Corporation eligible to make
deferral elections under this Plan shall be those Directors who are not
actively employed officers or employees of the Corporation or of any of its
subsidiaries or affiliates (hereinafter referred to individually as a "Non-
Employee Director" and collectively as the "Non-Employee Directors") .
2. Deferrable Compensation. A Non-Employee Director may elect to defer
receipt of all, any part or none of the aggregate compensation payable by the
Corporation for services rendered as a Director, including the annual base
retainer, Committee Chairman annual retainer increment, attendance fees for
board and committee meetings, and other fees for special services (in the
aggregate, the "Director's Fees").
3. Election to Defer. A Non-Employee Director who desires to defer receipt
of all or a portion of his Director's Fees in any calendar year shall so
notify the Corporation's Pension Committee in writing on or before December 31
of the prior calendar year, specifying on a form supplied by the Committee (a)
the dollar amount or percentage of the Director's Fees to be deferred, (b) the
deferral period, (c) the form of payment, and (d) the notional investment
direction. Elections to take effect with respect to the initial year of this
Plan may be made by Non-Employee Directors until the first regularly scheduled
Board of Directors meeting in 1995. A newly-appointed Non- Employee Director
shall be eligible to defer payment of future Director's Fees by so notifying
the Pension Committee on the appropriate form at any time within 30 days of
his appointment to the Board of Directors. The elections made pursuant to
this Paragraph shall be irrevocable with respect to those Director's Fees to
which such elections pertain and shall also apply to Director's Fees payable
in subsequent calendar years unless the Non-Employee Director notifies the
Pension Committee in writing, on or before December 31, that different
elections shall apply with respect to Director's Fees payable during the
immediately following calendar year. Such new elections shall likewise
continue in effect and apply to subsequent calendar years until similarly
changed.
4. Non-Deferred Compensation. Any Director's Fees not deferred under this
Plan shall be paid in accordance with normal Corporation policy.
5. Deferred Compensation Accounts and Notional Investment Directions.
(a) Accounts: At the time a Non-Employee Director elects to defer the
receipt of compensation pursuant to Paragraph 3 above, he shall also direct
the amount of the deferral to be notionally invested in an Interest-Bearing
Account and the amount to be notionally invested in a Harsco Stock Account.
Pursuant to such investment direction, the deferral amounts shall be credited
to the appropriate accounts as set forth below:
(I) Interest-Bearing Account: To the extent that a Non-Employee
Director elects a notional investment in an Interest-Bearing Account, the
Corporation shall, on the business day the Director's Fees would have been
paid absent the deferral election, credit an Interest-Bearing Account
established in his name with the amount of the deferred Director's Fees to be
so invested.
(ii) Harsco Stock Account: To the extent that a Non-Employee Director
elects a notional investment in a Harsco Stock Account, the Corporation shall,
on the business day the Director's Fees would have been paid absent the
deferral election, credit a Harsco Stock Account established in his name with
units (including fractions), the number of which shall be obtained by dividing
the amount of the deferred Director's Fees to be so invested by the Fair
Market Value of the Corporation's common stock. These units, thus calculated,
are hereinafter referred to as "Stock Equivalents." For purposes of the Plan,
Fair Market Value of a share of the Corporation's common stock on any date
shall be equal to the mean between the high and low prices at which such
shares were traded on the New York Stock Exchange ("NYSE") on such date, or,
if no sales were quoted on such date, on the most recent preceding date on
which sales were quoted. In the event of any change in the common stock of
the Corporation by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or a rights offering to purchase common stock at a price substantially
below Fair Market Value, or of any similar change affecting the common stock,
the value and attributes of each Stock Equivalent shall be appropriately
adjusted consistent with such change to the same extent as if such Stock
Equivalents were issued and outstanding shares of common stock of the
Corporation.
(b) Earnings: The Corporation shall credit earnings to each account as
follows:
(i) Interest-Bearing Account: As of the last day of each calendar
month, the Corporation shall credit as earnings to each Interest-Bearing
Account established on behalf of a Non-Employee Director an amount equal to
the Five Year U.S. Treasury Note Percentage Rate multiplied by the average
daily balance in such Interest-Bearing Account during such calendar month.
Such Five Year U.S. Treasury Note Percentage Rate shall be equal to one
twelfth (1/12) of the yield on U.S. Treasury Notes having a maturity date five
(5) years hence as listed in The Wall Street Journal or any successor
publication, as of market closing on the first day of the calendar quarter
which includes that month.
(ii) Harsco Stock Account: As of each quarterly dividend payment date,
the Corporation shall credit as earnings to each Harsco Stock Account an
amount equal to the cash dividends payable on such date with respect to that
number of shares (including fractional shares) of its common stock equal to
the number of Stock Equivalents credited to the Harsco Stock Account on the
relevant dividend record date. The amount so credited shall then be converted
into additional Stock Equivalents in the manner described earlier using the
dividend payment date as the valuation date.
6. Deferral Period. At the time a Non-Employee Director elects to defer the
receipt of compensation pursuant to Paragraph 3 above, he shall indicate the
deferral period applicable to such deferred compensation by specifying the
year (the "Payment Year") in which the deferred amounts are to be paid in a
lump sum or in which installment payments shall commence; provided, however,
that in no event shall the Payment Year be later than the year following the
year in which the Non-Employee Director will attain age 72.
7. Form of Payment of Deferred Compensation. Initial payments made under the
Plan shall be based upon the aggregate balance in a Non-Employee Director's
account(s) determined on the first business day of the Payment Year. The
balance in the Non- Employee Director's Interest-Bearing Account shall be the
dollar amount credited to such account as of the first business day of the
Payment Year. The balance in the Non-Employee Director's Harsco Stock Account
shall be the dollar amount determined by multiplying the Stock Equivalents
credited to such account on the first business day of the Payment Year by the
Fair Market Value of a share of common stock of the Corporation on such date.
The aggregate balance as thus determined shall be paid to him in cash either
in a lump sum within 30 days following the first business day of the Payment
Year or in up to ten (10) annual installments commencing with the Payment Year
as specified in the election to defer made pursuant to Paragraph 3 above. If
an election to receive installment payments is made, the Non-Employee Director
shall receive the first installment within 30 days following the first
business day of the Payment Year in an amount equal to the aggregate balance
in his account(s) divided by the number of years in the installment payment
period. Subsequent installments shall be computed and paid in similar
fashion; provided, however, that pending distributions in the second through
final years of the installment payment period, the aggregate balance in the
Non- Employee Director's account(s) shall be deemed to be invested in an
Interest-Bearing Account and in a Harsco Stock Account, as applicable, in the
same proportion as deferred amounts under the Plan were notionally invested on
the first business day of the Payment Year, and increased by earnings
accordingly. Exhibit A attached hereto presents an example illustrating how
such a calculation is made.
8. Change in Control.
(a) In the event of a "Change in Control" of the Corporation followed by
a Non-Employee Director's cessation of service to the Corporation as a
Director, all amounts credited to the account(s) of the Non-Employee Director
under the Plan shall be immediately due and payable to the Non-Employee
Director in a single lump sum notwithstanding the deferral period and form of
payment specified pursuant to Paragraph 3 above.
(b) For purposes of the Plan, a "Change in Control" shall have occurred
if:
(i) Stock Acquisition. Any "person" (as such term is used in Section
13(d) and 14(d) (2) of the Exchange Act), other than the Corporation or a
corporation a majority of whose outstanding stock entitled to vote is owned,
directly or indirectly, by the Corporation, is or becomes, other than by
purchase from the Corporation or such a corporation, the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding voting securities.
Such a Change in Control shall be deemed to have occurred on the first to
occur of the business day immediately preceding the date securities are first
purchased by a tender or exchange offer, or the date on which the Corporation
first learns of the acquisition of 20% of such securities, or the earlier of
the business day immediately preceding the effective date of an agreement for
the merger, consolidation or other reorganization of the Corporation or the
date of approval thereof by the stockholders of the Corporation, as the case
may be.
(ii) Change in Board. During any period of two consecutive years,
individuals who at the beginning of such period were members of the Board of
Directors, and any new director whose election by the Board or nomination for
election by the Corporation's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at
least a majority of the Board of Directors. Such a Change in Control shall be
deemed to have occurred on the date upon which the requisite majority of
directors fails to be elected by the stockholders of the Corporation.
(iii) Other Events. There occurs a change in control of the
Corporation of a nature that would be required to be reported as such in
response to Item 1(a) of the Current Report on Form 8-K pursuant to Section 13
or 15(d) of the Exchange Act, or any successor provision to such Item relating
to a "change in control," or in any other filing under the Exchange Act.
9. Designation of Beneficiary. If a Non-Employee Director dies prior to
receiving the entire balance of his accounts(s) under the Plan, any balance
remaining in his account(s) shall be paid in a lump sum as soon as practicable
to the Non-Employee Director's designated beneficiary or, if the Non-Employee
Director has not designated a beneficiary or the designated beneficiary is
dead, then to his estate. Any designation of a beneficiary may be revoked or
modified at any time by the Non-Employee Director, except that no designation
shall be recognized as valid unless properly filed with the Pension Committee
during the lifetime of the Non-Employee Director while he is legally
competent.
10. Withholding of Taxes. The rights of a Non-Employee Director to payments
or credits under this Plan shall be subject to the Corporation's obligations,
if any, to withhold income or other taxes from such payments.
11. Status of Plan. This Plan is a nonqualified deferred compensation plan
covering no employees of the Corporation. As such, the Plan is exempt from
the requirements of the Employee Retirement Income Security Act of 1974, as
amended. The Corporation intends that the Plan shall at all times be
maintained on an unfunded basis for federal income tax purposes. Hence, all
payments from this Plan shall be made from the general assets of the
Corporation. This Plan shall not require the Corporation to set aside,
segregate, earmark, pay into a trust or special account or otherwise restrict
the use of its assets in the operation of its business. A Non-Employee
Director (or, if applicable, his designated beneficiary) shall have no greater
right or status than as an unsecured general creditor of the Corporation with
respect to any amounts owed hereunder.
12. Rights Nonassignable. All payments to persons entitled to benefits
hereunder shall be made to such persons and shall not be grantable,
transferable or otherwise assignable in anticipation of payment thereof, in
whole or in part, by the voluntary or involuntary acts of any such persons or
by operation of law subject to garnishment, execution, attachment or any other
similar legal process of creditors of such persons.
13. Administration. Full power and authority to construe, interpret and
administer this Plan shall be vested in the Corporation's Pension Committee.
The Pension Committee shall have full power and authority to make each
determination provided for in this Plan. All determinations made by the
Pension Committee shall be conclusive and binding upon the Company and any
other party claiming rights hereunder.
14. Termination. The Board of Directors may, in its discretion, terminate
this Plan at any time. Upon termination of the Plan, benefits shall be paid
in accordance with the deferral elections made by the Non-Employee Director;
provided, however, that the Pension Committee shall have the right to
determine the total amount payable to each Non-Employee Director (or, if
applicable, his beneficiary) and to cause the amount so determined to be paid
in lump sum, thereby discharging the Corporation from any further liability or
obligation under this Plan.
15. Amendment. The Board of Directors may, in its discretion, amend this
Plan from time to time. In addition, the Pension Committee may from time to
time amend this Plan to make such administrative changes as it may deem
necessary or desirable. No such amendment shall divest any Non-Employee
Director (or person claiming through him) of any rights to amounts previously
credited to his accounts hereunder.
16. Incompetency. If the person to receive payment hereunder is deemed by
the Pension Committee or is adjudged to be legally incompetent, the payments
shall be made to the duly appointed guardian of such incompetent, or they may
be made to such person or persons who the Pension Committee believes are
caring for or supporting such incompetent; and the receipt thereof by such
person or persons shall constitute complete satisfaction of the Company's
obligations under this Plan.
17. Expenses. The expenses of administering this Plan shall be borne by the
Corporation.
18. Gender. The masculine pronoun shall be deemed to include the feminine,
and the singular to include the plural, unless a different meaning is plainly
required by context.
19. Governing Law. This Plan shall be construed, administered and enforced
according to the laws of the Commonwealth of Pennsylvania.
2O. Effective Date. The effective date of this Plan is January 1, 1995 and
shall apply with respect to Director's Fees payable by the Corporation in
respect of services performed on or after such date.
Executed this ______ day of _____________, 1995.
ATTEST: HARSCO CORPORATION
Paul C. Coppock Derek Hathaway
Senior Vice President, Chief Administrative Chairman, President and
Officer, General Counsel and Secretary Chief Executive Officer
HARSCO CORPORATION
COMPUTATION OF FULLY DILUTED NET INCOME PER COMMON SHARE
(dollars in thousands except per share)
<TABLE>
<CAPTION>
YEARS ENDED
__________________________________________________________________________
1994 1993 1992 1991 1990
__________ __________ __________ __________ __________
<S> <C> <C> <C> <C> <C>
Net income $ 86,553 $ 87,618 $ 84,332 $ 76,543 $ 72,504
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
Average shares of common stock
outstanding used to compute
primary earnings per common
share 25,114,874 25,036,893 25,966,755 26,278,384 26,217,027
Additional common shares to be
issued assuming exercise of
stock options, net of shares
assumed reacquired 105,388 149,408 198,220 118,208 28,355
__________ __________ __________ __________ __________
Shares used to compute dilutive
effect of stock options 25,220,262 25,186,301 26,164,975 26,396,592 26,245,382
__________ __________ __________ __________ __________
__________ __________ __________ __________ __________
Fully diluted net income per
common share $ 3.43 $ 3.48 $ 3.22 $ 2.90 $ 2.76
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Net income per common share
as reported in report to
shareholders $ 3.45 $ 3.50 $ 3.25 $ 2.91 $ 2.77
________ ________ ________ ________ ________
________ ________ ________ ________ ________
</TABLE>
HARSCO CORPORATION
Exhibit 12
Computation of Ratios of Earnings to Fixed Charges
(In Thousands of Dollars)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1990 1991 1992 1993 1994
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
Consolidated Earnings:
Pre-tax income from continuing
operations <F1> $115,587 $119,647 $140,576 $137,151 $146,089
Add fixed charges computed below 21,864 23,544 22,425 23,879 37,982
Net adjustments for equity companies (532) (439) (454) (363) (134)
Net adjustments for capitalized
interest (255) (469) (134) (172) (274)
________ ________ ________ ________ ________
Consolidated Earnings Available for
Fixed Charges $136,664 $142,283 $162,413 $160,495 $183,663
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Consolidated Fixed Charges:
Interest expense per financial
statements <F2> $17,506 $18,925 $18,882 $19,974 $34,048
Interest expense capitalized 345 574 355 332 338
Portion of rentals (1/3) representing
an interest factor 4,013 4,045 3,188 3,573 3,576
Interest expense for equity companies
whose debt is guaranteed <F3> - - - - -
________ ________ ________ ________ ________
Consolidated Fixed Charges $21,864 $23,544 $22,425 $23,879 $37,982
________ ________ ________ ________ ________
________ ________ ________ ________ ________
Consolidated Ratio of Earnings to
Fixed Charges 6.25 6.04 7.24 6.72 4.84
________ ________ ________ ________ ________
________ ________ ________ ________ ________
<FN>
<F1> 1992 excludes the cumulative effect of change in accounting method for postretirement benefits other than pensions.
<F2> Includes amortization of debt discount and expense.
<F3> No fixed charges were associated with debt of less than fifty percent owned companies guaranteed by Harsco during the five
year period 1990 through 1994.
</FN>
</TABLE>
HARSCO CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(In thousands, except share amounts)
<TABLE>
<Captions>
1994 1993
_____________________________________________________________________________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43,550 $ 58,740
Notes and accounts receivable, less allowance
for uncollectible accounts ($7,285 and $13,479) 350,578 322,894
Inventories 121,199 202,426
Other 21,432 16,045
_____________________________________________________________________________________________
Total current assets 536,759 600,105
_____________________________________________________________________________________________
Property, plant and equipment, net 434,968 491,655
Cost in excess of net assets of businesses acquired, less
accumulated amortization ($25,912 and $13,995) 213,480 221,082
Investments 43,711 61,079
Investment in unconsolidated entities 32,312 5,920
Other assets 53,419 47,771
_____________________________________________________________________________________________
$1,314,649 $1,427,612
LIABILITIES
Current liabilities:
Short-term borrowings $ 14,236 $ 51,884
Current maturities of long-term debt 11,502 11,625
Accounts payable 92,166 98,021
Accrued compensation 37,837 45,546
Advances on long-term contracts - 88,518
Income taxes 10,971 14,905
Dividends payable 9,317 8,739
Other current liabilities 106,392 98,111
_____________________________________________________________________________________________
Total current liabilities 282,421 417,349
_____________________________________________________________________________________________
Long-term debt 340,246 364,869
Deferred income taxes 29,217 33,424
Insurance related liabilities 44,560 49,350
Other liabilities 36,983 39,536
_____________________________________________________________________________________________
733,427 904,528
_____________________________________________________________________________________________
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock
Series A junior participating cumulative preferred stock - -
Common stock, par value $1.25, issued 32,343,553 and
32,114,499 shares, respectively 40,429 40,143
Additional paid-in capital 94,070 86,436
Cumulative translation adjustments (16,020) (16,059)
Cumulative pension liability adjustments (99) (107)
Retained earnings 653,996 603,158
_____________________________________________________________________________________________
772,376 713,571
Treasury stock, at cost (7,161,303 and 7,146,698
shares, respectively) (191,154) (190,487)
_____________________________________________________________________________________________
581,222 523,084
_____________________________________________________________________________________________
$1,314,649 $1,427,612
_____________________________________________________________________________________________
_____________________________________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
for the years 1994, 1993 and 1992
(In thousands, except per share)
<TABLE>
<CAPTION>
1994 1993 1992
_________________________________________________________________________________________________________________
<S> <C> <C> <C>
Revenues:
Net sales $1,357,715 $1,422,308 $1,624,939
Equity in income of unconsolidated entities 64,120 2,415 3,626
Gain on sale of investments 5,966 17,555 -
Other revenues 37,980 2,018 2,093
_________________________________________________________________________________________________________________
Total revenues 1,465,781 1,444,296 1,630,658
_________________________________________________________________________________________________________________
Costs and expenses:
Cost of sales 1,060,695 1,107,187 1,297,090
Selling, administrative and general expenses 199,837 180,375 175,092
Research and development 5,463 5,167 4,590
Facilities discontinuance and reorganization costs 17,143 2,419 445
Other 6,158 (493) 2,251
_________________________________________________________________________________________________________________
Total costs and expenses 1,289,296 1,294,655 1,479,468
_________________________________________________________________________________________________________________
Income before interest, taxes, minority interest and
cumulative effect of accounting changes 176,485 149,641 151,190
Interest income 6,403 7,586 8,198
Interest expense (34,048) (19,974) (18,882)
_________________________________________________________________________________________________________________
Income before taxes, minority interest, and cumulative
effect of accounting changes 148,840 137,253 140,506
Provision for income taxes 59,536 56,335 49,060
_________________________________________________________________________________________________________________
Income before minority interest and cumulative
effect of accounting changes 89,304 80,918 91,446
Minority interest 2,751 102 (70)
_________________________________________________________________________________________________________________
Income before cumulative effect of accounting changes 86,553 80,816 91,516
Cumulative effect of accounting changes - 6,802 (7,184)
_________________________________________________________________________________________________________________
Net income $ 86,553 $ 87,618 $ 84,332
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
Average shares of common stock outstanding 25,115 25,036 25,967
Earnings per common share:
Income before cumulative effect of accounting changes $3.45 $3.23 $3.52
Cumulative effect of accounting changes - 0.27 (0.27)
_________________________________________________________________________________________________________________
Net income per common share $3.45 $3.50 $3.25
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years 1994, 1993 and 1992
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
_________________________________________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 86,553 $ 87,618 $ 84,332
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 90,179 69,558 57,064
Amortization 9,410 5,250 2,007
Cumulative effect of accounting changes - (6,802) 7,184
Gain on sale of investments (5,966) (17,555) -
Equity in earnings of unconsolidated entities (64,120) (2,415) (3,626)
Dividends or distributions from equity companies 71,845 1,348 3,517
Other, net 1,525 689 (2,508)
Changes in assets and liabilities, net of
acquisitions and dispositions of businesses
and formation of a partnership:
Notes and accounts receivable (34,263) 66,562 (43,878)
Inventories (7,302) 9,189 13,566
Accounts payable 14,191 10,371 (26,271)
Advances on long-term contracts (9,636) 13,673 25,030
Other assets and liabilities 8,979 (5,266) (8,283)
_________________________________________________________________________________________________________________
Net cash provided by operating activities 161,395 232,220 108,134
_________________________________________________________________________________________________________________
Cash flows from investing activities:
Expenditures for property, plant and equipment (90,928) (83,395) (42,720)
Purchase of businesses, net of cash acquired* - (337,062) (28,404)
Proceeds from sale of businesses 2,444 - 44,466
Proceeds from sale of property, plant and equipment 8,222 3,302 2,079
Proceeds from sale of investment held available-for-sale 7,617 22,555 -
Investments held-to-maturity:
Purchases (15,750) - -
Maturities 24,740 - -
Other investing activities (9,495) (3,066) 61
_________________________________________________________________________________________________________________
Net cash (used) by investing activities (73,150) (397,666) (24,518)
_________________________________________________________________________________________________________________
Cash flows from financing activities:
Short-term borrowings, net (35,303) 28,339 (5,444)
Current maturities and long-term debt:
Additions 123,445 224,248 -
Reductions (164,662) (8,222) (82,948)
Cash dividends paid on common stock (35,137) (35,089) (34,373)
Common stock issued-options 7,241 4,450 7,734
Common stock acquired for treasury - (36,322) (37,587)
Other financing activities 1,376 (3,849) (34)
_________________________________________________________________________________________________________________
Net cash provided (used) by financing activities (103,040) 173,555 (152,652)
_________________________________________________________________________________________________________________
Effect of exchange rate changes on cash (395) 265 (796)
_________________________________________________________________________________________________________________
Net increase (decrease) in cash and cash equivalents (15,190) 8,374 (69,832)
Cash and cash equivalents at beginning of year 58,740 50,366 120,198
_________________________________________________________________________________________________________________
Cash and cash equivalents at end of year $ 43,550 $ 58,740 $ 50,366
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
*Purchase of businesses, net of cash acquired:
Working capital, other than cash $ - $ 5,748 $ (11,863)
Property, plant and equipment - (202,241) (16,513)
Cost in excess of net assets of companies acquired, net - (215,428) -
Other assets - (7,789) (1,155)
Long-term debt - 29,655 -
Noncurrent liabilities - 52,993 1,127
_________________________________________________________________________________________________________________
Net cash used to acquire businesses $ - $ (337,062) $ (28,404)
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
HARSCO CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years 1994, 1993 and 1992
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Additional Cumulative Adjustments
________________________
Common Stock Paid-in Pension Retained
________________________
Issued Treasury Capital Translation Liability Earnings
__________ __________ __________ __________ __________ __________
__________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1992 $ 39,471 $ (126,044) $ 70,564 $ (3,864) $ (1,153) $ 500,752
__________________________________________________________________________________________________________________________________
Net income 84,332
Cash dividends declared, $1.34 per share (34,598)
Translation adjustments (4,191)
Pension liability adjustments, net of $309
deferred income taxes 520
Acquired during the year, 1,256,662 shares (42,474)
Stock options exercised, 348,606 shares 436 9,504
Distribution of common stock under incentive
program, 51,663 shares 1,836 1
Other, 335 shares 10 1
__________________________________________________________________________________________________________________________________
Balances December 31, 1992 39,907 (166,672) 80,070 (8,055) (633) 550,486
__________________________________________________________________________________________________________________________________
Net income 87,618
Cash dividends declared, $1.40 per share (34,946)
Translation adjustments (8,004)
Pension liability adjustments, net of $311
deferred income taxes 526
Acquired during the year, 901,557 shares (34,975)
Stock options exercised, 189,076 shares 236 5,546
Acquisition of a company, 300,297 shares 11,143 818
Other, 426 shares 17 2
__________________________________________________________________________________________________________________________________
Balances, December 31, 1993 40,143 (190,487) 86,436 (16,059) (107) 603,158
__________________________________________________________________________________________________________________________________
Net income 86,553
Cash dividends declared, $1.42 per share (35,715)
Translation adjustments 39
Pension liability adjustments, net of $5
deferred income taxes 8
Acquired during the year, 14,991 shares (677)
Stock options exercised, 229,054 shares 286 7,627
Other, 386 shares 10 7
__________________________________________________________________________________________________________________________________
Balances, December 31, 1994 $ 40,429 $ (191,154) $ 94,070 $ (16,020) $ (99) $ 653,996
__________________________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to consolidated financial statements.
HARSCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary Of Significant
Accounting Policies
Consolidation Principles:
The consolidated financial statements include the accounts of Harsco
Corporation and its majority-owned subsidiaries ("Company"). Investments in
United Defense, L.P., a 40% owned partnership, effective January 1, 1994, and
other unconsolidated entities are accounted for on the equity method. The
equity in income of unconsolidated entities is on a pre-tax basis for United
Defense, L.P. as it is a partnership, and net of taxes for all other
unconsolidated entities.
Cash and Cash Equivalents:
The Company's policy is to maintain its uninvested cash at minimal levels.
Cash and cash equivalents include highly liquid debt instruments purchased
with a maturity of three months or less.
Investments in Debt and Equity Securities:
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115). The cumulative effect resulting from the
adoption of SFAS 115 in 1994 is immaterial. In accordance with SFAS 115,
prior years' financial statements have not been restated to reflect the change
in accounting method. Prior to the adoption of SFAS 115, the Company's
investments in marketable equity securities were reported at the lower of cost
or market, and marketable debt securities at amortized cost which approximated
market.
Marketable debt securities held by the Company's wholly-owned captive
insurance subsidiary are classified as held-to-maturity. Management
determines the appropriate classification of debt securities at the time of
purchase. Debt securities are classified as held-to-maturity when the Company
has the positive intent and ability to hold the securities to maturity. Held-
to-maturity securities are stated at amortized cost. Interest on securities
classified as held-to-maturity is included in investment income.
The Company also had an investment in a marketable equity security that was
classified as available-for-sale at January 1, 1994. The realized gains were
reflected in the Company's Consolidated Statements of Income.
Inventory Valuation:
Inventories are stated at the lower of cost or market, cost being determined
using the last-in, first-out (LIFO), first-in, first-out (FIFO) and average
cost methods.
Property, Plant and Equipment:
Property, plant and equipment is recorded at cost and depreciated over the
estimated useful lives of the assets using principally the straight-line
method. When property is retired from service, generally the cost of the
retirement is charged to the allowance for depreciation to the extent of the
accumulated depreciation thereon and the balance is charged to income.
Cost in Excess of Net Assets of Businesses Acquired:
Cost in excess of net assets of businesses acquired is amortized on a
straight-line basis over periods not to exceed 30 years. The Company's policy
is to record an impairment loss against the net unamortized cost in excess of
net assets of businesses acquired in the period when it is determined that the
carrying amount of the asset may not be recoverable. An evaluation is made at
each balance sheet date (quarterly) and it is based on such factors as the
occurrence of a significant event, a significant change in the environment in
which the business operates or if the expected future net cash flows
(undiscounted and without interest) would become less than the carrying amount
of the asset.
Long-term Defense Contracts:
Defense contracts are accounted for under the percentage of completion (units-
of-delivery) method, whereby sales and estimated average cost of the units to
be produced under a contract are recognized as deliveries are made or
accepted. Changes in estimates for sales, costs, and profits are recognized
in the period in which they are determinable using the cumulative catch-up
method of accounting. Claims are considered in the estimated contract
performance at such time as realization is probable. Any anticipated losses
on contracts are charged to operations as soon as they are determinable.
Inventory costs include factory overhead, general and administrative expenses,
initial tooling and other related costs. Internal research and development
costs are charged to expense or allocated to production contracts, as
applicable, when incurred. Under certain arrangements in which a customer
shares in product development costs, the Company's portion of such costs is
expensed as incurred. Effective January 1, 1994, substantially all defense
contracts were transferred to United Defense, L.P.
Income Taxes:
All U.S. federal and state income taxes and foreign taxes are provided
currently on the undistributed earnings of foreign subsidiaries and
unconsolidated affiliated companies, giving recognition to current tax rates
and applicable foreign tax credits. Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" (SFAS 109). The adoption of SFAS 109 changed the Company's
method of accounting for income taxes from the deferred method under
Accounting Principles Board Opinion No. 11 to an asset and liability approach.
Deferred income taxes are recognized for all temporary differences between the
tax and financial reporting bases of the Company's assets and liabilities
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income.
Employee Benefits:
The Company has pension and profit sharing retirement plans, most of which are
noncontributory, covering substantially all its employees and outside
directors. The benefits for salaried employees generally are based on years
of service and the employee's level of compensation during specified periods
of employment. Plans covering hourly employees generally provide benefits of
stated amounts for each year of service. The Company's funding policy for
qualified plans is consistent with statutory regulations and customarily
equals the amount deducted for income tax purposes. The Company's policy is
to amortize prior service costs over the average future service period of
active plan participants.
The Company has postretirement life insurance benefits for a majority of
employees, and postretirement health care benefits for a limited number of
employees mainly under plans related to acquired companies. Effective January
1, 1992, the Company adopted Statement of Financial Accounting Standards No.
106, "Employer's Accounting for Postretirement Benefits Other Than Pensions"
(SFAS 106) for its domestic plans. Effective January 1, 1993, the Company
adopted SFAS 106 for its foreign plans, the effect of which was immaterial.
This accounting standard requires accrual accounting for all postretirement
benefits other than pensions. Under the prescribed accrual method, the
Company's obligation for these postretirement benefits is to be fully accrued
by the date employees attain full eligibility for such benefits. Prior to the
adoption of SFAS 106, the cost of these benefits was recognized on the pay-as-
you-go method. Under SFAS 106, the cost of life insurance and health care
benefits for current and future retirees are recognized as determined under
the projected unit credit actuarial method. The Company's postretirement
health care and life insurance plans are unfunded.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" (SFAS 112) for both its domestic and foreign plans, the effect of
which was immaterial. This statement requires companies to accrue
postemployment benefits if the obligation is attributable to employees'
services already rendered, employees' rights to those benefits accumulate or
vest, payment of the benefits is probable and the amount of the benefits can
be reasonably estimated.
Environmental Compliance and Remediation:
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be
reasonably estimated. Generally, the timing of these accruals coincides with
the earlier of completion of a feasibility study or the Company's commitment
to a plan of action based on the then known facts.
Casualty Insurance:
The Company is insured for workers compensation, automobile, general, and
product liability losses through a risk retention program. The Company
accrues for the estimated losses occurring from both asserted and unasserted
claims. The estimate of the liability for unasserted claims arising from
unreported incidents is based on an analysis of historical claims data. The
Company has a wholly-owned captive insurance company for the payment of its
claims under this risk retention program. Annual contributions are made by
the Company to the captive insurance company to provide funding for its
retained risk. Additionally, the Company self-insures its workers
compensation exposures in the states of Ohio and Pennsylvania. The Company
accrues for their losses in the same fashion as described above; however,
funding is made from operating earnings.
Property Insurance:
The Company generally insures its property on an all-risk basis through
conventional insurers with a minor deductible applicable to each loss. For
certain foreign operations, the Company has a second wholly-owned captive
insurance company for the payment of its claims under such risk retention
program. The captive is funded for expected losses.
Foreign Currency Translation:
The financial statements of the Company's subsidiaries outside the United
States, except for those subsidiaries located in highly inflationary
economies, are generally measured using the local currency as the functional
currency. Assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date. The resultant translation
adjustments are included in equity adjustment from translation, a separate
component of stockholders' equity. Income and expense items are translated at
average monthly rates of exchange. Gains and losses from foreign currency
transactions of these subsidiaries are included in net earnings. For
subsidiaries operating in highly inflationary economies, gains and losses on
foreign currency transactions and balance sheet translation adjustments are
included in net earnings.
Foreign Exchange Contracts:
During 1994, the Company adopted Statement of Financial Accounting Standards
No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments" (SFAS 119).
The Company has significant foreign investments. It is the Company's policy
to reduce substantially the effects of fluctuations in foreign currency
exchange rates associated with these investments by managing its currency
exposure which includes foreign currency hedging activities. The Company
enters into foreign exchange forward contracts to hedge the effect of foreign
currency fluctuations on the financial statements.
The Company enters into contracts to buy and sell foreign currencies in the
future only to protect the U.S. dollar value of certain investments and future
foreign currency transactions. The Company does not engage in speculation.
The gains and losses on these contracts are included in income when the
operating revenues and expenses are recognized and, for assets and
liabilities, in the period in which the exchange rates change. The cash flows
from forward contracts accounted for as hedges of identifiable transactions
are classified consistent with the cash flows from the transactions being
hedged.
The Company also enters into foreign exchange contracts that are used to
exchange the proceeds from U.S. commercial paper borrowings into foreign
currency, and simultaneously enters into a forward foreign exchange contact to
exchange such foreign currency back into U.S. dollars at the maturity date of
the U.S. commercial paper borrowing. These forward contracts do not qualify
as hedges for financial reporting purposes, and accordingly are carried in the
financial statements at the current foreign exchange rates, with the changes
in rates recognized directly in operations. The Company does not hold or
issue financial instruments for trading purposes.
Reclassifications:
To conform to the single step format in 1994, the Consolidated Statements of
Income for the years 1993 and 1992 were reclassified to more appropriately
report the Company's business results and revenues and expenses. Certain
other amounts in the 1993 and 1992 financial statements and related notes have
been reclassified to conform with the 1994 presentation.
2. Formation of Defense Business
Partnership and Acquisition of
MultiServ International, N.V.
Formation of Defense Business Partnership:
On January 28, 1994, FMC Corporation ("FMC") and the Company announced
completion of a series of agreements ("Agreements"), first announced in
December 1992, to combine certain assets and liabilities of FMC's Defense
Systems Group ("DSG") and the Company's BMY-Combat Systems Division ("BMY-
CS"). The effective date of the combination was January 1, 1994. The
combined company, United Defense, L.P., operates as a limited partnership
("Partnership"). FMC as the Managing General Partner has a 60 percent equity
interest, and Harsco Defense Holding, Inc., a wholly owned subsidiary of the
Company, as the Limited Partner has a 40 percent equity interest. The Company
contributed to the partnership net assets of $29,600,000, which included
$5,200,000 in cash. The net assets were contributed on the historical basis
of accounting and no gain was recognized on the transaction.
The Partnership has an Advisory Committee comprised of ten individuals, six
appointed by FMC and four appointed by the Company which considers and
discusses Partnership issues. FMC as the managing general partner exercises
management control over the Partnership subject to the Company's right to
consent to certain actions delineated in the Partnership Agreement.
Additionally, the Partnership Agreement contains certain exit rights for both
Partners any time more than 25 months after the formation of the Partnership
including the right of the Company to sell its interest to the partnership
(payable by a promissory note from the Partnership) based upon a calculation
of 95% of appraised value, and the right of FMC or the partnership to buy the
Company's interest (payable in cash) based upon a calculation of 110% of
appraised value. Appraised value is substantially the fully distributed
public equity trading value of the Partnership as determined by three
investment banking firms in accordance with certain contractual stipulations,
multiplied by the Company's percentage interest in the Partnership. The
Partnership Agreement provides for certain special capital account allocations
and cash distributions, but otherwise allocates and distributes income in
proportion to the partners' percentage ownership. Under the Participation
Agreement between FMC and the Company, each Partner generally is financially
accountable to the Partnership for environmental conditions occurring prior to
formation of the Partnership at facilities or properties previously operated
or used in their respective businesses, to the extent that costs incurred are
not recovered from third parties or not covered by environmental accruals
contributed by the parties at formation. The Company retained the rights and
any liabilities associated with certain pending major claims between the
Company and the U.S. Government, and the Company and the Government of Iran.
See "Commitments and Contingencies" for additional disclosure on these claims.
The following amounts were contributed by the Company to United Defense, L.P.:
<TABLE>
<CAPTION>
(In thousands)
______________________________________________________________________________
<S> <C> <C>
Cash $ 5,200
Accounts receivable 6,779
Inventories 86,815
Property, plant and equipment, net 50,597
Other 624
______________________________________________________________________________
Total assets $ 150,015
Accounts payable 17,007
Accrued expenses 15,413
Advances on long-term contract 78,882
Pension liability 4,452
Postretirement benefits liability 4,661
______________________________________________________________________________
Total liabilities 120,415
______________________________________________________________________________
Net assets contributed $ 29,600
______________________________________________________________________________
______________________________________________________________________________
</TABLE>
Acquisition of MultiServ International, N.V.:
MultiServ International, N.V. was acquired by the Company on August 31, 1993.
The acquisition of MultiServ has been accounted for by the purchase method of
accounting, and operating results of this acquisition are included in the
Company's Consolidated Financial Statements since the date of acquisition.
The total consideration paid by the Company was approximately $384,000,000 and
consisted of: (i) approximately $333,000,000 in cash, (ii) approximately
$12,000,000 in Company Common Stock from treasury, and (iii) the assumption of
certain project financing indebtedness of MultiServ in the amount of
approximately $39,000,000. Approximately $8,000,000 in closing and
acquisition costs were also incurred. The funds used by the Company to
complete the acquisition consisted of approximately $83,000,000 from cash
balances of the Company, and approximately $250,000,000 borrowed from a
financial institution.
Pro Forma Results of Operations:
The following represents the unaudited pro forma results of operations as if
the United Defense, L.P. and MultiServ International, N.V. combinations had
occurred at the beginning of 1993:
<TABLE>
<CAPTION>
Pro Forma
______________________________________________________________________________
(Unaudited) Year Ended
(In thousands, except per share amounts) December 31, 1993
______________________________________________________________________________
<S> <C>
Total Revenues $1,385,302
______________________________________________________________________________
______________________________________________________________________________
Income before provision for income taxes, minority
interest, extraordinary item and cumulative effect
of accounting change 140,865
Provision for income taxes 66,775
Minority interest 818
______________________________________________________________________________
Income before extraordinary item and cumulative effect
of accounting change 73,272
Extraordinary item, net of taxes <F1> (2,277)
Cumulative effect of accounting change for income taxes 6,802
______________________________________________________________________________
Net income $ 77,797
______________________________________________________________________________
______________________________________________________________________________
Average shares of common stock outstanding 25,337
______________________________________________________________________________
______________________________________________________________________________
Earnings per common share:
Income before extraordinary item and cumulative effect
of accounting change $2.89
Extraordinary item <F1> (.09)
Cumulative effect of accounting change .27
______________________________________________________________________________
Net income per share $3.07
______________________________________________________________________________
______________________________________________________________________________
<FN>
<F1> MultiServ's preacquisition extinguishment of debt.
</FN>
</TABLE>
Pro forma information relative to United Defense, L.P. and MultiServ
International, N.V. presented for the year ended December 31, 1993, include
adjustments to reflect additional expenses of MultiServ associated with the
amortization of the created goodwill and the write-up of fixed assets to fair
market value. The pro forma results also include additional provisions for
interest and debt expenses on the MultiServ acquisition borrowings, the
elimination of BMY-CSD and accounting for the 40% ownership interest of the
Company in United Defense, L.P. on the equity method of accounting. The pro
forma operating results are not necessarily indicative of what would have
occurred had the combinations actually taken place on January 1, 1993. Also,
no adjustments have been made to operations for the impact of certain
anticipated operational and administrative efficiencies.
3. Investments
The following is a summary of held-to-maturity debt securities at December 31,
1994:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
(In thousands) Cost Gains Losses Value
__________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Corporate debt securities $ 31,685 $ - $ 1,089 $ 30,596
NonU.S. Government debt securities 17,555 - 682 16,873
__________________________________________________________________________________________________
$ 49,240 $ - $ 1,771 $ 47,469
__________________________________________________________________________________________________
__________________________________________________________________________________________________
</TABLE>
The amortized cost and fair market value of fixed income debt securities at
December 31, 1994, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because the borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Amortized
(In thousands) Cost Fair Value
__________________________________________________________________________________________________
<S> <C> <C>
Held to Maturity
Due in one year or less $ 5,529 $ 5,438
Due after one year through five years 43,711 42,031
__________________________________________________________________________________________________
$ 49,240 $ 47,469
__________________________________________________________________________________________________
__________________________________________________________________________________________________
</TABLE>
Proceeds from fixed income debt securities which matured during 1994
amounted to $24,740,045.
During the first quarter of 1994, the Company sold its remaining shares of
an investment in a marketable equity security that was held available-for-
sale. During 1993, the Company sold the majority of its holdings in this
investment. These sales have been included as Revenues under Gain on Sale
of Investments in the Consolidated Statements of Income.
4. Inventories
<TABLE>
<CAPTION>
Inventories are summarized as follows:
(In thousands) 1994 1993
____________________________________________________________________________
<S> <C> <C>
Classification:
Finished goods $ 25,641 $ 23,543
Work in process 28,625 25,612
Raw materials and purchased parts 53,338 52,608
Stores and supplies 13,595 12,171
____________________________________________________________________________
121,199 113,934
Long-term contract costs (including general and
administrative costs of $7,576) - 110,133
Contract loss reserves -
(4,979)
Progress payments - U.S. Government -
(16,662)
____________________________________________________________________________
$ 121,199 $ 202,426
____________________________________________________________________________
____________________________________________________________________________
Valued at lower of cost or market:
LIFO basis $ 86,722 $ 80,786
FIFO basis 16,938 16,133
Average cost basis 17,539 105,507
____________________________________________________________________________
$ 121,199 $ 202,426
____________________________________________________________________________
____________________________________________________________________________
</TABLE>
No current year amounts are shown under long-term contract costs as these
costs were contributed to United Defense, L.P.
The Company had incurred costs that are assignable to units not yet produced
as of the end of 1993. The aggregate amount incurred, exclusive of raw
materials and purchased parts included in long-term contract costs, was
$12,069,000 as of December 31, 1993. These costs related primarily to U.S.
Government contracts for certain tracked vehicles.
Inventories valued on the LIFO basis at December 31, 1994 and 1993 were
approximately $36,564,000 and $33,878,000, respectively, less than the
amounts of such inventories valued at current costs.
As a result of reducing certain inventory quantities valued on the LIFO
basis, profits from liquidation of inventories were recorded which increased
net income by $276,000, $246,000 and $3,316,000 in 1994, 1993 and 1992,
respectively.
5. Property, Plant and Equipment
Property, plant and equipment, net, consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
_______________________________________________________________
<S> <C> <C>
Land and improvements $ 24,955 $ 27,205
Buildings and improvements 110,190 142,971
Machinery and equipment 820,868 857,941
Uncompleted construction 28,917 32,612
_______________________________________________________________
984,930 1,060,729
Less allowance for depreciation 549,962 569,074
_______________________________________________________________
$ 434,968 $ 491,655
_______________________________________________________________
_______________________________________________________________
</TABLE>
The following table shows the estimated useful lives of different types of
assets:
<TABLE>
<CAPTION>
Classification Expected Useful Lives
__________________________________________________________________________
<S> <C>
Land improvements 10 years
Buildings and improvements 10 to 50 years
Certain plant, buildings and installations
(Principally Metal Reclamation and
Mill Services Group.) 5 to 25 years
Machinery and equipment 3 to 25 years
__________________________________________________________________________
</TABLE>
6. Investment in Unconsolidated Entities
The Company has a 40% interest in United Defense, L.P. which principally
manufactures ground combat vehicles for the U.S. and international
governments (see Note 2). The Company's other equity investments are in the
Metal Reclamation and Mill Services group. Summary information is not shown
for 1993 or 1992 as it is immaterial to the Consolidated Financial
Statements. The following table presents summarized financial information
on a combined 100% basis of the companies accounted for by the equity
method:
<TABLE>
<CAPTION>
(In thousands) 1994
_______________________________________________________
<S> <C>
Current assets $ 321,596
Noncurrent assets 187,896
Current liabilities 315,983
Noncurrent liabilities 56,485
Net sales 1,129,528
Costs and expenses 983,955
Net income 134,441
_______________________________________________________
</TABLE>
The Company's share of income of all unconsolidated entities for 1994 was
$64,120,000.
7. Employee Benefit Plans
Pensions:
The actuarially computed net pension cost includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
__________________________________________________________________________
<S> <C> <C> <C>
Defined benefit plans:
Service cost $ 10,604 $ 12,077 $ 11,521
Interest cost 14,160 15,468 14,945
Actual return on plan assets (7,885) (33,984) (18,072)
Net amortization and deferral (12,909) 8,547 (6,134)
__________________________________________________________________________
Net periodic pension cost 3,970 2,108 2,260
Multi-employer and defined
contribution plans 7,250 5,110 4,649
__________________________________________________________________________
Total pension cost $ 11,220 $ 7,218 $ 6,909
__________________________________________________________________________
__________________________________________________________________________
</TABLE>
The Company participates in multi-employer plans, providing defined benefits
for certain unionized employees, the cost of which totaled $3,285,000,
$2,474,000 and $2,426,000, for 1994, 1993 and 1992, respectively.
The following tables sets forth the financial status and amounts recognized
in the Company's Consolidated Statements of Financial Position at December
31, 1994 and 1993:
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
_____________________ ______________________
(In thousands) 1994 1993 1994 1993
______________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested $130,826 $152,412 $ 12,751 $ 30,492
Non-vested 6,696 3,881 823 995
______________________________________________________________________________________________________
Accumulated benefit obligation 137,522 156,293 13,574 31,487
Effect of increase in compensation 33,438 47,757 1,204 3,717
______________________________________________________________________________________________________
Projected benefit obligation 170,960 204,050 14,778 35,204
Plan assets at fair value 234,489 256,786 9,628 32,858
______________________________________________________________________________________________________
Plan assets in excess of (less than)
projected benefit obligations 63,529 52,736 (5,150) (2,346)
Unrecognized prior service costs 12,512 13,553 1,202 5,647
Unrecognized net loss (gain) (25,868) (19,127) 589 (443)
Unrecognized net asset (24,926) (29,367) (192) (3,225)
Minimum liability adjustment - - (1,106) (1,142)
______________________________________________________________________________________________________
Prepaid pension asset (liability) $ 25,247 $ 17,795 $ (4,657) $ (1,509)
______________________________________________________________________________________________________
______________________________________________________________________________________________________
</TABLE>
Plan assets include equity and fixed-income securities. At December 31,
1994 and 1993, 366,320 Harsco common shares with a fair market value of
$14,973,000 and $14,882,000, respectively are included in plan assets.
Dividends paid on Harsco Common Stock amounted to $512,000 in 1994 and in
1993.
The actuarial assumptions used for the defined benefit pension plans,
including foreign plans, are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
____________________________________________________________________________
<S> <C> <C> <C>
Weighted average assumed discount rates 7.5% 7.4%
6.9%
Weighted average expected long-term rate
of return on plan assets 8.6% 9.0%
9.2%
Rates of compensation increase 5.3% 5.3%
5.9%
____________________________________________________________________________
</TABLE>
The change in the assumed discount rate in 1994 had the effect of decreasing
the projected benefit obligation by $13,641,000. The changes in the assumed
discount and compensation rates had the effect of decreasing the projected
benefit obligation by $31,956,000 in 1993, and increasing the projected
benefit obligation by $20,699,000 in 1992.
Postretirement Benefits:
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106), for its domestic plans. In
conjunction with the adoption of SFAS 106, the Company elected to
immediately recognize the accumulated postretirement benefit obligations for
current and future retirees, and recognized accrued postretirement benefit
cost (transition obligation), in the amount of $7.2 million, ($.27 per
share) net of a deferred income tax benefit of $4.3 million. Effective
January 1, 1993, the Company adopted SFAS 106 for its foreign plans, the
effect of which was immaterial.
The postretirement benefit expense (health care and life insurance) for
1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
Health Life
(In thousands) Care Insurance Total
______________________________________________________________________________________
<S> <C> <C> <C>
1994
Service cost $ 46 $ 52 $ 98
Interest cost 292 244 536
Amortization (Gain) (154) (29) (183)
______________________________________________________________________________________
Total postretirement benefit costs $ 184 $ 267 $ 451
______________________________________________________________________________________
______________________________________________________________________________________
1993
Service cost $ 235 $ 73 $ 308
Interest cost 532 324 856
Amortization (Gain) (319) - (319)
______________________________________________________________________________________
Total postretirement benefit costs $ 448 $ 397 $ 845
______________________________________________________________________________________
______________________________________________________________________________________
1992
Service cost $ 289 $ 80 $ 369
Interest cost 560 334 894
Amortization (Gain) - - -
______________________________________________________________________________________
Total postretirement benefit costs $ 849 $ 414 $ 1,263
______________________________________________________________________________________
______________________________________________________________________________________
</TABLE>
The 1994 and 1993 postretirement benefit liability recorded in the
Consolidated Balance Sheets included the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
______________________________________________________________________________________________________________________
Health Life Health Life
Care Ins. Total Care Ins. Total
______________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Current retirees $3,398 $2,765 $6,163 $3,786 $3,250 $ 7,036
Future retirees 329 769 1,098 4,489 1,202 5,691
______________________________________________________________________________________________________________________
Total 3,727 3,534 7,261 8,275 4,452 12,727
Unrecognized gain 998 945 1,943 295 938 1,233
______________________________________________________________________________________________________________________
Accumulated postretirement
benefit liability $4,725 $4,479 $9,204 $8,570 $5,390 $13,960
______________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________
</TABLE>
The actuarial assumptions used for plans under SFAS 106 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
_____________________________________________________________________________
<S> <C> <C> <C>
Assumed discount rate 7.5% 7.0% 7.2%
Health care cost trend rate 12.4% 13.0% 13.0%
Decreasing to ultimate rate 6.0% 6.0% 6.0%
Effect of one percent increase in
health care cost trend rate:
On cost components $ 25 $110 $127
On accumulated benefit obligation $364 $937 $645
_____________________________________________________________________________
</TABLE>
It is anticipated that the health care cost trend rate will be achieved in
2004.
Savings Plans:
The Company has defined contribution savings plans designed to comply with the
requirements of the Employee Retirement Income Security Act of 1974 ("ERISA")
and Section 401(k) of the Internal Revenue Code. The plans cover
substantially all employees with the exception of any such employees
represented by a collective bargaining agent, unless the collective bargaining
agreement expressly provides otherwise. Employee contributions are generally
determined as a percentage of covered employee's compensation received. The
expense for contributions to the plans by the Company were $2,825,000,
$4,213,000 and $3,744,000 for 1994, 1993 and 1992, respectively.
8. Debt and Credit Agreements
The Company amended and restated its two committed credit facilities during
the year with a group of banks to take advantage of favorable terms and
pricing, to modify the facilities so that they are suitable for back-up to
commercial paper borrowings and eliminate or modify numerous covenants. The
first agreement, the 364-Day Facility, allows the Company to borrow up to $150
million, expires in June, 1995 and is subject to successive annual renewals
thereafter. The second agreement, the 5-Year Facility, permits the Company to
borrow up to $150 million and expires in June, 1999. Borrowings under both
facilities may be denominated in either U.S. dollars, British pounds, French
francs, Belgian francs, German marks or other currencies. Interest rates are
either a negotiated rate, a rate based upon the U.S. federal funds interbank
market, prime rate, or a rate based upon the London Interbank Offered Rate
(LIBOR). The Company pays facility fees based upon the full amount of each
facility that vary based upon its Moody's and Standard & Poor's credit
ratings. At December 31, 1994, the 364-Day Facility fee was .08% per annum,
while the 5-Year Facility fee was .125% per annum. At December 31, 1994,
there were no borrowings outstanding under these facilities.
Also during the year, the Company instituted a commercial paper borrowing
program under which it can issue up to $150 million of short-term notes in the
U.S. commercial paper market. The commercial paper program is also supported
by the two credit facilities. The Company limits the aggregate commercial
paper and credit facility borrowings at any one time to a maximum $300
million. Interest rates are based upon market conditions, but are generally
lower than comparable borrowings under the committed bank credit facilities.
At December 31, 1994, the Company had outstanding $24.1 million in commercial
paper. Commercial paper is classified as long-term debt because the Company
has the ability and intent to refinance it on a long-term basis through
existing long-term credit facilities.
Short-term debt consists of the following:
<TABLE>
<CAPTION>
(In Thousands) 1994 1993
_______________________________________________________________
<S> <C> <C>
Revolving Credit Facility $ - $ 30,000
Overdraft facilities and other
short-term borrowings 14,236 21,884
_______________________________________________________________
$ 14,236 $ 51,884
_______________________________________________________________
_______________________________________________________________
</TABLE>
The weighted average interest rate for short-term borrowings at December 31,
1994 and 1993 was 7.6% and 4.9%, respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
____________________________________________________________________________________
<S> <C> <C>
8.75% Notes due May 15, 1996 $ 100,000 $ 100,000
6.0% Notes due September 15, 2003 150,000 150,000
Commercial Paper Borrowings supported by
bank credit facility with interest up to 6.2% 24,139 -
Eurocurrency Facility, varying short-term interest rates - 68,792
Industrial Development Bonds, payable in varying
amounts to 2004 with interest up to 8.25% 10,750 10,890
Project financing and other, payable in varying
amounts to 2003 with interest up to 17.74% 66,859 46,812
____________________________________________________________________________________
351,748 376,494
Less current maturities 11,502 11,625
____________________________________________________________________________________
$ 340,246 $ 364,869
____________________________________________________________________________________
____________________________________________________________________________________
</TABLE>
The committed bank credit facilities and certain notes payable agreements
contain covenants restricting, among other things, the amount of issuance of
new debt as defined. At December 31, 1994, the Company was in compliance
with these covenants.
The maturities of long-term debt for the four years following December 31,
1995, are as follows:
<TABLE>
<CAPTION>
(In thousands)
_____________________________________________________________
<S> <C> <C> <C> <C>
1996 $ 123,614 1998 $33,372
1997 $ 9,484 1999 $12,629
</TABLE>
Cash payments for interest on all debt, net of capitalized interest, were
$33,544,000, $15,165,000 and $20,465,000 in 1994, 1993 and 1992,
respectively.
The Company has on file with the Securities and Exchange Commission, a Form
S-3 shelf registration for the possible issuance of up to an additional
$200,000,000 of new debt securities, preferred stock or common stock.
9. Leases
The Company leases certain property and equipment under noncancelable
operating leases. Rent expense under all operating leases was $10.9
million, $10.7 million and $9.6 million in 1994, 1993 and 1992,
respectively.
Future minimum lease payments under leases are as follows:
<TABLE>
<CAPTION>
__________________________________________________
Operating
(In Thousands) Leases
__________________________________________________
<S> <C>
1995 $ 7,328
1996 6,234
1997 4,834
1998 3,376
1999 2,803
Later years 17,958
__________________________________________________
</TABLE>
10. Commitments
and Contingencies
Federal Excise Tax and Other Matters Related to the Five-ton Truck Contract:
Subsequent to the award of the five-ton truck contract in 1986, the Federal
Excise Tax (FET) law, which was due to expire on October 1, 1988, was
extended. The Company and its legal counsel consider that the excise tax
required to be paid by the extension of the law constitutes an after-imposed
tax and therefore is subject to recovery by a price adjustment. In January
1993, the Armed Services Board of Contract Appeals decided in favor of the
Company's position, ruling that Harsco is entitled to a price adjustment to
the contract to reimburse FET paid on vehicles that were to be delivered
after October 1, 1988. The Government filed a motion requesting the Armed
Services Board of Contract Appeals to reopen the proceedings to admit
additional evidence or alternatively to reconsider its decision. On
February 25, 1994, the Armed Services Board of Contract Appeals denied the
Government's motions. In June 1994, the Government appealed these decisions
to the Court of Appeals for the Federal Circuit, but voluntarily withdrew
its appeal effective August 16, 1994. On February 23, 1995, the Government
filed another motion to reopen the proceedings at the Armed Services Board
of Contract Appeals to allow additional discovery or alternatively, to
reconsider its decision. The Company will oppose this motion. The
Government might also seek to overturn the decision in a separate legal
action based upon the results of the continuing investigation described
below.
As previously reported, the Company had already anticipated prevailing on
its claims and recorded as an account receivable the amount of the FET it
has paid on these vehicles of approximately $47 million, and the related
claim arising from changes in shipment destinations of approximately $15
million. The January 1993 decision only rules upon the Company's claim for
reimbursement of the taxes paid without establishing the specific amount of
the reimbursement. Subject to the Company prevailing against any future
Government motions or other legal challenges to the judgment, the government
contracting officer will be required to determine the proper amount of the
price adjustment consistent with the ruling. Under applicable law, interest
also accrues on the amount owed. Although the January 1993 decision does
not directly deal with the claim for $15 million on the related destination
change issue, the Company believes that the ruling resolves the key factual
issues in that claim in that claim in favor of Harsco as well. The Company
continues to anticipate favorable resolution with respect to both claims.
Final resolution of the issues in favor of the Company would not result in
the recording of additional income other than any interest received, but
would have a positive cash flow effect. To the extent that any portion of
the FET and related claims is not recovered, additional losses on the
contract will have to be recognized which could have a material effect on
quarterly or annual operating results.
The Commercial Litigation Branch of the Department of Justice is continuing
to conduct an investigation with respect to the facts underlying the
Company's claim for reimbursement of Federal Excise Tax payments and its
related claim regarding destination changes. In addition, the investigation
is examining the way the Company charged the Army for sales of certain cargo
truck models for which the Company did not pay Federal Excise Tax based upon
an exemption in the law. If the Government files a civil action against the
Company as a result of the civil investigation, it may seek various remedies
including forfeiture by the Company of its claims for reimbursement of FET
and related claims, treble damages, and civil penalties.
In a related matter, the Internal Revenue Service is reviewing Harsco's
position that certain cargo truck models are not taxable due to a provision
in the tax law that exempts trucks having a gross vehicle weight of 33,000
pounds or less, and has tentatively concluded that they appear to be
taxable. If the Internal Revenue Service asserts that tax is due on these
vehicles, the total claim could be $39 million plus interest and penalty, if
any. The Company plans to vigorously contest any such tax deficiency.
Although there is risk of an adverse outcome, the Company and its counsel
believe that these trucks are not taxable. Even if they are held to be
taxable, the Company and its counsel believe the Government would be
obligated to reimburse the Company for the majority of the tax, because it
would constitute an after-imposed tax that would be subject to the ruling of
the Armed Services Board of Contract Appeals discussed above, resulting in a
net maximum liability for Harsco of $16 million plus interest and penalty,
if any.
The Company had filed other nonFET claims relating to the five-ton truck
contract totalling in excess of $55 million plus interest, with respect to
contract changes, inadequate technical data package, and delays and
disruptions. On August 26, 1994, the Company and the Government signed a
modification to the five-ton truck contract resolving all outstanding
contractual matters concerning that agreement with certain limited
exceptions including FET related matters. The contract modification
includes resolution of the Company's claims described in earlier Company
filings for contract changes, inadequate technical data package, and delays
and disruptions. The modification provides for an increase of $12.5 million
in the contract price and payment has been received. The price increase
yielded net revenue to the Company of approximately $12.0 million after
related excise tax and other associated costs, which is included in other
revenues in the Consolidated Statements of Income.
M9 Armored Combat Earthmover Claim:
The Company and its legal counsel are of the opinion that the U.S.
Government did not exercise option three under the M9 Armored Combat
Earthmover (ACE) contract in a timely manner, with the result that the unit
price for options three, four and five are subject to renegotiation. Claims
reflecting the Company's position have been filed with respect to all
options purported to be exercised, totalling in excess of $60 million plus
interest. No recognition has been given in the accompanying financial
statements for any recovery on these claims. The Company is awaiting a
decision on its Motion for Summary Judgment relating to the late option
exercise that is now pending before the Armed Services Board of Contract
Appeals.
In addition, the Company negotiated a settlement with the U. S. Government
of a smaller outstanding claim concerning this contract which provides for
payment of $3.8 million by the U.S. Government to Harsco. The Company
recognized such amount as other revenue in the Consolidated Statements of
Income in the first quarter of 1994 and payment has been received.
Government Furnished Equipment Overcharge Claim:
The Company filed a claim in the Armed Services Board of Contract Appeals
asserting that the United States Government has overcharged Harsco in the
sale of government-furnished equipment on various contracts, all of which
have been completed. In December 1994, the Government and the Company
agreed to a settlement of the Company's claim on those contracts and several
other disputed contracts not included in the litigation. Under the terms of
the settlement, the Government agreed to pay the Company approximately
$20,400,000. This amount has been included in other revenues in the
Consolidated Statements of Income. Each party releases the other from all
liability relating to the completed contracts, including the Government's
previous claim for a payment from the Company of approximately $2,200,000.
Payment was received in the first quarter of 1995.
Other Litigation:
On March 13, 1992, the U.S. Government filed a counterclaim against the
Company in a civil suit alleging violations of the False Claims Act and
breach of a contract to supply M109A2 Self-Propelled Howitzers. The
counterclaim was filed in the United States Claims Court along with the
Government's answer to the Company's claim of approximately $5 million
against the Government for costs incurred on this contract relating to the
same issue. The Government claims breach of contract damages of $7.3
million and in addition seeks treble that amount under the False Claims Act
plus unquantified civil penalties which the Company estimates to be
approximately $3.3 million. The Company and its counsel believe it is
unlikely that resolution of these claims will have a material adverse effect
on the Company's financial position, however, it could have a material
effect on quarterly or annual results of operations.
Iran's Ministry of Defense initiated arbitration procedures against the
Company in 1991 under the rules of the International Chamber of Commerce for
damages allegedly resulting from breach of various contracts executed by the
Company and the Ministry of Defense between 1970 and 1978. The contracts
were terminated in 1978 and 1979 during the period of civil unrest in Iran
that preceded the Iranian revolution. Iran has asserted a claim under one
contract for repayment of a $7.5 million advance payment it made to the
Company, plus interest at 12% through June 27, 1991 in the amount of $25.3
million. Iran has also asserted a claim for damages under other contracts
for $76.3 million. The Company intends to assert various defenses and also
has filed counterclaims against Iran for damages in excess of $7.5 million
which it sustained as a result of Iran's breach of contract, plus interest.
The Company's management and its counsel believe it is unlikely that
resolution of these claims will have a material adverse effect on the
Company's financial position or results of operations.
In 1992, the United States Government through its Defense Contract Audit
Agency commenced an audit of certain contracts for sale of tracked vehicles
by the Company to foreign governments, which were financed by the United
States Government through the Defense Security Assistance Agency. The
Company cooperated with the audit and responded to a number of issues raised
by the audit. In September 1994, the Company received a subpoena issued by
the Department of Defense Inspector General seeking various documents
relating to sale contracts between the Company and foreign governments which
were funded by the Defense Security Assistance Agency. The Company is
continuing to cooperate and is responding to the subpoena. Although the
Government has not clearly identified to the Company the focus of its
investigation, based on discussions with the agent in charge, it appears
that it focuses on whether the Company received progress payments in advance
of the schedule permitted by the Defense Security Assistance Agency
regulations and Company certifications. The Company's management and its
counsel believe it is unlikely that this issue will have a material adverse
effect on the Company's financial position or results of operations.
In June 1994, the shareholder of the Ferrari Group, a Belgium holding
company involved in steel mill services and other activities, filed a legal
action in Belgium against Heckett MultiServ, S.A. and S.E.A.E., subsidiaries
of MultiServ International N.V. (a subsidiary of Harsco Corporation). The
action alleges that these two subsidiaries breached contracts arising from
letters of intent signed in 1992 and 1993 concerning the possible
acquisition of the Ferrari Group, claiming that the subsidiaries were
obligated to proceed with the acquisition and failed to do so. The action
seeks damages of 504 million Belgian Francs (approximately U.S. $16
million). The Company intends to vigorously defend against the action and
believes that based on conditions contained in the letters of intent and
other defenses it will prevail. The Company and its counsel believe that is
unlikely that these claims will have a material adverse effect on the
Company's financial position or results of operations.
On August 29, 1994, the Company filed a legal action in the United States
District Court for the Southern District of New York against certain former
shareholders of MultiServ International N.V. seeking recovery of damages
arising from misrepresentations which the Company claims were made to it in
connection with its purchase of the MultiServ International N.V. stock on
August 31, 1993. The Complaint seeks damages in an amount to be determined.
Environmental:
The Company is involved in a number of environmental remediation
investigations and clean-ups and, along with other companies, has been
identified as a "potentially responsible party" for certain waste disposal
sites. While each of these matters is subject to various uncertainties, it
is probable that the Company will agree to make payments toward funding
certain of these activities and it is possible that some of these matters
will be decided unfavorably to the Company. The Company has evaluated its
potential liability, and its financial exposure is dependent upon such
factors as the continuing evolution of environmental laws and regulatory
requirements, the availability and application of technology, the allocation
of cost among potentially responsible parties, the years of remedial
activity required and the remediation methods selected. The Consolidated
Balance Sheets at December 31, 1994 and 1993, include an accrual of $6.2
million and $10.1 million, respectively, for environmental matters. The
amounts charged to earnings on a pre-tax basis related to environmental
matters totaled $1.2 million, $3.2 million and $3.5 million for 1994, 1993
and 1992, respectively.
The liability for future remediation costs is evaluated on a quarterly
basis. Actual costs to be incurred at identified sites in future periods
may vary from the estimates, given inherent uncertainties in evaluating
environmental exposures. Subject to the imprecision in estimating future
environmental costs, the Company does not expect that any sum it may have to
pay in connection with environmental matters in excess of the amounts
recorded or disclosed above would have a material adverse effect on its
financial position or results of operations.
Other:
The Company is subject to various other claims, legal proceedings and
investigations covering a wide range of matters that arose in the ordinary
course of business. In the opinion of management, all such matters are
adequately covered by insurance or by accruals, and if not so covered, are
without merit or are of such kind, or involve such amounts, as would not
have a material adverse effect on the financial position or results of
operations of the Company.
11. Income Taxes
Income before taxes, minority interest, and cumulative effect of accounting
changes in the Consolidated Statements of Income consist of:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
______________________________________________________________________________________
<S> <C> <C> <C>
Income before income taxes:
Domestic $ 129,225 $ 126,521 $ 120,179
Foreign 19,615 10,732 20,327
______________________________________________________________________________________
$ 148,840 $ 137,253 $ 140,506
______________________________________________________________________________________
______________________________________________________________________________________
Provision for income taxes:
Currently payable:
Federal $ 37,193 $ 38,053 $ 34,607
Foreign 12,271 8,882 6,906
State 6,697 7,395 6,527
______________________________________________________________________________________
56,161 54,330 48,040
Deferred federal and state 3,503 4,195 27
Deferred foreign (128) (2,190) 993
______________________________________________________________________________________
$ 59,536 $ 56,335 $ 49,060
______________________________________________________________________________________
______________________________________________________________________________________
</TABLE>
Cash payments for income taxes were $49,151,000, $55,431,000 and $50,526,000,
for 1994, 1993 and 1992, respectively.
The following is a reconciliation of the normal expected statutory U.S.
federal income tax rate to the effective rate as a percentage of income before
provision for income taxes, minority interest, and cumulative effect on
accounting changes as reported in the financial statements:
<TABLE>
<CAPTION>
1994 1993 1992
______________________________________________________________________________________
<S> <C> <C> <C>
U.S. federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of federal
income tax benefit 3.2 3.9 3.0
Export sales corporation benefit (1.1) (1.0) (1.2)
Foreign losses for which no tax benefit
was recorded 2.4 2.1 .5
Difference in effective tax rates on
foreign earnings and remittances (1.4) (.5) (2.3)
Nondeductible acquisition costs 2.0 1.0 .5
Other, net (.1) .5 .4
______________________________________________________________________________________
Effective income tax rate 40.0% 41.0% 34.9%
______________________________________________________________________________________
______________________________________________________________________________________
</TABLE>
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109). The
cumulative effect of this change in accounting principle increased net
income in the first quarter of 1993 by $6,802,000, or $.27 per share. Prior
years' financial statements have not been restated.
The tax effects of the primary temporary differences giving rise to the
Company's deferred tax assets and liabilities for the years ended December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
__________________________________________________________________________________________________________
Deferred Income Taxes Asset Liability Asset Liability
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Depreciation $ - $ 38,301 $ - $ 50,111
Expense accruals 35,027 - 39,413 -
Inventories 5,710 - 5,110 -
Provision for receivables - 30,863 - 22,144
Postretirement benefits 3,564 - 5,637 -
Deferred revenue - 1,330 - 7,384
Unrelieved foreign tax losses 20,767 - 19,714 -
Unrealized translation adjustments 6,229 - 6,247 -
Pensions - 7,461 - 6,502
Investment in United Defense, L.P. 3,783 - - -
Other - 2,152 578 -
__________________________________________________________________________________________________________
Subtotal 75,080 80,107 76,699 86,141
Valuation allowance (23,215) - (25,251) -
__________________________________________________________________________________________________________
Total Deferred Income Taxes $ 51,865 $ 80,107 $ 51,448 $ 86,141
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
</TABLE>
At December 31, 1994, certain of the Company's foreign subsidiaries had
total available net operating loss carryforwards (NOL's) of approximately
$54,000,000 of which approximately $11,800,000 will expire by 1998,
$9,400,000 will expire by 1999 and the balance may be carried forward
indefinitely. Included in the total are $27,900,000 of preacquisition NOL's
relating to the MultiServ acquisition.
During 1994 and 1993, $13,500,000 and $8,500,000, respectively, of the
MultiServ preacquisition NOLs were utilized by the Company resulting in tax
benefits of $3,774,000 and $2,764,000, respectively, which were allocated to
reduce goodwill related to the acquisition.
The valuation allowance of $23,215,000 relates principally to cumulative
unrelieved foreign tax losses and unrealized translation adjustments which
are uncertain as to realizability at December 31, 1994. To the extent that
the preacquisition NOLs, are utilized in the future and the associated
valuation allowance reduced, the tax benefit thereof will be allocated to
reduce goodwill related to the acquisition.
The decrease in valuation allowance for 1994 results primarily from the
utilization of foreign tax loss carryforwards and the release of valuation
allowances in certain foreign jurisdictions based on the Company's
reevaluation of the realizability of future benefits resulting from tax
planning strategies implemented in 1994. The release of valuation
allowances in those foreign jurisdictions was allocated to further reduce
goodwill related to the acquisition by $3,367,000.
Overall, the net change in the valuation allowance relates to a decrease
from the utilization of preacquisition NOL's, net of increases applicable to
the creation of NOL's in 1994 and the effect of foreign currency translation
adjustments.
12. Capital Stock
The authorized capital stock consists of 70,000,000 shares of common stock
and 4,000,000 shares of preferred stock, both having a par value of $1.25
per share. The preferred stock is issuable in series with terms as fixed by
the Board of Directors. No preferred stock has been issued other than the
preferred stock rights for a Series A Junior Participating Cumulative
Preferred Stock distributed by the Company in September 1987 for each
outstanding share of common stock. The rights may be exercised, under
certain conditions, to purchase 1/100th share of a new Series A Junior
Participating Cumulative Preferred Stock at a purchase price of $200. This
new preferred stock has a par value of $1.25 per share and a liquidation
price of $150 per share with 400,000 shares authorized and none issued. The
rights are not exercisable or transferable apart from the common stock,
until ten days after a public announcement that a person or group has
acquired 20% or more, or intends to commence a tender offer for 25% or more
of the Company's common stock. The rights, which expire on September 28,
1997, do not have voting power, and may be redeemed by the Company at a
price of $.05 per right at any time until the 10th business day following
public announcement that a person or group has accumulated 20% or more of
the Company's outstanding shares.
In January 1992, the Board of Directors authorized the purchase, over a two-
year period, of up to 4,000,000 shares of its common stock in unsolicited
open market or privately negotiated transactions at prevailing market
prices. Through December 31, 1993, 2,064,555 shares of common stock had
been purchased under this plan at an aggregate cost of $73,862,000. In
1994, there were no stock purchases under a one year authorization of the
Board of Directors. In January 1995, the Board of Directors authorized the
purchase, over a one year period, of up to 500,000 shares of its common
stock.
<TABLE>
<CAPTION>
Common Stock Summary
__________________________________________________________________________
Shares Treasury Shares
Balances Issued Shares Outstanding
__________________________________________________________________________
<S> <C> <C> <C>
December 31, 1991 31,576,817 5,341,200 26,235,617
December 31, 1992 31,925,423 6,545,864 25,379,559
December 31, 1993 32,114,499 7,146,698 24,967,801
December 31, 1994 32,343,553 7,161,303 25,182,250
__________________________________________________________________________
</TABLE>
13. Stock Options
The Company has granted stock options to officers, directors and key
employees for the purchase of its common stock under two shareholder
approved plans, one of which expired in 1985. In April 1993, stockholders
approved an increase in the number of shares that may be issued under the
plan from 1,500,000 to 2,500,000. At December 31, 1994 and 1993, 1,016,284
and 1,204,560 shares, respectively, were available for granting of incentive
stock options, nonqualified stock options or stock appreciation rights.
Options are granted at fair market value at date of grant and become
exercisable commencing one year later.
At December 31, 1994, options to purchase 298,246 shares were exercisable.
Changes during 1994 and 1993 in options outstanding were as follows:
<TABLE>
<CAPTION>
Shares Under Option Price
Option Range per Share
___________________________________________________________________________
<S> <C> <C>
Outstanding, January 1, 1993 687,204 $15.75 to $35.44
Granted 220,680 40.94 to 41.56
Exercised (189,076) 23.44 to 32.13
Terminated and expired (4,390) 41.56
___________________________________________________________________________
Outstanding, December 31, 1993 714,418 15.75 to 41.56
Granted 232,480 42.00 to 43.25
Exercised (229,054) 15.75 to 41.56
Terminated and expired (44,204) 41.56 to 43.25
___________________________________________________________________________
Outstanding, December 31, 1994 673,640 23.44 to 43.25
___________________________________________________________________________
___________________________________________________________________________
</TABLE>
During 1994 and 1993, the Company had non-cash transactions related to stock
option exercises of $677,000 and $1,333,000, respectively, whereby old
shares are exchanged for new shares.
14. Financial Instruments
Off-Balance Sheet Risk:
As collateral for performance and advances on long-term contracts and to
ceding insurers, the Company is contingently liable under standby letters of
credit and bonds in the amount of $64.7 million and $220.1 million at
December 31, 1994 and 1993, respectively. These standby letters of credit
and bonds are generally in force from one to three years for which the
Company pays fees to various banks and insurance companies that generally
range from .25 to 1 percent per annum of their face value. If the Company
were required to obtain replacement standby letters of credit and bonds as
of December 31, 1994 for those currently outstanding, it is the Company's
opinion that the replacement costs for such standby letters of credit and
bonds would not significantly vary from the present fee structure.
At December 31, 1994 and 1993, the Company had $40.6 million and $35.4
million, respectively, of forward foreign currency exchange contracts
outstanding. These contracts are part of a worldwide program to minimize
foreign currency exchange operating income and balance sheet exposure. The
unsecured contracts generally mature within 12 months and are principally
with banks. The Company is exposed to credit loss in the event of non-
performance by the other parties to the contracts. The Company evaluates
the creditworthiness of the counterparties' financial condition and does not
expect default by the counterparties.
Foreign Exchange Risk Management:
Foreign currency exchange contracts are generally used to hedge commitments,
such as foreign currency debt, the purchase of equipment, and foreign
currency cash flows for certain anticipated export sales transactions.
Also, as discussed in Note 1, the Company enters into foreign exchange
contracts that are used to exchange the proceeds from U.S. commercial paper
borrowings into foreign currency, and simultaneously enters into a forward
foreign exchange contract to exchange such foreign currency back into U.S.
dollars at the maturity date of the U.S. commercial paper borrowings. These
forward foreign exchange contracts allow the Company to finance certain
foreign operations at effective interest rates that are generally lower than
in the foreign country. These forward contracts do not qualify as hedges
for financial reporting purposes.
The table below summarizes by currency the contractual amounts of the
Company's forward exchange contracts in U.S. dollars as of December 31,
1994. The "sell" amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies, and the "buy" amounts represent the
U.S. dollar equivalent of commitments to purchase foreign currencies.
<TABLE>
<CAPTION>
$ U.S. Recognized Unrealized
(In Thousands) Type Equivalent Maturity Gain (Loss) Gain (Loss)
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Forward exchange contracts:
Belgian francs Sell $19,120 1-12-95 $(290) -
French francs Sell 11,740 1-12-95 (187) -
French francs Buy 6,980 1-12-95 132 -
German marks Buy 2,606 Various - $244
to 1998
Finnish markka Buy 158 9-1-95 - 4
__________________________________________________________________________________________________________
$40,604 $(345) $248
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
</TABLE>
At December 31, 1994 the Company had forward exchange contracts for Belgian
and French francs to exchange those currencies to U.S. dollars at the time of
maturity of the commercial paper debt. Also, the Company had a forward
exchange contract for U.S. dollars to settle the French francs forward
exchange contract. These forward contracts do not qualify as hedges for
financial reporting purposes; therefore, gains and losses on these contracts
are included in income. At December 31, 1994, the Company had gains of
$132,000 and losses of $477,000 on these contracts. The Company also had
forward exchange contracts in Finnish markka and German marks which were used
to hedge a product cost transaction. The counterparties of these agreements
are major financial institutions; therefore, management believes the risk of
incurring losses related to these contracts is remote.
The table below summarizes by major currency the contractual amounts of the
Company's forward exchange contracts in U.S. dollars as of December 31, 1993.
<TABLE>
<CAPTION>
$ U.S. Recognized Unrealized
(In Thousands) Type Equivalent Maturity Gain (Loss) Gain (Loss)
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Forward exchange contracts:
Swedish kroner Sell $10,000 3-21-94 - $ (144)
Belgian francs Sell 25,000 1-31-94 - 291
Italian lire Buy 60 9-1-94 - (2)
Italian lire Buy 363 8-1-94 - (16)
__________________________________________________________________________________________________________
$35,423 - $ 129
__________________________________________________________________________________________________________
__________________________________________________________________________________________________________
</TABLE>
At the end of 1993, the Company had forward exchange contracts in Swedish
kroner, Belgian francs and Italian lire. The Swedish kroner and Belgian
francs forward exchange contracts were used to hedge a foreign currency
debt. The Italian lire forward exchange contracts were used to hedge a
product cost transaction.
Concentrations of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash
investments, investments and accounts receivable. The Company places its
temporary cash investments ($28.6 million at December 31, 1994 and $49.3
million at December 31, 1993) and investments ($49.2 million at December 31,
1994 and $61.1 million at December 31, 1993) with high quality institutions
and, by policy, limits the amount of credit exposure to any one institution.
Except for U.S. and foreign government agencies, concentrations of credit
risk with respect to accounts receivable are limited, due to the large
number of customers comprising the Company's customer base and their
dispersion across many different industries and geographies. The Company
generally does not require collateral or other security to support customer
receivables.
Fair Value of Financial Instruments:
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments:
Cash and cash equivalents
The carrying amount approximates fair value due to the relatively short
period to maturity of these instruments.
Investments
The fair values of investments are estimated based on quoted market prices
for those or similar investments.
Long-term debt
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
Foreign currency exchange contracts
The fair value of foreign currency exchange contracts are estimated by
obtaining quotes from brokers.
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments as of December 31, 1994 and 1993:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
__________________________________________________________________________________________________________
Carrying Fair Carrying Fair
Amount Value Amount Value
__________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 43,550 $ 43,55 $ 58,74 $ 58,740
Investments:
Marketable equity securities - - 1,750 7,766
Marketable debt securities 49,240 47,469 59,329 59,507
Long-term debt 351,748 329,580 376,494 379,415
Foreign currency exchange contracts 40,604 41,558 35,423 35,066
__________________________________________________________________________________________________________
</TABLE>
15. Facilities Discontinuance and Reorganization Costs
In 1994, the Company recorded a net charge of $17.1 million on the
Consolidated Statements of Income primarily for the asset impairment of the
school bus business assets, costs associated with the military truck contract
close-out and the discontinuance and rationalization of administrative
facilities at several foreign metal reclamation and mill service locations.
During the second and third quarters of 1994, the Company recognized a total
charge of $5.7 million relating to the discontinuance and rationalization of
administrative facilities in the Metal Reclamation and Mill Services Group.
This charge was principally composed of termination costs and lease costs.
The Company also recognized a $4.7 million charge in the third quarter for
costs associated with closing-out the military truck contract.
In November 1994, the Board of Directors authorized the Company to exit from
the school bus business. In the fourth quarter of 1994, the Company
recognized an asset impairment charge of $8.0 million for the write-down of
the bus business assets to their net realizable value. The Company expects to
recognize certain exit costs, termination costs as well as operating losses in
1995 until operations are completed.
16. Information by Industry Group and Geographic Area
During 1994, new Operating Groups were formed by the Company due to: (1) the
fact that the Company is no longer directly involved in the Defense business
because of the formation of United Defense, L.P., effective January 1, 1994,
in which the Company contributed its military tracked vehicle business and has
an equity interest of 40%, and the completion of the five-ton contract with
the U.S. Government and related conversion to a school bus business in 1993;
and (2) because of the acquisition of MultiServ International, N.V. which
substantially increased the Company's presence in metal reclamation and mill
services. This significant strategic refocusing of the Company necessitated
the new Group structure. Except for Defense, because it is no longer a Group,
the Company restated all the operating groups for the periods presented.
Financial information by Industry Group and geographic area for the years
1994, 1993 and 1992 is presented below:
<TABLE>
<CAPTION>
INDUSTRY GROUP
(In millions) 1994 1993 1992
__________________________________________________________________________________________________
<S> <C> <C> <C>
Net Sales to Unaffiliated Customers
Metal Reclamation and Mill Services $ 523.4 $ 268.1 $ 165.1
Infrastructure, Construction and Transportation 391.5 306.3 303.8
Process Industry Products 442.8 385.8 382.5
__________________________________________________________________________________________________
1,357.7 960.2 851.4
Defense <F2> - 462.1 773.5
__________________________________________________________________________________________________
Total $1,357.7 $1,422.3 $1,624.9
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Pre-Tax Income
Group Operating Profit
Metal Reclamation and Mill Services <F1> $ 43.5 $ 28.8 $ 30.8
Infrastructure, Construction and Transportation 11.3 17.9 20.2
Process Industry Products 42.0 33.2 27.8
__________________________________________________________________________________________________
96.8 79.9 78.8
Defense <F2> - 67.0 83.8
__________________________________________________________________________________________________
96.8 146.9 162.6
Facilities discontinuance and reorganization costs <F3) (17.4) (1.5) .2
__________________________________________________________________________________________________
Total Group Operating Profit 79.4 145.4 162.8
Equity in income of unconsolidated entities <F4> 64.1 2.4 3.6
Gain on sale of investments 6.0 17.6 -
Claim settlements 36.2 - -
Interest expense (34.0) (20.0) (18.9)
Unallocated expense (2.9) (8.1) (7.0)
__________________________________________________________________________________________________
Pre-tax income $ 148.8 $ 137.3 $ 140.5
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Identifiable Assets
Metal Reclamation and Mill Services $ 658.9 $ 638.2 $ 118.9
Infrastructure, Construction and Transportation 278.7 190.9 182.8
Process Industry Products 186.4 170.7 160.0
__________________________________________________________________________________________________
1,124.0 999.8 461.7
Defense - 265.0 353.4
__________________________________________________________________________________________________
1,124.0 1,264.8 815.1
Corporate 158.3 156.9 170.9
Investments in unconsolidated companies 32.3 5.9 5.2
__________________________________________________________________________________________________
Total assets $1,314.6 $1,427.6 $ 991.2
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Depreciation
Metal Reclamation and Mill Services $ 63.1 $ 32.1 $ 18.6
Infrastructure, Construction and Transportation 17.7 16.9 16.8
Process Industry Products 8.6 8.6 9.2
__________________________________________________________________________________________________
89.4 57.6 44.6
Defense - 11.3 11.7
Corporate .8 .7 .8
__________________________________________________________________________________________________
Total depreciation $ 90.2 $ 69.6 $ 57.1
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Capital Expenditures <F5>
Metal Reclamation and Mill Services $ 61.6 $ 51.7 $ 19.9
Infrastructure, Construction and Transportation 18.1 10.8 9.0
Process Industry Products 10.9 10.8 8.3
__________________________________________________________________________________________________
90.6 73.3 37.2
Defense - 9.2 5.4
Corporate .3 .9 .1
__________________________________________________________________________________________________
Total capital expenditures $ 90.9 $ 83.4 $ 42.7
__________________________________________________________________________________________________
__________________________________________________________________________________________________
<FN>
<F1> Includes $6.0 million foreign currency translation loss due to the maxi devaluation of Mexican peso incurred in December,
1994.
<F2> Effective January 1, 1994, Defense is no longer designated as a separate Group. This is due to the formation of the joint
venture, United Defense, L.P., in which Harsco has a 40% ownership, and the suspension of the five-ton truck production at midyear
in 1993. Truck activity in 1994 is reflected under the Infrastructure, Construction and Transportation Group.
<F3> The year ended December 31, 1994, includes $5.7 million for discontinuance and rationalization of administrative facilities
and termination costs related to Metal Reclamation and Mill Services Group, and a provision of $4.7 million relating to the net
realizable value of the investment in the five-ton truck business and future anticipated costs associated with contract close-out
and related issues and a provision for asset impairment of the school bus business of $8.0 million under the Infrastructure,
Construction and Transportation Group.
<F4> Includes equity in income of United Defense, L.P. of $61.9 million for the year ended December 31, 1994.
<F5> Excludes property, plant and equipment from acquired companies of $202.2 million in 1993 of which $197.1 million related to
Metal Reclamation and Mill Services, $4.0 million to Infrastructure, Construction and Transportation and $1.1 million to Defense,
and in 1992, $16.5 million related to Infrastructure, Construction and Transportation.
</FN>
</TABLE>
Identifiable assets are those assets used in each Group. Corporate assets
include cash, investments, prepaid pension costs and deferred taxes. There
are no significant intergroup sales.
GEOGRAPHIC AREA
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
__________________________________________________________________________________________________
<S> <C> <C> <C>
Net Sales to Unaffiliated Customers
United States $ 863.3 $ 1,181.0 $ 1,468.1
Europe 308.9 140.9 92.3
All Other 185.5 100.4 64.5
__________________________________________________________________________________________________
Total $ 1,357.7 $ 1,422.3 $ 1,624.9
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Geographic Operating Profit
United States $ 57.1 $ 133.1 $ 146.3
Europe 4.9 7.7 13.3
All Other 17.4 4.6 3.2
__________________________________________________________________________________________________
Total $ 79.4 $ 145.4 $ 162.8
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Identifiable Assets
United States $ 543.9 $ 655.8 $ 708.8
Europe 392.9 376.6 61.5
All Other 187.2 232.4 44.8
__________________________________________________________________________________________________
Total $ 1,124.0 $ 1,264.8 $ 815.1
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Export Sales and Major Customer Information:
<F1>Export sales from the United States
Asia $ 22.3 $ 242.3 $ 467.8
Africa 2.0 56.3 3.4
North America (Excluding USA) 60.1 32.4 25.9
All Others 10.7 12.5 88.3
__________________________________________________________________________________________________
Total $ 95.1 $ 343.5 $ 585.4
__________________________________________________________________________________________________
__________________________________________________________________________________________________
<F1>Sales to U.S. Government agencies,
principally by Defense Group in 1993 and 1992 $ 1.1 $ 303.3 $ 563.6
__________________________________________________________________________________________________
__________________________________________________________________________________________________
Foreign Military Sales through U.S. Government Agencies
Asia $ 0.1 $ 88.7 $ 274.1
Africa - 49.0 2.5
North America (Excluding USA) - 0.2 -
All Others - - 2.7
__________________________________________________________________________________________________
Total 0.1 $ 137.9 $ 279.3
__________________________________________________________________________________________________
__________________________________________________________________________________________________
<FN>
<F1> Includes Foreign Military Sales through U.S. Government agencies.
</FN>
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Harsco Corporation:
We have audited the accompanying consolidated balance sheets of Harsco
Corporation and Subsidiary Companies as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31,
1994. 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.
As discussed in the first two paragraphs of Note 10 to the consolidated
financial statements, the Company is involved in disputes relating to the
"after-imposed" Federal Excise Tax and related claims.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Harsco
Corporation and Subsidiary Companies as of December 31, 1994 and 1993, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994 in conformity with
generally accepted accounting principles.
In addition to the matters referred to in the third paragraph above, as
discussed in Note 10 to the consolidated financial statements, the Company
is involved in various disputes regarding Federal Excise Tax and other
contract matters primarily relating to the five-ton truck contract. Also,
the Company has filed or is in the process of filing various claims relating
to certain contracts. The ultimate outcome of these additional matters
cannot presently be determined. Accordingly, no provision for such
potential additional losses or recognition of possible recovery from such
claims has been reflected in the accompanying financial statements.
As discussed in Notes 1, 7 and 11 to the consolidated financial statements,
the Company changed its method of accounting for income taxes in 1993, and
its method of accounting for postretirement benefits other than pensions in
1992.
Philadelphia, Pennsylvania
February 7, 1995, except as
to the first paragraph of Note 10,
for which the date is February 23, 1995
MANAGEMENT'S DISCUSSION
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Cash provided by operating activities was $161.4 million for the year 1994,
reflecting, among other things, a $71.8 million distribution of earnings
from unconsolidated entities, principally United Defense, L.P., a $34.3
million increase in accounts receivable and a $14.2 million increase in
accounts payable. As previously reported, included in receivables is $62.4
million for amounts expended, or income not received, related to the Federal
Excise Tax (FET) and related claims for the completed five-ton truck
contract. Final resolution of the FET and related claims in favor of the
Company would not result in the recording of additional income other than
any interest received, but would have a positive cash flow effect. To the
extent that any portion of the FET and related claims is not recovered,
additional losses on the contract will have to be recognized, but there
would be little impact on cash outflows.
Cash flows from investing activities included capital expenditures of $90.9
million and $7.6 million of proceeds from the sale of the remaining shares
of an investment in a marketable equity security. Investment activity also
included the cash contribution of $5.2 million for a portion of the initial
capitalization of United Defense, L.P. and $8.2 million proceeds from the
sale of property, plant and equipment. Cash flows from financing activities
included a net decrease in long-term debt of $41.2 million, a $35.3 million
reduction in short-term debt, and $35.1 million of cash dividends paid on
common stock. Cash and cash equivalents decreased $15.2 million to $43.6
million at December 31, 1994.
In conjunction with the formation of United Defense, L.P., in which Harsco
holds a 40% equity interest, the Company contributed to the Partnership net
assets of $29.6 million, which included $5.2 million in cash. During the
first 12 months of the Partnership, the Company received a $70.1 million in
cash distributions. The Partnership agreement stipulates, among other
things, that cash distributions of earnings will be made at certain minimum
amounts of income in the quarter subsequent to the quarter in which income
is earned. However, special distributions, as allowed by the agreement,
were received during June and December 1994, due to strong cash flows of the
Partnership.
Other matters which could significantly affect cash flows in the future are
discussed in the 1994 Annual Report to Shareholders under Note 10,
"Commitments and Contingencies." During the first quarter, the Company
negotiated a settlement with the U. S. Government on a small portion of the
outstanding issues concerning the M9 Armored Combat Earthmover (ACE)
contract referred to in Note 10. Under this settlement, the Government paid
the Company $3.8 million. The Company's claim in excess of $60 million
against the Government on this contract for untimely exercise of contract
options has not yet been resolved. During the third quarter, the Company
reached a negotiated settlement with the U.S. Government concerning contract
changes, inadequate technical data package, and delays and disruptions
related to the five-ton truck contract and was paid a gross amount of $12.5
million. This settlement resolves all outstanding contractual matters
concerning the five-ton truck agreement with certain limited exceptions,
which include Federal Excise Tax related matters. During the fourth quarter
of 1994, the Company reached an agreement with the U.S. Government
concerning Harsco being overcharged by the U.S. Government in the sale of
government furnished equipment on various contracts. Under the terms of the
settlement, the Government will pay the Company approximately $20.4 million
in the first quarter of 1995.
Harsco continues to maintain a good financial position, with net working
capital of $254.3 million, up from the $182.8 million at December 31, 1993,
principally due to the conversion of $30.2 million of short-term debt to
long-term debt and the contribution of certain current assets and
liabilities to the formation of United Defense, L.P. Current assets
amounted to $536.7 million, and current liabilities were $282.4 million,
resulting in a current ratio of 1.9 to 1, higher than the 1.4 to 1 at year-
end 1993. With total debt at $366.0 million and equity at $581.2 million at
December 31, 1994, total debt as a percent of capital was 38.6%, which is
lower than the 45.0% at December 31, 1993.
The stock price range during 1994 was $46 3/8 - 38 3/8. Harsco's book value
per share at December 31, 1994, was $23.08, compared with $20.95 at year-end
1993. The Company's return on equity for 1994 was 15.7%, compared with
17.3% for 1993. The return on assets was 13.5%, compared with the 13.4% for
1993.
The Company has available through a syndicate of banks a $150 million, 364-
day revolving line of credit and a $150 million, multi-currency five-year
term line of credit. During the second quarter, the Company amended and
restated its two committed credit facilities, to extend maturity, update
pricing for favorable bank market dynamics, eliminate and/or modify certain
covenants, make certain technical adjustments to the documents and allow
more flexibility to borrow in additional currencies and provide back-up for
a commercial paper program, which the Company implemented during the fourth
quarter, in lieu of borrowing from the bank lines of credit. As of December
31, 1994, no balances were outstanding under the syndicated credit
facilities, $24.1 million was outstanding under the commercial paper
program. Harsco's outstanding notes are rated A by Standard & Poor's and
Baa1 by Moody's. Harsco's commercial paper is rated A-1 by Standard &
Poor's, F-1 by Fitch Investors Service and P-2 by Moody's. The Company,
also has on file with the Securities and Exchange Commission, a Form S-3
shelf registration for the possible issuance of up to an additional $200
million of new debt securities, preferred stock or common stock.
As indicated by the above, the Company's financial position and debt
capacity should enable it to meet its current and future requirements. As
additional resources are needed, Harsco should be able to obtain funds at
competitive costs.
RESULTS OF OPERATIONS
1994 Compared with 1993
Revenues for 1994 were $1.47 billion, up slightly from last year. The
increase was due principally to higher sales for all three operating groups
which were well ahead of the prior year. Total revenues increased despite a
substantial absence from sales of military vehicles in 1994.
Sales increased in 1994 for our three operating groups, due to acquisitions
in 1993, principally MultiServ International, N.V., as of August 31, 1993,
and higher sales from gas control and containment equipment, scaffolding,
shoring and forming equipment, metal reclamation and mill services, process
equipment, railway maintenance equipment, and pipe fittings. Revenues in
1994 include Harsco's $61.9 million share of the income from its equity
investment in United Defense, L.P., as well as $36.2 million of revenues
resulting from the negotiated settlement of three claims with the U.S.
Government relating to government furnished equipment on various contracts,
the resolution of certain outstanding contractual matters regarding the
military truck contract and a small claim concerning the M9 Armored Combat
Earthmover.
Cost of sales was lower, principally reflecting the substantial absence of
military vehicles. Internally-funded research and development increased 6%,
even with the absence of Defense which in past years was the principal
source, due to the higher level of effort for railway maintenance equipment.
Selling and administrative expenses increased, as a result of the inclusion
of acquired companies. Also contributing to the increase were higher sales
commissions and compensation costs. On a comparative basis, administrative
expenses in 1993 were reduced by the collection of $3.1 million of
previously reserved bad debts related to discontinued operations.
Income before taxes, minority interest, and cumulative effect of accounting
changes was up 8% from the comparable period last year, which included
overall increased operating profits in 1994 for the three operating groups
reflecting growth for the Company's core businesses, as well as results of
cost containment efforts which improved operating efficiencies. Income
benefited significantly from $36.2 million of pre-tax income resulting from
negotiated settlements with the U.S. Government concerning several completed
contracts, which were partially offset by significantly higher interest
expense, due to the debt incurred in conjunction with the acquisition and
operations of MultiServ International, N.V. Also unfavorably affecting
income was an $8.0 million pre-tax charge recorded for the impaired value of
certain assets in conjunction with the Company's exit from the school bus
business, a $4.7 million pre-tax provision recorded for the realizable value
of the Company's investment in the 5-ton truck business (including costs to
complete certain contract close-out and related issues), and a $5.7 million
pre-tax charge for the discontinuance and rationalization of administrative
facilities at several foreign metal reclamation and mill services locations.
Results in 1994 were unfavorably impacted by the school bus business, which
incurred a loss of $16.0 million during the year from a lower than
anticipated volume of production associated with the business, as compared
to income recorded for military trucks last year, for which production was
suspended in June 1993. Also, results were unfavorably affected by a $6.0
million foreign currency translation loss which was recorded for the
Company's operations in Mexico, as a result of the maxi devaluation of the
peso in December 1994, and profits from the sale of our remaining holdings
of an investment in a marketable equity security were lower than the prior
year principally due to fewer shares being sold in 1994. On a comparative
basis, scaffolding, shoring and forming equipment recorded income in 1994 as
compared with a loss in 1993. Additionally, higher earnings in 1994 were
recorded for gas control and containment equipment, process equipment,
roofing granules, and abrasives, pipe fittings and railway maintenance
equipment. Income from the Company's equity investment in United Defense,
L. P., was slightly below amounts recorded in 1993 from military tracked
vehicles.
Net income of $86.6 million ($3.45 per share) was slightly below 1993, a
record which included an unusual after-tax gain of $10.7 million ($.43 per
share) on the partial sale of an investment in a marketable equity security
and the favorable effect of an accounting change of $6.8 million ($.27 per
share). Excluding unusual items, 1994 income was $76.3 million after-tax
($3.03 per share) compared to 1993 which income was $70.1 million after-tax
($2.80 per share). Results for 1994 were favorably affected by higher
earnings from operations for our three groups overall, as well as the net
favorable effect of unusual items that included after-tax negotiated
settlements of $21.7 million ($.87 per share) of claims with the U.S.
Government and an after-tax gain of $3.5 million ($.14 per share) on the
sale of the remaining shares of an investment in a marketable equity
security, partially offset by after-tax provisions of $14.9 million ($.59
per share) for the unusual items of expense for the school bus, the military
truck contract, metal reclamation and mill service businesses, and the maxi
devaluation of the Mexican peso, as discussed above. The effective income
tax rate before minority interest for 1994 was 40%, versus 41% in 1993.
Sales of the Metal Reclamation and Mill Services Group, at $523.4 million,
were significantly greater than 1993, due to the acquisition of MultiServ
International, N.V. The acquisition of MultiServ International, N.V.
resulted in total international sales increasing substantially over amounts
recorded in 1993. International sales of $494.4 million in 1994 were
slightly more than twice the amount recorded in 1993 and increased to 36% of
consolidated sales compared with only 17% in 1993. Sales for the
Infrastructure, Construction and Transportation Group, at $391.5 million,
and for the Process Industry Products Group, at $442.8 million, were well
ahead of 1993 due principally to greater demand for most product classes.
Sales of scaffolding, shoring and forming equipment were up 30% in the
Infrastructure, Construction and Transportation Group, and process equipment
and gas control and containment equipment posted increases of 25% and 17%,
respectively in the Process Industry Products Group.
Operating profit, excluding the impact of the unusual expense items relating
to the discontinuance and rationalization of administrative facilities at
several foreign locations and the maxi devaluation of the Mexican peso, for
the Metal Reclamation and Mill Services Group was $49.5 million, up 72% from
1993, principally due to the acquisition of MultiServ International, N.V.
After including the impact of the unusual items of expense, operating profit
was $37.8 million, up 31% from the comparable period. Performance was
unfavorably affected in Mexico by the maxi devaluation of the peso and
operating losses on a contract which was terminated in December of 1994, the
ongoing rationalization of the European steel industry, as well as weak
economic conditions experienced principally in the first six months of this
year in certain countries in Europe, the adverse impact of foreign currency
devaluations and hyperinflation in Brazil particularly during the first half
of 1994, and the ongoing expensing of start-up costs for new contracts.
During the latter half of 1994, performance improved due to the management
reorganization completed in July and improving economic conditions in Brazil
and certain European countries. The acquisition of MultiServ International,
N.V. resulted in total international operating profit increasing
substantially over the amount recorded in 1993. International operating
profit in 1994 was up 81% from 1993 and increased to 28% of the total
operating profit compared with only 8% in 1993. Although international
profits increased substantially, profit margins came in slightly lower in
1994 than 1993 due principally to the maxi devaluation of the Mexican peso
and a full year's amortization of cost in excess of net assets acquired in
conjunction with the acquisition of MultiServ International, N.V. The
Infrastructure, Construction and Transportation Group with an operating
profit of $11.3 million, excluding the impact of unusual expense items
relating to the completed military truck contract and the school bus
business, was 37% below 1993. Although most product classes posted
significantly improved results, they were more than offset by the $16.0
million in operating losses from the school bus business. After including
the impact of the unusual items of expense relating to military trucks and
school buses, results for this group reflect a $1.4 million operating loss.
Operating profit for the Process Industry Products Group, at $42.0 million,
was up 27% over the prior year and reflected improved performance for all
product classes. Gas control and containment equipment and process
equipment posted record results.
RESULTS OF OPERATIONS
1993 Compared with 1992
Management's discussion and analysis have been updated from last year's to
reflect the reclassification of the Consolidated Statement of Income and new
Operating Groups formed in 1994, necessitated by the strategic refocusing of
the Company, as discussed in Notes 1 and 16 to the Consolidated Financial
Statements.
Revenues for 1993 were $1.44 billion, down 11% from last year and sales for
the year were $1.42 billion, down 12% from 1992. These decreases are due
principally to lower sales of five-ton trucks in the Defense Group,
reflecting reduced production levels in 1993 and completion of most
contracts at midyear. Also contributing to the decline were lower sales of
tracked vehicles in the Defense Group, gas control and containment
equipment, and grating. The decline in sales also included the divestiture
of a division and a product line in the first quarter of 1992. These
declines were partially offset by sales arising from acquisitions in 1993,
principally MultiServ International, N.V., as well as an acquisition made in
June 1992. Higher sales were recorded for pipe fittings, process equipment
and scaffolding equipment.
Cost of sales decreased at a rate greater than revenues, due principally to
improvement in profit margins on sales of tracked vehicles in the Defense
Group and the favorable impact of profit improvement measures, including the
divestiture of an unprofitable division and a marginally profitable
operation in the first quarter of 1992. Selling and administrative expenses
increased, as a result of the inclusion of acquired companies which more
than offset lower costs associated with sales in the Defense Group and the
collection of previously reserved bad debts.
Income before taxes, minority interest, and cumulative effect of accounting
changes was lower than last year. Unfavorably affecting profits were
significantly lower results for wheeled vehicles in the Defense Group, which
includes start-up costs associated with the recently acquired school bus
business. Also, earnings were lower in 1993 for metal reclamation and mill
services due to start-up costs at certain locations, particularly Mexico
with six new contracts, and weaker economic conditions in Europe, which also
contributed to lower earnings for gas control and containment equipment. On
a comparative basis, income was unfavorably affected in 1993 by larger
provisions for facilities discontinuances compared with a smaller net charge
in 1992 which included profits related to the divestitures of the Company's
unprofitable plastic pipe division and its marginally profitable hydraulic
tool product line. Income benefited significantly from a $17.6 million pre-
tax gain ($10.7 million after-tax, $.43 per share) on the sale of a
substantial portion of a marketable equity security. Higher earnings in
1993 were recorded for tracked vehicles in the Defense Group, and to a
lesser extent, for pipe fittings. Interest expense increased, due to the
debt incurred in conjunction with the acquisition and operations of
MultiServ, International, N.V., which was partially offset by lower interest
expense due to the payment of $82.5 million of other nonrelated debt during
the last nine months of 1992.
Net income of $87.6 million, a record, which included a $6.8 million non-
cash reduction of deferred income taxes ($.27 per share) to reflect the
adoption, effective January 1, 1993, of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," was up from last year,
which included a $7.2 million non-cash, after-tax charge ($.27 per share) to
reflect the adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
1992 also included after-tax profit of $2.3 million ($.09 per share) from
the divestiture of the Company's plastic pipe division and hydraulic tool
product line. The effective income tax rate of 41% in 1993 was up from 35%
in 1992. The increase relates to the higher effective tax rates associated
with international earnings, losses sustained in certain foreign operations
for which there was no tax benefit, as well as the nondeductibility of
certain acquisition costs. Higher taxes were also due to the increase in
the U.S. federal tax rate and higher state taxes, due to the change in the
mix of U.S. and foreign income.
Sales of the Metal Reclamation and Mill Services Group, at $268.1 million,
were significantly greater than 1992, due to the acquisition of MultiServ
International, N.V. Sales for the Infrastructure, Construction and
Transportation Group, at $306.3 million, and Process Industry Products
Group, at $385.8 were slightly ahead of 1992. The increase for the
Infrastructure, Construction and Transportation Group was due to higher
volume in railway maintenance equipment, due to an acquisition made in June
1992, which more than offset reduced demand for grating. Defense Group
sales at $462.1 million, were well below the level for 1992, reflecting the
completion of most contracts for five-ton trucks at midyear and, to a lesser
extent, lower sales for tracked vehicles.
Operating profit for the Metal Reclamation and Mill Services Group was below
last year, despite significantly greater sales than 1992. Earnings for
Metal Reclamation and Mill Services were unfavorably affected by weaker
demand from economic conditions in Europe and start-up costs at several
locations. The operating profit for the Infrastructure, Construction and
Transportation Group in 1993 was lower than 1992 which included income from
the liquidation of inventories associated with the railway maintenance
equipment product class. Higher operating profit was recorded for the
Process Industry Products Group due to improved earnings for most product
lines. The Defense Group posted an operating profit of $67.0 million,
significantly below 1992, due to completion of most contracts for five-ton
trucks at midyear. Higher earnings were recorded for tracked vehicles,
which reflected improvement in margins.
RESULTS OF OPERATIONS
1992 Compared with 1991
Management's discussion and analysis have been updated from last year's to
reflect the reclassification of the Consolidated Statement of Income and new
Operating Groups formed in 1994, necessitated by the strategic refocusing of
the Company, as discussed in Notes 1 and 16 to the Consolidated Financial
Statements.
Revenues for 1992 were $1.63 billion, and sales for the year were $1.62
billion, both down 16% from 1991. The decreases are due to lower sales of
five-ton trucks in the Defense Group, reflecting the previously announced
reduced production levels. Also contributing to the decline was the
divestiture of a division and a product line in the first quarter of 1992,
as well as lower sales of grating, scaffolding equipment, and process
equipment which continue to be affected by weaknesses in the economy. These
declines were partially offset by increased sales recorded for tracked
vehicles in the Defense Group, railway maintenance equipment, gas control
and containment equipment, metal reclamation and mill services, roofing
granules and slag abrasives, and the inclusion of product sales from an
acquisition made in the second quarter of 1992.
Cost of sales decreased at a rate greater than revenues, due to the
improvement in profit margins of five-ton truck sales, lower charges in 1992
for product liability insurance, and the favorable impact of profit
improvement measures, including divestitures of a loss and a marginally
profitable operation. Selling and administrative expenses increased as a
result of higher costs associated with sales in the Defense Group and the
inclusion of an acquisition in 1992. The higher costs, however, were
partially offset by the divestiture of certain operations, lower
compensation costs, and decreased commissions.
Income before taxes, minority interest, and the cumulative effect of
accounting changes was significantly higher than last year. Favorably
affecting profits were improved results for both tracked vehicles and
wheeled vehicles in the Defense Group. On a comparative basis, results were
favorably affected by certain nonrecurring expenses incurred in 1991 in
conjunction with the Company's unsuccessful bid on a contract for initial
production of the Family of Medium Tactical Vehicles with the U.S.
Government, as well as abnormally high charges for product liability
insurance, which were recorded particularly in the fourth quarter of 1991.
Also contributing to the increase in profits were higher levels of income
for railway maintenance equipment, metal reclamation and mill services, and
roofing granules and slag abrasives, as well as lower net expenses for
facility discontinuances, due principally to profits related to the
divestiture of the Company's plastic pipe division and the hydraulic tool
product line. Earnings benefited from income arising from an acquisition in
the second quarter of 1992. Grating and pipe fittings recorded lower income
in 1992. Interest income decreased, due to lower investment rates available
for funds. Interest expense approximated the amount recorded in 1991.
Equity in net income of unconsolidated companies decreased as a result of
discontinuing operations at a foreign location.
Net income, after a $7.2 million one-time, non-cash after-tax charge for the
effect of an accounting change, to adopt Statement of Financial Accounting
Standards No. 106, was $84.3 million, a record, up 10% from last year's
record, as a result of the foregoing. The effective income tax rate of 35%
in 1992 was down from 36% in 1991, due to utilization of tax loss
carryforwards at a foreign subsidiary, and benefits related to export sales.
Earnings for the first quarter of 1992 have been restated by $.27 per share
to reflect the additional expense associated with Statement of Financial
Accounting Standards No. 106, which was adopted retroactive to January 1,
1992.
Sales of the Metal Reclamation and Mill Services Group, at $165.1 million,
were slightly higher than 1991. The Infrastructure, Construction and
Transportation Group sales were down 10% from 1991 due to the divestiture of
an unprofitable division in the first quarter of 1992. The decrease was
partially offset by sales from an acquisition made in the second quarter of
1992. Process Industry Products Group sales approximated 1991 levels.
Sales in the Defense Group were $773.5 million versus $1.1 billion for 1991,
as a result of decreased sales of five-ton trucks, which more than offset a
sizable increase in sales of tracked vehicles.
Operating profit for the Metal Reclamation and Mill Services Group increased
slightly from last year. Operating profit for the Infrastructure,
Construction and Transportation Group increased from last year. The
improvement reflects income arising from an acquisition made during the
second quarter of 1992 and the divestiture of a division which operated at a
loss in 1991. The Process Industry Products Group's operating profit was up
from 1991 which included abnormally high charges for product liability
insurance. The Defense Group's operating profit was significantly above
last year, as a result of higher levels of profits on sales of five-ton
trucks and tracked vehicles, as well as the inclusion in 1991 of certain
nonrecurring expenses incurred in conjunction with the Company's
unsuccessful bid on a contract for initial production of the Family of
Medium Tactical Vehicles with the U.S. Government.
ELEVEN-YEAR STATISTICAL SUMMARY
(In thousands, except per share)
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS 1994 1993<F5> 1992 1991
<S> <C> <C> <C> <C>
Net sales $1,357,715 $1,422,308 $1,624,939 $1,943,083
Equity in income of unconsolidated entities 64,120 2,415 3,626 3,838
Gain on sale of investments and other revenues 43,946 19,573 2,093 2,230
Costs and expenses excluding facilities
discontinuance and reorganization costs 1,272,153 1,292,236 1,479,023 1,819,379
Facilities discontinuance and reorganization costs 17,143 2,419 445 1,664
Income before interest, taxes, minority interest,
and cumulative effect of accounting changes 176,485 149,641 151,190 128,108
Interest expense 34,048 19,974 18,882 18,925
Income before cumulative effect of accounting changes 86,553 80,816<F6> 91,516<F7> 76,543
Net income 86,553 87,618 84,332 76,543
Return on net sales<F1> 6.4% 5.7%<F6> 5.6%<F7> 3.9%
Return on average equity<F2> 15.7% 17.3% 17.2% 16.9%
Return on average assets<F3> 13.5% 13.4%<F6> 15.2%<F7> 13.5%
FINANCIAL DATA
Shareholders' Equity 581,222 523,084 495,103 479,726
Cash Dividends Declared 35,715 34,946 34,598 32,319
Depreciation 90,179 69,558 57,064 57,664
Capital Expenditures 90,928 83,395 42,720 53,846
Cash provided by operating activities 161,395 232,220 108,134 151,485
Cash provided (used) by investing activities (73,150) (397,666) (24,518) (58,184)
Cash provided (used) by financing activities (103,040) 173,555 (152,652) 16,897
Working Capital 254,338 182,756 316,918 284,699
Current Ratio1. 9:1 1.4:1 2.1:1 1.8:1
Total Assets 1,314,649 1,427,612 991,225 1,059,708
Long-term Debt 340,246 364,869 119,841 120,451
Total Debt 365,984 428,378 131,068 221,652
Percent of Total Debt to Capital<F4> 38.6% 45.0% 20.9% 31.6%
PER SHARE DATA
Income Before Cumulative Effect of
Accounting Changes 3.45 3.23<F6> 3.52<F7> 2.91
Shareholders' Equity 23.08 20.95 19.51 18.29
Cash Dividends Declared 1.42 1.40 1.34 1.23
Price/Earnings Ratio, High-Low 13-11 13-10 12-9 10-8
Market Price of Common Stock
High - Low, by Quarter
1st 46 3/8 - 40 5/8 45 - 36 7/8 39 1/2 - 27 3/4 27 3/4 - 22 3/4
2nd 44 5/8 - 39 3/4 44 1/2 - 35 38 - 33 5/8 30 3/8 - 25 1/4
3rd 43 1/4 - 38 1/2 44 5/8 - 37 1/2 37 5/8 - 28 29 5/8 - 26 3/4
4th 44 1/8 - 38 3/8 43 3/8 - 39 1/4 38 3/4 - 28 1/8 30 1/8 - 23 5/8
Dividends Paid, by Quarter
1st .3500 .3500 .3300 .3000
2nd .3500 .3500 .3300 .3000
3rd .3500 .3500 .3300 .3000
4th .3500 .3500 .3300 .3000
OTHER INFORMATION
Average Number of Shares Outstanding 25,114,874 25,036,893 25,966,755 26,278,384
Number of Shareholders of Record 7,674 8,069 8,415 8,767
Number of Employees 13,000 14,200 9,600 10,500
Backlog $160,703 $146,751<F8> $190,914<F8> $1,229,688
<FN>
<F1> "Return on Net Sales" is calculated by dividing Net Income by Net Sales.
<F2> "Return on Average Equity" is calculated by dividing net income by quarterly weighted average equity.
<F3> "Return on Average Assets" is calculated by dividing income before interest expense, income taxes and minority interest by
quarterly weighted average assets.
<F4> "Percent of Total Debt to Capital" is calculated by dividing the sum of debt (short-term borrowings and long-term debt
including current maturities) by equity and debt.
<F5> Includes MultiServ International, N.V. since date of acquisition.
<F6> Excludes cumulative effect of change in method of accounting for income taxes, which increased net income by $6.8 million,
($.27 per share).
<F7> Excludes cumulative effect of change in method of accounting for postretirement benefits other than pensions, which
decreased net income by $7.2 million, ($.27 per share).
<F8> Excludes $397.9 million contributed to United Defense, L.P., a joint venture formed between Harsco and FMC Corporation for
comparative purposes with 1994 and $548.1 million for comparative purposes with 1993.
<F9> Excludes extraordinary charge of $3,212 or $.11 per share.
</FN>
</TABLE>
ELEVEN-YEAR STATISTICAL SUMMARY (Years con't)
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS 1990 1989 1988 1987
<S> <C> <C> <C> <C>
Net sales $1,759,507 $1,351,213 $1,278,987 $1,169,225
Equity in income of unconsolidated entities (360) (2,698) 1,202 2,683
Gain on sale of investments and other revenues 1,860 1,493 4,955 1,153
Costs and expenses excluding facilities
discontinuance and reorganization costs 1,639,621 1,325,078 1,218,628 1,063,278
Facilities discontinuance and reorganization costs (4,471) (6,538) 1,862 821
Income before interest, taxes, minority interest,
and cumulative effect of accounting changes 125,857 31,468 64,654 108,962
Interest expense 17,506 16,412 16,180 8,004
Income before cumulative effect of accounting changes 72,504 11,362 31,103 63,289
Net income 72,504 11,362 31,103 63,289
Return on net sales<F1> 4.1% 0.8% 2.4% 5.4%
Return on average equity<F2> 17.5% 2.8% 7.1% 13.5%
Return on average assets<F3> 13.1% 4.1% 8.3% 15.1%
FINANCIAL DATA
Shareholders' Equity 437,111 394,480 421,266 443,985
Cash Dividends Declared 31,463 31,464 30,197 29,371
Depreciation 56,574 56,229 53,768 56,135
Capital Expenditures 71,127 67,613 69,000 60,564
Cash provided by operating activities 63,635 129,547 67,261 86,535
Cash provided (used) by investing activities (50,147) (50,540) (76,724) (49,457)
Cash provided (used) by financing activities (15,375) (78,720) (11,736) (24,019)
Working Capital 226,522 211,130 235,289 276,555
Current Ratio1. 1.6:1 1.5:1 1.8:1 2.5:1
Total Assets 990,960 978,200 893,060 802,273
Long-term Debt 122,695 127,345 131,341 135,866
Total Debt 170,732 151,175 193,815 150,023
Percent of Total Debt to Capital<F4> 28.1% 27.7% 31.5% 25.3%
PER SHARE DATA
Income Before Cumulative Effect of
Accounting Changes 2.77 .43 1.17 2.20
Shareholders' Equity 16.67 15.05 15.94 16.34
Cash Dividends Declared 1.20 1.20 1.14 1.03
Price/Earnings Ratio, High-Low 10-6 72-52 30-21 18-11
Market Price of Common Stock
High - Low, by Quarter
1st 28 3/4 - 21 1/8 29 1/2 - 24 1/4 35 1/2 - 26 1/2 33 5/8 - 25 5/8
2nd 26 1/2 - 22 5/8 27 - 23 7/8 35 5/8 - 30 34 1/4 - 31 1/8
3rd 24 1/2 - 20 1/4 26 3/4 - 22 1/2 34 3/4 - 30 1/2 39 3/8 - 33 5/8
4th 26 1/4 - 17 3/4 31 1/8 - 23 31 1/2 - 25 37 3/8 - 23 1/2
Dividends Paid, by Quarter
1st .3000 .3000 .2800 .2500
2nd .3000 .3000 .2800 .2500
3rd .3000 .3000 .2800 .2500
4th .3000 .3000 .2800 .2500
OTHER INFORMATION
Average Number of Shares Outstanding 26,217,027 26,261,017 26,619,026 28,793,048
Number of Shareholders of Record 9,308 9,620 9,991 9,975
Number of Employees 10,300 11,200 11,600 11,000
Backlog $1,197,126 $1,538,331 $1,342,292 $1,019,404
<FN>
<F1> "Return on Net Sales" is calculated by dividing Net Income by Net Sales.
<F2> "Return on Average Equity" is calculated by dividing net income by quarterly weighted average equity.
<F3> "Return on Average Assets" is calculated by dividing income before interest expense, income taxes and minority interest by
quarterly weighted average assets.
<F4> "Percent of Total Debt to Capital" is calculated by dividing the sum of debt (short-term borrowings and long-term debt
including current maturities) by equity and debt.
<F5> Includes MultiServ International, N.V. since date of acquisition.
<F6> Excludes cumulative effect of change in method of accounting for income taxes, which increased net income by $6.8 million,
($.27 per share).
<F7> Excludes cumulative effect of change in method of accounting for postretirement benefits other than pensions, which
decreased net income by $7.2 million, ($.27 per share).
<F8> Excludes $397.9 million contributed to United Defense, L.P., a joint venture formed between Harsco and FMC Corporation for
comparative purposes with 1994 and $548.1 million for comparative purposes with 1993.
<F9> Excludes extraordinary charge of $3,212 or $.11 per share.
</FN>
</TABLE>
ELEVEN-YEAR STATISTICAL SUMMARY (Years con't)
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS 1986 1985 1984
<S> <C> <C> <C>
Net sales $1,130,253 $1,261,193 $1,101,271
Equity in income of unconsolidated entities 2,319 1,267 1,700
Gain on sale of investments and other revenues 1,195 910 931
Costs and expenses excluding facilities
discontinuance and reorganization costs 1,035,052 1,138,243 1,015,233
Facilities discontinuance and reorganization costs 10,286 14,965 6,868
Income before interest, taxes, minority interest,
and cumulative effect of accounting changes 88,429 110,162 80,801
Interest expense 12,685 13,981 14,439
Income before cumulative effect of accounting changes 49,613<F9> 60,458 47,550
Net income 49,613<F9> 60,458 47,550
Return on net sales<F1> 4.4%<F9> 4.8% 4.3%
Return on average equity<F2> 9.8% 13.4% 11.5%
Return on average assets<F3> 12.3%<F9> 15.1% 12.4%
FINANCIAL DATA
Shareholders' Equity 473,393 467,687 432,347
Cash Dividends Declared 27,903 25,952 24,425
Depreciation 51,930 49,801 47,475
Capital Expenditures 52,604 55,842 41,504
Cash provided by operating activities 111,521 148,814 58,371
Cash provided (used) by investing activities (61,257) (119,477) (100,814)
Cash provided (used) by financing activities (104,609) (25,941) 7,695
Working Capital 258,230 285,214 283,308
Current Ratio1. 2.5:1 2.5:1 2.3:1
Total Assets 754,837 823,898 824,684
Long-term Debt 63,027 118,650 125,887
Total Debt 76,571 136,573 136,813
Percent of Total Debt to Capital<F4> 13.9% 22.6% 24.0%
PER SHARE DATA
Income Before Cumulative Effect of
Accounting Changes 1.67<F9> 2.03 1.60
Shareholders' Equity 16.13 15.67 14.52
Cash Dividends Declared .94 .87 .81
Price/Earnings Ratio, High-Low 19-13 12-8 10 - 8
Market Price of Common Stock
High - Low, by Quarter
1st 26 1/4 - 20 7/8 19 1/8 - 15 5/8 16 5/8 - 13 5/8
2nd 28 7/8 - 24 19 5/8 - 17 3/8 15 1/8 - 12 5/8
3rd 27 1/2 - 23 1/4 20 1/8 - 18 5/8 16 - 13
4th 27 - 23 23 3/8 - 18 7/8 16 1/4 - 14 5/8
Dividends Paid, by Quarter
1st .2300 .2133 .2000
2nd .2300 .2133 .2000
3rd .2300 .2133 .2000
4th .2300 .2133 .2000
OTHER INFORMATION
Average Number of Shares Outstanding 29,763,561 29,811,366 29,697,894
Number of Shareholders of Record 9,989 9,866 10,114
Number of Employees 10,800 12,000 11,800
Backlog $985,100 $575,680 $763,338
<FN>
<F1> "Return on Net Sales" is calculated by dividing Net Income by Net Sales.
<F2> "Return on Average Equity" is calculated by dividing net income by quarterly weighted average equity.
<F3> "Return on Average Assets" is calculated by dividing income before interest expense, income taxes and minority interest by
quarterly weighted average assets.
<F4> "Percent of Total Debt to Capital" is calculated by dividing the sum of debt (short-term borrowings and long-term debt
including current maturities) by equity and debt.
<F5> Includes MultiServ International, N.V. since date of acquisition.
<F6> Excludes cumulative effect of change in method of accounting for income taxes, which increased net income by $6.8 million,
($.27 per share).
<F7> Excludes cumulative effect of change in method of accounting for postretirement benefits other than pensions, which
decreased net income by $7.2 million, ($.27 per share).
<F8> Excludes $397.9 million contributed to United Defense, L.P., a joint venture formed between Harsco and FMC Corporation for
comparative purposes with 1994 and $548.1 million for comparative purposes with 1993.
<F9> Excludes extraordinary charge of $3,212 or $.11 per share.
</FN>
</TABLE>
TWO-YEAR SUMMARY OF QUARTERLY RESULTS
(In millions, except per share)
<TABLE>
<CAPTION>
1994 First Second Third Fourth
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Net Sales $318.7 $338.1 $348.1 $352.9
Gross Profit <F1> 64.7 67.9 68.4 73.4
Income, before interest, taxes, and minority interest 41.0 39.5 47.5 48.4
Net Income 18.6 17.5 22.3 28.2
Net Income per Common Share .74 .70 .89 1.12
1993 First Second Third Fourth
______________________________________________________________________________________________________________________________
Net Sales $345.8 $354.6 $314.9 $407.0
Gross Profit <F1> 70.9 79.5 71.8 85.3
Income, before interest, taxes, minority interest,
and cumulative effect of accounting change 41.9 37.4 37.7 32.7
Net Income 31.0 22.2 18.3 16.1
Net Income per Common Share 1.22 .89 .74 .65
<FN>
<F1> Gross Profit is defined as Net Sales less Cost of Sales, Provision for Facilities Discontinuance and Reorganization and
Research and Development Expenses.
</FN>
</TABLE>
Notes:
The first quarter of 1993 includes the cumulative effect of the adoption of
SFAS 109 for Accounting for Income Taxes (see Notes 1 and 11 to consolidated
financial statements) which increased net income by $6.8 million ($.27 per
share) and the after-tax gain of $5.4 million ($.21 per share) on the partial
sale of a marketable equity security.
The third quarter of 1993 includes the after-tax gain of $5.3 million ($.22
per share) on the partial sale of a marketable equity security.
The fourth quarters of 1994 and 1993 reflect after tax LIFO income of $0.6
million and $1.4 million, respectively, representing final determination of
price changes and liquidations of inventories which occurred during the year.
The fourth quarters of 1994 and 1993 reflect reduction in income taxes of $4.0
million and $1.1 million, respectively, resulting from final determination of
income taxes to be provided for the year.
The first quarter of 1994 includes the after-tax gain of $3.5 million ($.14
per share) on the sale of the remaining shares of a marketable equity
security. The first quarter also includes a claim settlement of $2.1 million
after-tax ($.08 per share).
The second quarter of 1994 includes an after-tax charge of $2.5 million ($.10
per share) for termination costs and other matters.
The third quarter of 1994 includes after-tax charges of $2.7 million ($.11 per
share) and $2.0 million ($.08 per share) relating to the realizable value of
the investment in the 5-ton truck business and costs associated with contract
close-out and related issues, and for the discontinuance and rationalization
of administrative facilities and termination costs related to Metal
Reclamation and Mill Services Group, respectively. The third quarter also
includes claim settlement of $6.8 million after-tax ($.27 per share)
The fourth quarter of 1994 includes after-tax charges of $4.8 million ($.19
per share) for the impairment of certain assets in conjunction with exiting
the school bus business and a $3.6 million ($.14 per share) maxi devaluation
of the Mexican peso. The fourth quarter also includes claim settlement of
$12.2 million after-tax ($.49 per share).
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Partners
United Defense, L.P.
We have audited the accompanying balance sheet of United Defense, L.P. as of
December 31, 1994 and the related statements of income, partners' capital and
cash flows for the year then ended. These financial statements are the
responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 United Defense, L.P. at
December 31, 1994 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Washington, D.C.
January 23, 1995
United Defense, L.P.
Balance Sheet
December 31, 1994
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
Assets:
Current assets:
Cash and marketable securities $ 32,000
Trade receivables 81,251
Inventories (Note 3) 182,965
Other current assets 9,600
________
Total current assets 305,816
Investments in affiliated companies 8,412
Property, plant and equipment 478,853
Less -- accumulated depreciation 356,805
________
Net property, plant and equipment (Note 4) 122,048
Patents and deferred charges (Note 5) 11,686
Prepaid pension cost (Note 6) 31,935
Total assets $ 479,897
________
________
Liabilities and Partners' Capital
Current liabilities:
Accounts payable, trade and other $ 75,058
Advanced payments 165,417
Accrued and other liabilities 58,660
Due to FMC Corporation for current services 2,513
________
Total current liabilities 301,648
Accrued pension cost (Note 6) 12,346
Accrued postretirement benefit cost (Note 7) 42,207
________
Total liabilities 356,201
Commitments and contingencies (Notes 9, 11 and 12)
Partners' capital
FMC Corporation 104,359
Harsco Corporation 19,337
________
Total partners' capital 123,696
________
Total liabilities and partners' capital $ 479,897
</TABLE>
See Accompanying Notes to Financial Statements
United Defense, L.P.
Statement of Income
Year ended December 31, 1994
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenue:
Sales and other revenue $1,088,730
Costs and expenses:
Cost of sales 815,045
Selling, general and administrative expenses 122,303
Research and development 16,311
_________
953,659
_________
Income from operations 135,071
Other income (expense)
Interest 2,569
Miscellaneous, net (4,235)
_________
Income before income taxes 133,405
Provision for income taxes (Note 2) 3,878
_________
Net income $ 129,527
</TABLE>
See Accompanying Notes to Financial Statements
United Defense, L.P.
Statement of Partners' Capital
Year ended December 31, 1994
(In thousands)
<TABLE>
<CAPTION>
FMC Harsco Total
______________________________________
<S> <C> <C> <C>
Initial partnership contributions $124,740 $ 29,600 $154,340
Tax distributions (29,861) (29,883) (59,744)
Net income distributions (60,256) (40,171) (100,427)
1994 net income 69,736 59,791 129,527
______________________________________
Balance, December 31, 1994 $104,359 $ 19,337 $123,696
</TABLE>
See Accompanying Notes to Financial Statements
United Defense, L.P.
Statement of Cash Flows
Year ended December 31, 1994
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
Operating activities
Net Income $129,527
Adjustments for non-cash components of
net income:
Depreciation 28,993
Other (6,966)
Changes in assets and liabilities:
Trade receivables 7,401
Inventories (2,609)
Other current assets (964)
Prepaid pension cost (5,898)
Accounts payable, trade and other (2,290)
Advanced payments (8,613)
Accrued and other liabilities 21,912
Due to FMC Corporation for current services 2,513
Accrued pension cost 6,072
Accrued other postretirement benefit costs (3,069)
_______
Cash provided by operating activities 166,009
Investing activities
Capital spending (18,259)
Disposal of property, plant and equipment 1,138
_______
Cash used in investing activities (17,121)
Financing activities
Cash contributions from partners 41,670
Partner distributions (160,171)
_______
Cash used in financing activities (118,501)
_______
Increase in cash and marketable securities 30,387
Cash and marketable securities, beginning of year 1,613
_______
Cash and marketable securities, end of year $ 32,000
_______
_______
</TABLE>
See Accompanying Notes to Financial Statements
UNITED DEFENSE, L.P.
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
Note 1 Formation of United Defense, L.P.
On January 28, 1994, FMC Corporation ("FMC") and Harsco Corporation ("Harsco")
announced completion of a series of agreements, first announced in December
1992, to combine certain assets and liabilities of FMC's Defense Systems Group
("DSG") and Harsco's BMY Combat Systems Division ("BMY"). The effective date
of the combination was January 1, 1994. The combined company, United Defense,
L. P. ("the partnership"), will operate as a limited partnership. FMC is the
Managing General Partner with a 60 percent equity interest and Harsco Defense
Holding is a Limited Partner holding a 40 percent equity interest.
Note 2 Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
United Defense, L.P. is a limited partnership comprised of the former Defense
Systems Group of FMC and the BMY Combat Systems Division of Harsco. The
partnership's only subsidiaries are a Foreign Sales Corporation (FSC) and UDLP
International, Inc.
Significant Accounting Policies
Revenue recognition for contracts-in-progress Sales are recognized on most
production contracts as deliveries are made or accepted. Sales under cost
reimbursement contracts for research, engineering, prototypes, repair and
maintenance and certain other contracts are recorded as costs are incurred and
include estimated fees in the proportion that costs incurred to date bear to
total estimated costs. Changes in estimates for sales and profits are
recognized in the period in which they are determinable using the cumulative
catch-up method. Claims are considered in the estimated contract performance
at such time as realization is probable. Any anticipated losses on contracts
are charged to operations as soon as they are determinable.
Inventories Inventories are stated at the lower of cost or market value.
Cost is determined on the last-in, first-out (LIFO) basis, except for
inventories relating to long-term contracts. Inventoried costs relating to
long-term contracts not valued on the LIFO basis are stated at the actual
production cost incurred to date, reduced by amounts recognized as cost of
sales. The costs attributed to units delivered under long-term contracts are
based on gross margins expected to be realized over the life of the related
contract. Gross margins are based on the estimated revenue less the estimated
cost of all units expected to be produced over the life of the related
contract.
Inventory costs include manufacturing overhead. Costs normally associated
with general and administrative functions, independent research and bid and
proposal are expensed as incurred.
BMY had followed the accounting practice of capitalizing general and
administrative expense in inventory. To conform with the partnership's
accounting policy and the agreement between FMC and Harsco, $7.4 million of
such expenses, which were included in the inventory contributed by Harsco,
were charged against income during 1994.
Investments in affiliated companies Investments in affiliated companies,
primarily foreign joint ventures, are carried primarily at cost, with income
recognized as dividends are received. Investments in majority-owned foreign
joint ventures are not consolidated since there is uncertainty regarding the
partnership's ability to control these ventures or repatriate earnings, and
because of the extreme volatility of foreign exchange rates in countries in
which these ventures are active. Dividends received were $12.4 million during
1994 and are included in sales and other revenue.
Property, plant and equipment Property, plant and equipment is recorded at
cost. Depreciation is provided principally on the sum-of-the-years digits and
straight line methods over estimated useful lives of the assets (land
improvements - 20 years, buildings - 20 to 35 years, and machinery and
equipment - 3 to 12 years). Gains and losses realized upon sale or retirement
of assets are included in income.
Maintenance and repairs are expensed as incurred. Expenditures that extend
the useful life of property, plant and equipment or increase its productivity
are capitalized and depreciated.
Advanced payments received from customers Amounts advanced by customers as
deposits on orders not yet billed and progress payments on contracts-in-
progress are recorded as current liabilities.
Financial instruments The fair values of financial instruments approximated
their carrying values at December 31, 1994. Fair values have been determined
through information obtained from market sources and management estimates.
Environmental Under the Participation Agreement between FMC and Harsco each
partner generally is financially accountable to the partnership for
environmental conditions occurring prior to formation of the partnership at
facilities or properties previously operated or used in their respective
businesses, to the extent that costs incurred are not recovered from third
parties or not covered by environmental accruals contributed by the parties at
formation. At December 31, 1994, $4.5 million of the FMC contributed accruals
and $2.5 million of the Harsco contributed accruals are unused.
Income taxes As a limited partnership, income or loss passes to the partners
and is taxable at that level, except for taxes payable on the income of the
partnership's FSC. The FSC paid income taxes amounting to $3.6 million during
1994.
Cash flows Marketable securities consists of investments with initial
maturities of three months or less.
Impact of new accounting pronouncement Effective January 1, 1994 the
partnership adopted the provisions of FAS 112, "Employer's Accounting for
Postemployment Benefits". This statement requires accrual of liabilities for
postemployment benefits provided to former or inactive employees, their
beneficiaries, and covered dependents after employment, but before retirement,
if those liabilities can be reasonably estimated. Adoption of FAS 112
resulted in a charge to the partnership's 1994 earnings amounting to $826,000.
Accounting standards not adopted The Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 94-6 on December 30, 1994. This SOP, Disclosure
of Certain Significant Risks and Uncertainties, will be effective for the
partnership's 1995 financial statements. The disclosures required by the SOP
focus primarily on the nature of an entity's operations, the use of estimates
in the preparation of financial statements and on risks and uncertainties that
could significantly affect the amounts reported in the financial statements.
Management has not yet determined what additional disclosures may be necessary
as a result of this new statement.
Note 3 Inventories
The current replacement cost of LIFO inventories exceeded their recorded
values by approximately $19.5 million at December 31,1994 ($13.9 million as of
January 1, 1994). Inventories on long-term contracts carried at actual
production cost total approximately $9.6 million at December 31, 1994.
Note 4 Property, Plant and Equipment
Property, plant and equipment is as follows:
<TABLE>
<CAPTION>
December 31, 1994
_________________
<S> <C>
Buildings $ 58,342
Machinery and Equipment 398,573
Land and Improvements 16,526
Construction in Progress 5,412
_______
478,853
Less: Accumulated Depreciation 356,805
_______
$122,048
</TABLE>
Note 5 Advance Agreement
In October 1994 the partnership entered into an Advance Agreement with the
U.S. Government Department of Defense. Under the terms of the Agreement, the
partnership is permitted to defer certain costs associated with consolidation
and restructuring of its ground systems businesses that are incurred from
January 1, 1994 through March 31, 1996. Costs deferred will then be allocated
ratably to contracts with the Department of Defense for 36 months beginning
January 1, 1996. As of December 31, 1994 consolidation and restructuring
costs deferred amount to $7.0 million and are included in patents and deferred
charges in the accompanying balance sheet.
Note 6 Retirement Plans
Substantially all of the partnership's domestic employees are covered by
retirement plans. Plans covering salaried employees provide pension benefits
based on years of service and compensation. Plans covering hourly employees
generally provide benefits of stated amounts for each year of service.
The partnership's funding policy is to make contributions based on the
projected unit credit method and to limit contributions to amounts that are
currently deductible for tax purposes.
The following table summarizes the assumptions used and the components of the
net pension cost:
<TABLE>
<CAPTION>
Year ended December 31, 1994
_____________________________________________________________________
<S> <C>
Assumptions:
Weighted average discount rate 8.00%
Rates of increase in future compensation levels 5.00%
Weighted average expected long-term asset return 9.60%
_____________________________________________________________________
Components:
_____________________________________________________________________
Service cost $ 9,976
Interest cost on projected benefit obligation 16,967
Actual return on plan assets:
Investment (gains) losses, net (6,106)
Net amortization and deferral:
Net transition asset amortization (1,733)
Prior service cost amortization 2,954
Net gain amortization (1,226)
Loss from special termination benefits 3,792
Net asset gain (loss) deferred (20,025)
_____________________________________________________________________
Net pension cost $ 4,599
_____________________________________________________________________
_____________________________________________________________________
</TABLE>
As part of the partnership's downsizing and consolidation program an incentive
benefit package, which lowered the early retirement penalty, was offered to
salaried and non-union hourly employees who were at least 55 years of age
with 10 or more years of service. In addition to the voluntary program, early
retirement penalties were also adjusted for certain salaried and hourly
employees affected by the downsizing and consolidation.
Pension expense includes a $3.8 million charge related to special termination
benefits (early retirement incentive) and a $0.9 million curtailment charge
included in prior service cost amortization relating to the elimination of
employees in selected hourly plans.
The funded status of the plans and accrued pension cost recognized in the
partnership's financial statements as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
____________________________________________________________________________
<S> <C>
Actuarial present value of benefits for service rendered to date:
Accumulated benefit obligation based on salaries to date,
including vested benefits of $182,001 $(192,341)
Additional benefits based on estimated future salary levels (42,965)
____________________________________________________________________________
Projected benefit obligation (235,306)
Plan assets at fair market value <F1> 274,139
____________________________________________________________________________
Plan assets in excess of projected benefit obligation 38,833
Unrecognized net transition asset (10,798)
Unrecognized prior service cost 12,089
Unrecognized net gain (20,535)
____________________________________________________________________________
Net prepaid pension cost $ 19,589
____________________________________________________________________________
<FN>
<F1> Primarily equities, bonds and fixed income securities.
</FN>
</TABLE>
Note 7 Postretirement Health Care and Life Insurance Benefits
Substantially all of the partnership's employees are covered by postretirement
health care and life insurance benefit programs. Employees generally become
eligible for the retiree benefit plans when they meet minimum retirement age
and service requirements. The cost of providing most of these benefits is
shared with retirees. The partnership has reserved the right to change or
eliminate these benefit plans.
The partnership funds a trust for retiree health and life benefits for
employees previously covered under the FMC benefit plans. Benefits for
employees formerly covered under the Harsco plan are not funded. At December
31, 1994 the projected benefit obligation for the partnership's employees
included in this latter postretirement plan category amounts to $3.4 million.
Actuarial assumptions used to determine costs and the benefit obligation
include a discount rate of 8 percent and weighted average expected return on
long-term assets of 9 percent. The assumed rate of future increases in per
capita cost of health care benefits was 10 percent in 1994, decreasing
gradually to 6 percent by the year 2001 and after. Increasing the health care
cost trend rates by one percentage point would increase the accumulated
benefit obligation by approximately $3.4 million and would increase annual
service and interest costs by $0.3 million.
The following table summarizes the components of net postretirement benefit
cost for 1994:
<TABLE>
<CAPTION>
____________________________________________________________________________
<S> <C>
Service cost $ 1,372
Interest cost on accumulated postretirement benefit obligation 4,576
Actual return on plan assets - investment (gains) losses 364
Net amortization and deferral:
Net gain amortization (129)
Loss from special termination benefits 380
Net asset gain (loss) deferred (2,454)
____________________________________________________________________________
Net periodic postretirement benefit cost $ 4,109
____________________________________________________________________________
____________________________________________________________________________
</TABLE>
The funded status of the plans and accrued postretirement benefit cost
recognized in the partnership's financial statements as of December 31, 1994
are as follows:
<TABLE>
<CAPTION>
____________________________________________________________________________
<S> <C>
Accumulated post retirement obligation:
Retirees $(44,054)
Fully eligible active participants (6,209)
Other active participants (15,793)
____________________________________________________________________________
Accumulated postretirement benefit obligation (66,056)
Plan assets at fair market value <F1> 24,491
____________________________________________________________________________
Accumulated postretirement benefit obligation in excess of
plan assets (41,565)
Unrecognized net gain (642)
____________________________________________________________________________
Accrued postretirement benefit cost $(42,207)
____________________________________________________________________________
____________________________________________________________________________
<FN>
<F1> Primarily equities and fixed income securities.
</FN>
</TABLE>
Note 8 Employees' Thrift And Stock Purchase Plan
Based on their prior employment with FMC or Harsco, the partnership's
employees may be eligible to participate in the partners' defined contribution
savings plans designed to comply with the requirements of the Employee
Retirement Income Security Act of 1974 (ERISA) and Section 401(k) of the
Internal Revenue Code. Charges against income for matching contributions to
the plans were $6.2 million in 1994.
Note 9 Commitments and Contingent Liabilities
The partnership leases office space, plants and facilities, and various types
of manufacturing, data processing and transportation equipment. Rent expense
for 1994 was $10.8 million. Minimum future rentals under noncancellable
leases, excluding a related party lease (Note 12) are estimated to be payable
$6.2 million in 1995, $5.2 million in 1996, $3.0 million in 1997, $2.6 million
in 1998, $1.7 million in 1999. The real estate leases generally provide for
payment of property taxes, insurance and repairs by the partnership.
The partnership is subject to claims and suits arising in the ordinary course
of its operations. In the opinion of management, the ultimate resolution of
any current pending legal proceedings will not have a material effect on the
partnership's financial position or results of operations.
Note 10 Partners' Capital
Under the agreements of formation of the partnership, FMC and Harsco were
required to contribute net assets with a historical net book value of $154.3
million.
The agreement provides for allocation of profits and losses and distribution
of available cash generally on the basis of the partner's equity ownership
interests, after giving effect to a limited partner preferred distribution.
Under the terms of the partnership agreement the partnership is required to
make quarterly tax distributions to each partner equal to the product of (i)
such partner's share of the taxable income of the partnership times (ii) 40
percent. In addition, the partnership is required to make certain other
distributions to the partners. Such required distributions are also made with
reference to the partnership's taxable income.
Beginning on February 1, 1996 FMC has the option to purchase or cause the
partnership to purchase Harsco's interest in the partnership for 110 percent
of the appraised value of Harsco's interest in the partnership subject to
adjustment, as provided for in the partnership agreement. Concurrently,
beginning February 1, 1996, Harsco has the option to require the partnership
to purchase its interest in the partnership for 95 percent of the appraised
value of its partnership interest similarly subject to adjustment as provided
for in the partnership agreement.
Note 11 Significant Customer and Export Sales
Sales to various agencies of the U.S. Government aggregated $614.9 million
during 1994. At December 31, 1994 trade accounts receivable from the U.S.
Government totalled $63.7 million. Export sales, including sales to foreign
governments transacted through the U.S. Government, were $280.6 million during
1994.
Note 12 Related Party Transactions
The partnership has contracted with FMC for various administrative and support
services. These services include computer services, systems and programming,
data communications, employee relocation support, payroll processing,
insurance and general management support. During the year ended December 31,
1994 the partnership paid $42.4 million to FMC for their support.
The partnership leases office and manufacturing facilities in San Jose,
California from FMC. Under the lease agreement monthly rent payments are
comprised of fixed base rent plus depreciation on the facilities. Fixed base
rent is $2.0 million per year and the lease expires December 31, 2003. During
1994 the partnership incurred rent amounting to $4.2 million under this lease.
Sales of inventory to FMC during 1994 amounted to $2.8 million. Management
believes that such transactions were consumated on terms substantially similar
to those that would arise in transactions with third parties.
At December 31, 1994 amounts due FMC totalled $2.5 million. Amounts due from
FMC and Harsco totalled $0.3 million and $0.2 million, respectively. Related
party receivables and payables are included in Other Current Assets and Due to
FMC for current services, respectively, in the accompanying financial
statements.
HARSCO CORPORATION
Subsidiaries of the Registrant:
<TABLE>
<CAPTION>
Country of Ownership
Name Incorporation Percentage
____ _____________ __________
<S> <C> <C>
Heckett MultiServ SAIC Argentina 100%
MetServ (Australia) Pty. Ltd. Australia 70%
MetServ Victoria Pty. Ltd. Australia 70%
MetServ Pty. Ltd. Australia 55%
Harsco (Australia) Pty. Limited Australia 100%
Tamper (Australia) Pty. Limited Australia 100%
Taylor-Wharton (Australia) Pty. Limited Australia 100%
WRG MultiServ GmbH Austria 90%
Alu Serv Middle East W.L.L. Bahrain 75%
Heckett MultiServ S.A. Belgium 100%
MultiServ Russia S.A. Belgium 100%
Loyquip Holdings S.A. Belgium 100%
Societe D'Etudes et D'AdministrationBelgium
des Enterprises S.A. Belgium 100%
Somafer Benelux Interim S.A. Belgium 100%
Finauxa S.A. Belgium 100%
Fortuna Insurance Limited Bermuda 100%
Harsco (Bermuda) Limited Bermuda 100%
Sociedade Brasileria de RecuperacaoBrazil
de Metals (Sobremetal) Ltda Brazil 100%
Comercio de Rejeitos Industriais Ltda Brazil 100%
Harsco Canada Limited Canada 100%
Heckett Technology Services Canada, Inc. Canada 100%
Heckett MultiServ S.A. Chile 100%
MultiServ Wuhan Ltd. China 100%
MultiServ Jiangxi Ltd. China 100%
MultiServ s.r.o. Czech Republic 100%
Heckett MultiServ Holding S.A. France 100%
Floyequip S.A. France 100%
Heckett MultiServ S.A. France 100%
ASVID S.A. France 100%
Chimimeca S.A. France 100%
PyroServ France 100%
Societe Francais D'Interim S.A. France 100%
Heckett MultiServ Sud S.A. France 100%
Heckett MultiServ GmbH Germany 100%
Harsco GmbH Germany 100%
Axil International Ltd. Ireland 100%
IMS Servizi Spa Italy 100%
MultiServ Spa Italy 100%
ILSERV Italy 65%
Luxequip Holdings S.A. Luxembourg 100%
Heckett MultiServ S.A. Luxembourg 100%
Societe Luxembourgoiese D'Interim S.A. Luxembourg 100%
Taylor-Wharton Asia (M) SDN. BHD. Malaysia 70%
Irving, S.A. de C.V. Mexico 100%
Heckett Mexicana, S.A. de C.V. Mexico 100%
Andamios Patentados, S.A. de C.V. Mexico 100%
Servicios Industriales Siderurgicos, S.A. de C.V. Mexico 100%
Electroforjados Nacionales, S.A. de C.V. Mexico 100%
Heckett MultiServ International N.V. Netherlands 100%
Heckett MultiServ Finance B.V. Netherlands 100%
Heckett MultiServ China B.V. Netherlands 100%
Heckett MultiServ Far East B.V. Netherlands 100%
Harsco Europa B.V. Netherlands 100%
Heckett (Holland) B.V. Netherlands 100%
Heckett MultiServ AS Norway 100%
Heckett Saudi Arabia Limited Saudi Arabia 55%
MultiServ Slovensko s r.o. Slovakia Republ 100%
FerroServ (Pty.) Limited South Africa 100%
FerroServ Operations (Pty.) Ltd. South Africa 100%
MultiServ Lycrete S.A. Spain 95%
Serviequipo S.A. Spain 95%
MultiServ Intermetal S.A. Spain 100%
MultiServ Iberica S.A. Spain 100%
Heckett MultiServ Reclamet S.A. Spain 100%
Gestion Materias Ferricas, S.A. Spain 100%
Heckett MultiServ Nordiska AB Sweden 100%
Heckett MultiServ AB Sweden 100%
Heckett MultiServ plc U.K. 100%
MultiServ Ltd. U.K. 100%
MultiServ Overseas Ltd. U.K. 100%
Quipco Ltd. U.K. 100%
Harsco (U.K.) Ltd. U.K. 100%
The Permanent Way Equipment Company Limited U.K. 100%
Harsco Ltd. U.K. 100%
Tamper Corp. (U.K.) Limited U.K. 100%
Heckett International Services Limited U.K. 100%
Heckett Limited U.K. 100%
Heckett MultiServ Inc. U.S.A. 100%
Heckett MultiServ U.S. Corp. U.S.A. 100%
Heckett MultiServ Operations Ltd. U.S.A. 100%
Heckett MultiServ General Corp. U.S.A. 100%
Heckett MultiServ Intermetal Inc. U.S.A. 100%
Heckett Technology Services Inc. U.S.A. 100%
Harsco Investment Corporation U.S.A. 100%
Harsco Defense Holding, Inc. U.S.A. 100%
Harsco Foreign Sales Corporation U.S. Virgin Isl 100%
Heckett MultiServ MV + MS Venezuela 100%
Heckett Yugoslavia Ltd. Yugoslavia 100%
</TABLE>
Companies in which Harsco Corporation does not have majority ownership are not
consolidated. These companies are listed below as unconsolidated entities:
<TABLE>
<CAPTION>
Country of
Incorporation/ Ownership
Name Organization Percentage
____ _____________ __________
<S> <C> <C>
Ferro Scrap Nigam Ltd. India 40%
P.T. Purna Baja Heckett Indonesia 40%
IKG-Salcon SDN. BHD. Malaysia 50%
Nutter-Niro Ingenieria S.A. de C.V. Mexico 49%
Heckett MultiServ (South Africa) (Pty.) Ltd. South Africa 50%
United Defense, L.P. U.S.A. 40%
</TABLE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
following Registration Statements of Harsco
Corporation and in the related Prospectuses of our
report dated January 23, 1995 with respect to the
financial statements of United Defense, L.P. included
in this Annual Report (Form 10-K) for the year ended
December 31, 1994:
Post Effective Amendment No. 6 to Form S-8
Registration Statement (Registration No. 2-57876),
effective May 21, 1982.
Post Effective Amendment No. 2 to Form S-8
Registration Statement (Registration No. 33-5300),
dated March 26, 1987.
Form S-8 Registration Statement (Registration No. 33-
14064), dated May 6, 1987.
Amendment No. 2 to Form S-8 Registration Statement
(Registration No. 33-24854), dated October 31, 1988.
Form S-3 Registration Statement (Registration No. 33-
56885) dated December 15, 1994.
ERNST & YOUNG LLP
Washington, D.C.
March 22, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the
following Registration Statements of Harsco
Corporation and Subsidiary Companies (the "Company")
of our report dated February 7, 1995, except as to
the first paragraph of Note 10, for which the date is
February 23, 1995 on our audits of the consolidated
financial statements and consolidated financial
statement schedule of the Company as of December 31,
1994 and 1993 and for each of the three years in the
period ended December 31, 1994. Our reports, which
include (A) an emphasis of a matter paragraph
regarding the Company's involvement in disputes
relating to the "after-imposed" Federal Excise Tax
and related claims and (B) explanatory paragraphs
regarding (i) the Company's involvement in various
disputes regarding Federal Excise Tax and other
contract matters primarily relating to the five-ton
truck contract and claims relating to certain
contracts and (ii) changes in the Company's methods
of accounting for income taxes and postretirement
benefits other than pensions appear on page 58 of the
1994 Annual Report to Shareholders of Harsco
Corporation and on page 27 of this Annual Report on
Form 10-K, respectively:
Post Effective Amendment No. 6 to Form S-8
Registration Statement (Registration No. 2-57876),
effective May 21, 1982.
Post Effective Amendment No. 2 to Form S-8
Registration Statement (Registration No. 33-5300),
dated March 26, 1987.
Form S-8 Registration Statement (Registration No. 33-
14064), dated May 6, 1987.
Amendment No. 2 to Form S-8 Registration Statement
(Registration No. 33-24854), dated October 31, 1988.
Form S-3 1994 Registration Statement (Registration
No. 33-56885) dated December 15, 1994.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 43,550
<SECURITIES> 0
<RECEIVABLES> 357,863
<ALLOWANCES> (7,285)
<INVENTORY> 121,199
<CURRENT-ASSETS> 536,759
<PP&E> 984,930
<DEPRECIATION> (549,962)
<TOTAL-ASSETS> 1,314,649
<CURRENT-LIABILITIES> 282,421
<BONDS> 340,246
<COMMON> 40,429
0
0
<OTHER-SE> 540,793
<TOTAL-LIABILITY-AND-EQUITY> 1,314,649
<SALES> 1,357,715
<TOTAL-REVENUES> 1,465,781
<CGS> 1,060,695
<TOTAL-COSTS> 1,289,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,019
<INTEREST-EXPENSE> 34,048
<INCOME-PRETAX> 148,840
<INCOME-TAX> 59,536
<INCOME-CONTINUING> 86,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,553
<EPS-PRIMARY> 3.45
<EPS-DILUTED> 3.43
</TABLE>
